RERA / Dubai Rental Index and Rent Increases
RERA (Real Estate Regulatory Authority) as a unit of the Dubai Land Department, provides a rental increase calculator which helps landlords and tenants to determine whether a proposed rental increase is allowed or not.
The new RERA Index for 2016 has just come out and many residents of Dubai are wondering if they should expect rental increases or decreases from their landlords this year. For those who don’t know how the RERA rental increase calculator works, here’s a simple explanation.
What is the Dubai Rental Index / RERA Rental Increase Calculator?
In December 2013 in a move to prevent the market from out pricing itself, H.H Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, issued Decree No. 43 of 2013 to cap rental increases and to control illegal rental increases.
The rental calculator works in accordance with the RERA rental index which is updated yearly (last update: January 2016) and the rental recommendations in the index are valid for all rental properties in Dubai, for the entire year.
The RERA rental increase calculator allows landlords and tenants to input details of their property and be provided with results to show if a property rental increase is applicable or not. Landlords are encouraged to check the rental calculator when considering a rental increase to ensure they are working within the confines of the law and tenants are advised to check the calculator in the event of a notice to increase their rent.
The RERA rental calculator asks for the following:
Whether the property is residential, commercial, industrial or staff accommodation
Tenancy contract expiry date
Main area of the property (Deira, Bur Dubai which refers to elsewhere in Dubai or whether it is a freehold property)
Property type (apartment or villa)
Area (community or subcommunity)
Number of bedrooms
Current annual rental amount
However, there are some important aspects which the RERA rent calculator does not take into consideration:
Age of the building/unit
Building condition
Available facilities
Floor level
The calculator works by comparing the price of your property with the average prices of similar properties in your area.
How much can my rent increase by?
As of January 2016, the RERA rental index follows a graded structural approach:
If the current annual rent is below 10% of the calculated market value, there is no increase applicable.
If the current annual rent is between 11% and 20% under the calculated RERA market value, the maximum rental increase applicable is 5%.
If the current annual rent is 21% to 30% under the calculated RERA market value, the maximum rent increase applicable 10%.
If the annual rent on the property is 31% to 40% under the calculated RERA market value, the maximum rent increase applicable is 15%.
If the annual rent on the property is more than 40% below the RERA calculated market value, the maximum rent increase applicable is 20%.
When is a rent increase allowed?
If your property is eligible for a rental increase, and only then, your landlord must give you written notice that is notarised, 90 days prior to your contract renewal. It can be handed personally to you, left at your door or sent via registered mail.
If the landlord fails to give you a written notarised notice before the assigned 90 days in any of the means specified above, you are not obligated to accept the rental increase.
Illegal rent increases – what do I do?
Unfortunately, despite the law and the presence of the rental increase calculator, some landlords will try to increase rent when they are not allowed to – or they will increase rent beyond what is allowed by law.
In the case that the rental calculator indicates a rental increase is excessive or simply not allowed, but the landlord is insistent on increasing rent, the tenant should try to discuss with the landlord and use the rental calculator as supporting evidence.
Should the discussions not prove fruitful, then the tenant is well within their right to lodge a rental increase dispute with the Rental Dispute Settlement Centre where the matter will be dealt with accordingly.
