New Dubai law allows landlords to increase rents by up to 20%

Tenants paying below average rates for their area will be impacted by the new decree

Landlords in Dubai will be able to increase rents by up to 20 percent under new laws governing the city’s rental market.

The latest real estate sector reforms, announced by the government late on Saturday, override the 5 percent rental cap and set out new maximum rent increases for tenancy contracts renewals.

Under a new decree issued by Dubai ruler Sheikh Mohammad Bin Rashid Al Maktoum, rent rises can now kick in when a property hits 11 percent below market value for an area, a statement on state news agency WAM said.

If it is between 11 percent and 20 percent lower than the average rent for a similar property, a landlord can increase the rent by five percent.

The maximum increase can be 10 percent if the property falls 21 percent to 30 percent below market rates and 15 percent if the property is 31 percent to 40 percent under average rents.

However, Dubai properties which are more than 40 percent below average rents for similar properties in an area could be subject to rent hikes of up to 20 percent.

The average rent, which will be used as the benchmark for the rises, will be determined by the Real Estate Regulatory Agency’s rent index.

“The decree applies to landlords from the public and private sectors in the emirate of Dubai, including private development areas and free zones,” the statement said.

It said the decree was effective immediately.

It is unclear whether the current caveat on landlords that prevents any rent increase for two years after a tenancy contract is signed will still apply.

The move follows several reforms initiated by the government in a bid to better control Dubai’s real estate market.

CB Richard Ellis said average rental rates for residential property in Dubai increased 17 percent in 2012.

In 2007 at the height of the property boom Dubai introduced a rental cap of 7 percent to stem the city’s over-heated rental market, which was lowered to 5 percent in 2008.

At the time, rent rises of up to 15 percent a year were being reported.

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Posted by: Mohamed

@Anna- Buildings will fall apart probably where your from :) And for your information it will take about 7 years or less for me to recover my capital invested on all my properties ;) You can wait for your next bubble , goodluck!

Posted by: Geko

Wow... finally, they selflessly trying to help investors to earn higher rent at the cost of Nation's economy. Buildings are getting old, new ones will be promoted but the exising population will be slowly rooted out. Before they could realise there will be a bubble burst bigger than before. Time is ticking.....

Posted by: Mohamed

VerY Goooood!!! Higher rents for us landlords;)

Posted by: SA1

@Anna - well said..and many other issues are only known as time passes.. like inheritance, management of common space (where is strata law?), in absence of sinking fund how the current owners will handle big ticket cost, etc.

Posted by: Anna

Haha, you need higher rents because you know that when the building is 10 years old it is falling apart and nobody wants to live there anymore or even buy it from you.

So in the long-term you are stuck with a worthless investment as people only want to live in new & fresh buildings with latest smart technology and you are left with a stinky building nobody cares about. Poor you :)

Posted by: Lathif

Is there anyone speaking about the salary hike here..NO.? Learn to understand what it says. If rental is increased up to 20% which means your salary is down by 20%. Do not debate on unrelated topics. Wake up... ask your employer to provide rental compensation of 20% or increase allowances or increase on the basics.

Posted by: leo50

this issue will be compounded by people leaving Dubai, or spending less in the market as a whole. As a relatively small business I would like to increase staff salaries annually, but competition here is tough and if I look to increase my rates to customers (including government departments), they squeal like wounded animals and run away to find a cheaper alternative. This cannot be sustained in the long run as Dubai found out a few years ago. It appears we are destined to re-run our mistakes once again unless the government steps in with realistic checks and balances.

Posted by: DAKHROF

I am REALLY sorry but it is not fair at all , lot of people coming here to earn money ,but increment is the worst this for all expats..There is no control for incremnet , THEY SIMPLY DOUBLE THE PRICE FOR RENT and now it is so hard to make money.ARE YOU OK? jUST within 1 month increased for 200%. ALSO if you want to rent a apartment they want only family..SO WHAT ABOUT OTHERS ? We need to live in the streets or what ?so STRANGE ..IT SEEMS ME THE CRISIS WILL BE BACK VERY SOON IF IT WILL BE THE SAME AGAIN..PEOPLE ARE LEAVING THE COUNTRY ..UNFURTUNITLY I SUFFER A LOT BEACUSE OF THIS ...I HOPE UAE GOVERMENT WILL GO FOR SOME WISER DECISSION THEN WHAT IS HAPPENING IN THE COUNTRY..

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