Dubai real estate: How much are you legally allowed to raise rent in the emirate? Experts weigh in

As the city witnesses a sharp uptick in property demand, both villa and apartment rents are steadily on the rise, with anticipations of further increases throughout the year. But how much is your landlord legally allowed to raise rent?

“Real Estate Regulatory Agency (RERA) has clear rules and guidelines that govern fairness and transparency, especially when it comes to annual rent increases, and we are seeing more and more tenants educating themselves about their rights and challenging landlords, when there is deviation from the legally allowed rent increase,” Ainsley Duncombe, Founder of Off-Market Listing (OML) said in an exclusive interview with Arabian Business.

The Dubai Land Department (DLD) provides a rental increase calculator allowing tenants to check whether their landlord raised rent is permissible or not in accordance with Decree No. (2) of 2011.

There is no arbitrary maximum rent increase in Dubai. Instead, the Real Estate Regulatory Agency (RERA) under the Dubai Land Department has implemented a tiered system to demonstrate the permissible percentage increase based on several factors.

Some of the factors that are taken into consideration includes the average decline in the region’s rental value, based on specifications such as location, number of rooms and more.

“Landlords are prohibited from raising rental rates beyond the guidelines set by RERA. Typically, they are limited to a 5 percent increase, but this cap recently doubled to 10 percent. If property owners serve eviction notices to tenants, they are precluded from re-renting the property,” Liam Dawett, Sales Manager at BetterHomes told Arabian Business.

The DLD website states that the rental calculator can be used to settle disputes between landlords and tenants over rent increases.

How are rental increases calculated?

• If the rent is 10 percent less than the market value, there is no increase
• If the rent is 11-20 percent lower than the market value, the maximum increase may be up to 5 percent
• If the rent is 21-30 percent lower than the market value, the maximum increase may be up to 10 percent
• If the rent is 31-40 percent lower than the market value, the maximum increase may be up to 15 percent
• If the rent is lower than 40 percent or more of the market value, the maximum increase may be up to 20 percent

How to calculate the permissible rent increase on the RERA calculator?

• Visit the official DLD website
• Navigate to e-services and select the inquiry about rental index
• Click on ‘Access this service’
• Choose the property type and fill in the required details including contract end date, property type, area, bedrooms and current annual rent
• Click ‘Calculate’

Factors contributing to rising rents in Dubai

Several factors, including property handovers and an influx of migrants, coupled with a scarcity of housing supply, are expected to drive higher rents in Dubai. As the market tightens, tenants may find themselves facing new challenges in negotiating rental terms as flexibly.

“We are currently anticipating 30,000 to 40,000 property handovers, with an expected influx of over 400,000 individuals migrating to Dubai. It is important to say that the prevailing scarcity of supply is expected to persist throughout the year, thereby exerting an impact on rising rental prices,” Dawett explained.

According to Duncombe, heightened investor interest, a growing influx of professionals, and Dubai’s increasing appeal to high-net-worth individuals have fueled the projected increase. The city’s attractiveness as an investment destination and the preference for property ownership over renting have contributed to robust demand in the market.

“Financial strain is a primary concern, as this hike could pose challenges for existing tenants managing a fixed budget. Affordability of housing may also become a pressing issue, potentially prompting tenants to relocate to areas with lower rental rates or to explore different types of accommodations. The increased rental costs may also affect tenants’ ability to save money or invest in other areas, prompting a reassessment of financial goals and budget adjustments,” he explained.

Jake Walton, Leasing Director, haus & haus Real Estate believes that there are several factors influencing increasing rent and demand including population increase aided by the Dubai 2040 Urban Master Plan, the inflow of high-net-worth individuals, corporate tax incentives in free zones, golden visa, and more.

“Mass migration is compounding, and social media plays a part as everyone these days knows someone (or follows someone) who is living a great life in another country; the world seems more accessible than ever, and Dubai has everything you could want no matter where you are in life,” he said.

Additionally, Walton highlighted that “Crime rates, cost of living, and the weather only seems to be worsening in places like the UK and professionals are more open than ever to uproot their lives in search of something better.”

Best areas for tenants amid rent increases

There are areas within Dubai that might exhibit more resilience to the rent increases. Villa areas, characterised by limited remaining inventory, are expected to be less affected by the rising rental prices. Tenants looking for more stability and reasonable rental rates may find these areas to be a preferable choice.

However, Dawett advised: “Tenants do not necessarily need to avoid specific areas; rather, their decision should be informed by the quality of life they seek or the proximity to their workplace.”

Duncombe suggested that the best way to navigate rental increases would be priotitise value and to explore off-market options which offer “budget-friendly deals compared to listed properties.”

“For instance, Jumeirah Village Circle (JVC) presents attractive properties at very affordable prices. Areas that are still much more affordable than others include, but are not limited too those that are positioned much more inland and further away from the iconic landmarks (which have driven up the property prices due to the success of short-term rentals to visitors to the Emirates who are happy to pay much more for these benefits),” he explained.

These areas include:

• International City 
• Arjan 
• Remraam 
• JVC & JVT 
• Deira 
• Sports City 

On the other hand, Walton mentioned that highly saturated areas like Downtown or the Marina, where tenants have numerous options, tend to experience slower rent increases. He also highlighted the potential benefit of considering upgraded units, which may have lower average rents compared to standard units, affecting the rental index calculations.

“In communities where, for example, you might have 4 bedroom townhouses and 4 bedroom standalone villas – these could be grouped together on the rental index, so taking a higher priced villa means that the calculator could work in your favour by pulling averages from the townhouses, therefore negating the chance of an increase,” he explained.

Negotiating favourable terms with landlords

To negotiate more favorable rental terms with landlords, Duncombe highlighted emerging trends.

“A trend that we are seeing is that tenants are increasingly entering into multiple-year contracts with landlords whereby they can lock in the rent for 2-3 years at today’s price, giving them peace of mind that their rent is set for the next couple of years,” he said.

However, despite this, landlords are still negotiating higher rents for 12-cheque payments.

“Despite being commonplace in the rest of the world, many landlords still fear the 12 cheque contracts. We are seeing an increasing number of them being agreed to, but it often results in a landlord asking for a higher rent in compensation,” he explained, highlighting that this has led to an increase in some financial institutions who “take advantage” by offering rent packages where tenants pay monthly and landlords receives less frequent installments.

Walton cautioned: “Tenants should be aware that no rent increase or changes to lease terms are allowed within the first two years of a lease agreement. Landlords must provide a 90-day notice before the lease expiry if they wish to make any changes to the rent or terms of the contract.”

“In case of disputes over renewal figures, tenants can utilise the Rental Dispute Centre’s “Offer and Deposit” system. This involves providing the original lease contract, a new lease contract, post-dated cheques, and copies of all correspondence with the landlord. A judge will review the documents and either order the landlord to sign and deposit the cheques or return them to the tenant,” he advised.

As Dubai’s rental market enters a period of transition, with rising rents expected to impact tenants across the city. “It’s important for tenants to stay informed about rental regulations, understand their lease terms, and be proactive in communicating with landlords if they anticipate challenges in meeting the increased rental costs. Seeking advice from legal professionals or RERA may also be beneficial in navigating these situations,” Duncombe concluded.