Dubai's real estate market is undergoing a transformative shift with the launch of a cutting-edge rental index. This innovative system, introduced by the Dubai Land Department (DLD), will classify and rate residential buildings from one to five stars based on over 60 criteria, including location, sustainability, security, building age, and amenities. This move is expected to encourage property owners to upgrade their buildings and ensure rental value aligns with quality.

Encouraging Building Improvements for Better Ratings

Majid Al Marri, the Chief Executive of Real Estate Registration at the DLD, emphasized the significance of this new system. “To increase the rating from three to four or higher, property owners must undertake renovations that meet government standards for safety, security, and maintenance,” he explained. The rating system aims to align properties with civil defense and Dubai Police regulations, ensuring high-quality living spaces.

A Dynamic System Powered by AI

Unlike its predecessor, which relied on static annual updates, the new rental index leverages AI technology for real-time updates. Covering both freehold and non-freehold areas, this system offers granular insights for individual buildings, fostering transparency and fairness. While currently focused on residential properties, the DLD plans to expand the system to commercial, retail, and industrial buildings.

Boosting Confidence in Dubai's Real Estate Market

The introduction of the rating system is expected to reduce tenant-landlord disputes by over 20%, according to officials. It also aims to create a balanced and sustainable real estate environment, promoting investments and meeting the needs of all stakeholders. Registered leases surged by 8% in 2024, reflecting growing confidence in Dubai's rental market.

Addressing Dubai's Rising Rents

Amid surging demand and a population boom, Dubai's rental market has seen consistent growth. Apartment rents increased by 19% annually, while villa rents rose by 13% in 2024, according to Cushman and Wakefield Core. With average annual rents climbing 20.8%, housing remains a key driver of Dubai’s inflation metric, as reported by Emirates NBD.

Transparency for Tenants and Landlords

Matthew Green, Head of Research at CBRE Mena, highlighted the value of the new system: “This rental index adds a layer of transparency, enabling accurate assessments of market rents and rewarding property upgrades.” Similarly, Mario Volpi of Novvi Properties believes the system will balance the market, offering fairness to both new and existing contracts.

Future Outlook: Fairer Rental Valuations

The DLD’s rental index marks a pivotal moment for Dubai’s property market. By tying rental values to property quality, it fosters tenant satisfaction and incentivizes landlords to enhance their buildings. Experts like Farooq Syed of Springfield Properties and Harris Hiscoe of Espace Real Estate applaud the initiative as a "game-changer" that ensures fairness in a dynamic and competitive market.

As Dubai’s real estate market continues to evolve, the new rental index will undoubtedly play a crucial role in shaping a more equitable and transparent landscape.

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Summary of the new policy is:

Dubai’s new rental index is a transformative initiative aimed at enhancing transparency, fairness, and efficiency in the real estate market. Integrating advanced technologies like AI, the system evaluates properties based on over 60 criteria, including location, quality, maintenance, and facilities, ensuring rental values reflect true property quality. Supporting Dubai’s Digital Strategy and Real Estate Sector Strategy 2033, the index fosters market sustainability, protects tenant rights, and promotes landlord accountability. With over 900,000 rental contracts registered in 2024, reflecting 8% annual growth, the initiative builds trust among stakeholders while simplifying procedures through tools like the Dubai REST app and the Model Tenant Classification system. Covering all residential and free zones, it governs rental increases under Decree No. 34 of 2013, ensuring fair valuation and market stability while cementing Dubai’s position as a global real estate hub.