Dubai Tenants Face Rising Rents as Market Adjusts to New RERA Guidelines
RERA Rent Index Revision: The Real Estate Regulatory Agency (RERA) has revised its rent index to reflect market averages more accurately, leading landlords to adjust rents towards these averages, especially in mid-market residential areas.
Lease Renewal Increases: Tenants in Dubai, particularly in mid to upper-mid market areas like Jumeirah Village Circle (JVC) and Discovery Gardens, are experiencing rental increases of 10-20% upon lease renewal, as landlords aim to align with the revised market rates.
Market Dynamics Shift: Previously, significant rental gains were predominantly seen in the upper-mid to top end of the market. Now, these adjustments are filtering through to mid-tier areas, impacting a broader range of tenants.
Regulated Rental Increases: Under the updated RERA rules, rental increases are capped based on how much current rents are below market value, ranging from a maximum of 5% for rents 11%-20% below market value to 20% for rents 40% or more below market value.
Dubai Marina Rental Trends: Reports from the property portal Dubizzle show notable rent increases for apartments in Dubai Marina over the past year, though future growth in prime areas is expected to stabilize, contrasting with the continued pressure on mid-market districts.
Mid-Market Rental Adjustments: The average rent for apartments in areas favored for their affordability, such as JVC, has seen significant increases, indicating a substantial shift in the affordable rental apartment category. This trend is expected to continue, affecting other mid-market locations like Sports City.
Tenants in Dubai's mid-tier residential zones are observing significant rental increases as landlords aim to align with the 'market averages,' prompted by the recent adjustments in the Real Estate Regulatory Agency's (RERA) rent index. This shift marks a noticeable move from the previous focus on the upper-mid to high-end market segments, now impacting more moderately priced areas.
In areas like Jumeirah Village Circle (JVC), Discovery Gardens, and Sports City, among others, renters are facing hikes of 10-20% in lease renewals. These adjustments follow the RERA Rental Index's latest revisions, which aim to more accurately reflect the current rental market dynamics in Dubai.
Property experts highlight that these updates are essential for keeping the rental values in line with the actual market conditions, especially in the mid-market sectors. This recalibration could lead to a stabilization in rental growth rates, which have surged significantly across various segments since 2021.
Under RERA rules, this is the extent of hikes that landlords can apply:
11%-20% below market value: 5% maximum rental increase.
21%-30% below market value: 10% maximum rental increase
31%-40% below market value: 15% maximum rental increase.
40% or more below market value: 20% maximum rental increase.
The updated RERA rent index now allows landlords to adjust rents within specified limits, based on how much current rents are below market value. These regulations aim to provide a framework for fair rental practices while accommodating the city's growing demand for housing.
Despite the market's adjustment to these new regulations, Dubai Marina has already seen substantial rent increases, with average yearly rents for apartments rising significantly in the last year. However, experts suggest that the prime market areas may not maintain such growth rates, shifting the focus to mid-market districts where tenants are already experiencing noticeable hikes in lease renewals.
As Dubai continues to attract a diverse resident base, the need for affordable mid-market rental options becomes more pronounced. Locations like JVC have seen the largest increases in this category, emphasizing the demand for reasonably priced housing options in the city.
With the RERA rent index adjustments now in place, tenants and landlords alike are navigating the new landscape of Dubai's rental market. While the full impact of these changes will unfold over time, mid-market areas are expected to feel the most immediate effects.