Do You Know How RERA Calculates Rent Increases in Dubai?

Decree No. (43) of 2013, issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai, establishes the guidelines for determining rent increases for real property in the Emirate of Dubai. This decree aims to regulate rent increases to ensure fairness and stability in the rental market.

Percentages of Increase: The decree specifies the maximum allowable rent increases upon the renewal of real property lease contracts based on the current rent in comparison to the average rental value of similar units. The rent increase percentages are as follows:

• No Increase: If the current rent is up to 10% less than the average rental value.
• 5% Increase:If the current rent is 11% to 20% less than the average rental value.
• 10% Increase:If the current rent is 21% to 30% less than the average rental value.
• 15% Increase: If the current rent is 31% to 40% less than the average rental value.
• 20% Increase: If the current rent is more than 40% less than the average rental value.

Example: Rent Increase Calculation for a 3-Bedroom Villa

• Current Rent:  AED 150,000
• Current Market Rent: AED 180,000
• Difference: AED 180,000 - AED 150,000 = AED 30,000

According to Decree No. (43) of 2013, the rent increase will be based on the percentage difference between the current rent and the average market value.

• Rent Increase Calculation: The difference is AED 30,000, which is 17% of the current rent (AED 30,000 / AED 180,000 * 100).
• Rent Increase: Since the current rent is 16% to 20% less than the average market value (AED 180,000), the maximum allowable rent increase will be 5%.
• New Rent: 5% increase on AED 150,000 = AED 150,000 * 0.05 = AED 7,500 New Rent = AED 150,000 + AED 7,500 = AED 157,500

Therefore, according to the decree, the landlord can increase the rent to AED 157,500 for this villa, representing a 5% increase since the current rent is 16% to 20% below the market rent.

Scope of Application: The decree applies to all landlords, whether private or public entities, in the Emirate of Dubai, including those in special development zones and free zones such as the Dubai International Financial Centre (DIFC).

Average Rental Value: The average rental value of similar units, which serves as the basis for determining rent increases, is established according to the "Rent Index of the Emirate of Dubai" approved by the Real Estate Regulatory Agency (RERA).

When is a rent increase allowed?

According to local laws, landlords are required to provide renters 90 days' notice before raising rent once a year. To find out if an increase is within this acceptable range, you can use the online RERA index calculator.

How can I access the RERA Rental Increase Calculator?

You can access the RERA Rental Increase Calculator through the Dubai Land Department's official website or the Dubai REST app. The RERA index calculator requires property details such as type, location, size, and current rent to determine the maximum allowable rent increase based on the RERA Index.

Conclusion

Decree No. (43) of 2013 provides a structured approach to regulating rent increases in Dubai, ensuring that rent adjustments are fair and reflective of the market conditions as determined by the Rent Index. This decree helps maintain a balanced rental market, protecting both landlords and tenants from arbitrary rent hikes.