Dubai’s real estate sector has introduced the Smart Rental Index 2025, featuring a star rating system for buildings to enhance transparency in rental valuations. Importantly, this initiative does not involve changes to existing rental laws or the legislative framework governing landlord-tenant relationships. The foundational laws, such as Law No. (26) of 2007 and its amendment, Law No. (33) of 2008, remain unchanged.

Unchanged Rental Legislation and Rent Caps

Dubai’s rental laws continue to be governed by:

• Law No. (26) of 2007: Regulates the relationship between landlords and tenants in the Emirate of Dubai.
• Law No. (33) of 2008: Amends certain articles of the previous law to further define and regulate landlord-tenant interactions.

Additionally, Decree No. (43) of 2013 establishes the rent increase framework, detailing permissible rent hikes based on how current rents compare to the average market rate:

Market Value Increase vs Contract Value Permitted Rent Increase: Example Scenario

0% – 10% increase	No increase allowed	If current rent is AED 100,000 and market value is AED 110,000 – No increase permitted.
11% – 20% increase	Maximum 5% increase	If current rent is AED 100,000 and market value is AED 120,000 – Maximum increase allowed = AED 5,000. New rent = AED 105,000.
21% – 30% increase	Maximum 10% increase	If current rent is AED 100,000 and market value is AED 130,000 – Maximum increase allowed = AED 10,000. New rent = AED 110,000.
31% – 40% increase	Maximum 15% increase	If current rent is AED 100,000 and market value is AED 140,000 – Maximum increase allowed = AED 15,000. New rent = AED 115,000.
Over 40% increase	Maximum 20% increase	If current rent is AED 100,000 and market value is AED 150,000 – Maximum increase allowed = AED 20,000. New rent = AED 120,000.

Maximum Rent Increase Limited to 20%

Importantly, Dubai’s rental cap limits the maximum rent increase to 20% of the existing contract value — regardless of how much higher the landlord believes the market value has become. This is regulated under Decree No. 43 of 2013, specifically under Article 1 – Percentages of Increase.

For example:

• If your current rent is AED 100,000 and the property value has increased to AED 300,000 (a 300% increase), the landlord can only increase the rent by a maximum of 20% — or AED 20,000 — making the new rent AED 120,000 per year.

This ensures that even when the market value increases significantly, tenants are protected from excessive rent increases.

Introduction of the Star Rating System

The Smart Rental Index 2025, launched by the Dubai Land Department (DLD) in January 2025, introduces a star rating system for residential buildings, ranging from one to five stars. This system assesses properties based on over 60 criteria, including:

• Structural quality
• Maintenance standards
• Available amenities
• Facility management
• Energy efficiency

The objective is to align rental values more closely with the actual quality and condition of individual buildings, moving beyond the previous area-based assessments.

According to the authorities, the star rating applies to the building as a whole — not individual units. This means that a poorly maintained building in a high-demand area will not automatically command high rents. Conversely, a highly rated building in a less prestigious area may achieve higher rental values.

Determining and Updating Star Ratings

The star rating of a building is determined through a comprehensive evaluation by the DLD, considering both technical and service-related aspects. The system leverages artificial intelligence to ensure consistent and accurate assessments across all residential areas, including free zones and special development zones.

How the Star Rating System Works:

• Ratings are conducted based on specific criteria established by the DLD.
• A building owner with a low rating can bring on upgrades to his/her asset.
• Once improvements are verified and approved by the DLD, the star rating can be immediately adjusted.
• The system is updated frequently — not just once a year — allowing rental values to reflect building improvements in real time.

How the Star Rating System Differs from the RERA Index

1. Previous Model:

• The RERA Rental Index was based on broad geographical zones or districts.
• Rental caps were determined according to market averages within those zones, regardless of the specific condition or quality of the building.

2. New Model:

• The star rating system focuses on individual buildings rather than zones.
• Rental rates are determined by the building’s specific quality and amenities, not just the broader area.
• A high-end building in a less prestigious area may now command higher rents based on its star rating, while an older or poorly maintained building in a prime location may face rental limits due to its lower rating.

Accessing the Rental Index via the Dubai REST App

Tenants and landlords can utilize the Dubai REST App to access the updated rental index and determine permissible rent increases.

How to Use the Dubai REST App:

1. Download and Open the App: Access the Dubai REST App on your smartphone or tablet.
2. Navigate to Rental Index: Select the ‘Rental Index’ option within the app.
3. Enter Property Details: Input the necessary information, such as the property type, contract end date, and specific location details.
4. View Rental Index Result: The app will display the current rental value for the property, considering its star rating and other relevant factors.
5. Download Report: Users have the option to download the rental index result as a PDF for their records.

Implications for Tenants and Landlords

1. For Tenants:

• The star rating system provides greater clarity on what tenants are paying for.
• Rental costs will now reflect the quality and amenities of the building, not just the area.
• If a tenant lives in an older or lower-rated building, they are less likely to experience substantial rent increases compared to higher-rated properties.

2. For Landlords:

• Property owners are incentivized to maintain and upgrade their buildings to achieve higher star ratings.
• A higher star rating allows landlords to command higher rents and improve tenant retention.

Conclusion

The implementation of the star rating system within the existing legal framework signifies Dubai’s commitment to a more transparent and equitable rental market. By focusing on individual building assessments, the DLD ensures that rental values accurately reflect property quality, benefiting both tenants and landlords without necessitating changes to established rental laws.