Tim Elliott
Welcome to Lawgical the UAE’s first and only regular legal podcast. My name is Tim Elliott. I’m here with the expert and I mean expert management partner of the Dubai based legal firm, HPL, Yamalova and Plewka And that is Ludmila Yamalova How good to talk to you. It is.
Ludmila Yamalova
Good to talk to you too, Tim. And thank you as always for being here.
Tim Elliott
Now, Ludmila, this episode is really all about the reaction to the news that the Dubai Real Estate Regulatory Agency, is it agency or authority, RERA, by the way? It’s agency. It is agency. Now their RERA index, as it’s known, has been updated and that is basically an idea of what you should be paying in certain areas in Dubai. Everybody refers to it. It’s a huge topic of conversation.
Ludmila Yamalova
It’s agency, yes.
Tim Elliott
I’ve just moved house, so it’s kind of present in my mind as well. So the index has changed. Have the laws around renting real estate changed as well?
Ludmila Yamalova
No, not at all, but that’s a good question. So you are correct. The RERA index hasn’t in fact and indeed been updated. However, this is not a manifestation or a sign of the law being changed. The law related to rental issues in the Emirates of Dubai has always been the same and it dates back to 2008 and then they amended.
version in 2013, but certainly no new recent law has been issued. So when we’re talking about an updated RERA index, it’s just that the base prices on which RERA index is based and on which the government sort of relies in determining what the current market value and current market prices should be.
So that’s the kind of the base prices of the base data points have been updated, but not the legislative framework that governs rental issues in the Emirates of Dubai.
Tim Elliott
Okay, so let’s just jump back slightly and remind people what the RERA index is.
Ludmila Yamalova
Yes, so first of all, the RERA index, let’s perhaps kind of decrypt what RERA stands for, and it is the real estate regulatory agency, and this is a Dubai-based agency. And the RERA, or the real estate regulatory agency, was originally established for purposes of regulating the Dubai real estate market. And one of the most important tools, the RERA, is the RERA, which is the real estate regulatory
that it relies on and that it has created is this RERA index. And the RERA index itself is, it’s basically a form of a calculator that was created to manage the Dubai rental market and serve as a basis for rental increase. And so, and the relevance of this RERA index comes from, it’s sort of, you know, it’s sort of based on what…
the references and the mentions in the Dubai rental law itself. So the RERA index was issued by RERA, but it’s also on the basis of the Dubai rental law. And specifically, that’s Article 3 of the Decree Number 43 of 2013 regarding the determination of the increase in rent for properties in Emirates of Dubai.
And in this law, there’s a specific reference that the RERA index is the basis for which the average similar rent is calculated for the purposes of rental increase. And therefore, it’s this RERA index that is predominantly relied on by the RDC or the Dubai Rental Dispute Center or the Dubai Rental Court when it determines rental increases in rent valuation disputes.
So, in other words, it’s the RERA index is perhaps the main data point that the Dubai rental court relies on in determining landlords. Usually it’s the landlords request to increase rent that end up before the Dubai rental courts because tenants challenge the landlords attempted increase in the rent.
And it’s that’s the kind of the data point that the rental dispute center will look at in determining whether the landlord’s request is warranted and if so, like to what extent. So this is quite important because at the RERA index, the way it works is that it shows whether the rental, if there is a rental increase in that sort of base average property price,
And two, if there is an increase in the property, what’s the allowable percentage of increase?
Tim Elliott
So how do you use the RERA index if you are in front of the rental dispute center?
Ludmila Yamalova
Yes, so let’s say I’m renting a property right now from you, you’re my landlord, and I rent property for 100,000 dirhams a year. So, in order for, and now you’ve just received a notice from you requesting me to pay 150,000, so it’s a 50% increase. For you, it may be a fairly reasonable request because you look around and you see the current market perhaps rent the way you see it
similar properties that are being advertised and marketed and rented, you think this is more or less sort of the current market rate, so therefore you want the additional 50,000 dirhams from me. So you would send me a request for an increase in rent, and to do it correctly you need to send it to me through 90 days before
the expiration of my lease term. So it’s only allowed for the rent increases on the lot for the following year, not in the beginning of your term of the lease, of course. So you have to send me this request 90 days before and then I have to agree. And then this is where these disputes arise is that if the tenant does not agree, then
this ultimately either you or I will have to file a case with RDC and seek RDC’s involvement in deciding who is right, who is wrong. And so what happens is that before I disagree with you, what I will do is I will go and I will go onto the RERA index and I will put the details of my property and see whether the RERA index allows for an increase in the property.
and kind of on a similar property. And if it says no, then I’ll just say, well, Tim, no, I’m sorry, but I am paying in line with the RERA index. And so, and that’s basically what the document that RDC, that I will be presenting to the RDC that, you know, look here is the RERA index, so therefore I’m not, you know, RERA index shows that I am paying kind of in line with the index.
So, and that is the key document the RERA will or the RDC will rely on in deciding whether to allow an increase. So, you know, it’s not like that the landlords are not allowed to increase rent, it’s that they can only do so in line with this RERA index. And the idea of this RERA index, by the way, was introduced when it was introduced originally, was to help kind of regulate the market, because remember, RERA’s role is to regulate the market.
And so the idea is to create some kind of a baseline for residents of Dubai to know when and under what circumstances a rent can be increased and how, so that to introduce stability in the market and some kind of predictability. Because if you recall back in 2008, by the way, which is when the REIT index and the rental laws were introduced for the first time,
There was a lot of uncertainty, there’s a lot of instability because every time the rents were going up so rapidly and there was not enough inventory, so people would just move in and right away they’d get notices to move out the next year. So there’s a lot of fluctuation in the market and people were resettling every year, so this was very destabilizing for society. And so it was with that in mind that the law was introduced and the RERA index was created as a baseline.
Tim Elliott
Mm-hmm.
Ludmila Yamalova
for not just the authorities to judge, but more importantly, for people living and investing in Dubai to kind of know, okay, so what’s the framework within which we can kind of expect to be based on a particular property before we are kicked out.
Tim Elliott
How do you get to the RERA index? Where do you find it?
Ludmila Yamalova
It’s online. It’s actually very easily accessible. You just write on RERA index on Google, and so the RERA website will pop up with the tab to RERA index. And so it’s generally accessible to all the public. You don’t need to have an account, for example, with RERA. You don’t need to even input any specific. You don’t have to have a registered contract by which you would be checking whether you are entitled.
entitled to an increase or not. So it’s through the, we said the Dubai Land Department’s website where there’s a tab for RERA and that is RERA index. And so, and the only information that you would need to input is basically the type of property and that’s, you know, it’s a villa or is an apartment. And then whether it’s a one bedroom or five bedrooms, also in the area in which the property is located, whether it’s let’s say Palm Jumeirah or JLT
or Meydan or whatever other sort of area or Jumeirah. So and then also the contract date and the current market, so the current rent contract price that you pay. And as I said earlier, sort of the size of the parameters of the property, but just only by virtue of the bedrooms. It doesn’t.
ask you to input, for example, whether the villa or the property had been recently renovated or whether it has any great views or such. It just basically determines the specifications of the property on the basis of how many bedrooms it has and whether it’s a villa or a unit, a condominium unit or an apartment. So that’s it. Basically, it’s very easily accessible and that’s kind of all the levels of detail.
that you need to put in. And on that basis, once you put your rental price that you’re paying right now, so let’s say going back to yours in my example, I put 100,000 dirhams for, let’s say, a two-bedroom and JLT. Then the RERA index will stay, okay, on the basis of which the details I put in, 100,000 dirhams, JLT, two-bedroom.
You are paying the 100,000 dirhams you’re paying within the range that you’re paying, so therefore, no increase is allowed. So what I would do is I would take a print screen of that or I save that page and then I will later use this in RDC when I or you decide to file a case in RDC and I will challenge your request.
Tim Elliott
I remember the, I was going to say good old days. I wonder if they were at the days of 2008 when it was, it was a huge boom in real estate terms here in Dubai kind of feels a little bit like that now because the market is, let’s say the market is buoyant that kind of underplays it slightly. Um, and back in the day, if you like, the RERA index was originally updated. I think every quarter that changed and it really doesn’t seem to be updated.
that often until very recently. Is our updates a regular thing?
You’re correct. So in theory, the updates are often discussed and commented in all sorts of media or portals. But in practice, as you rightfully noted, we have not actually seen the baseline, the sort of base prices being updated recently. And part of it, perhaps because the market had until recently been fairly…
stable and kind of predictable, but it’s only in the last two years or so that the UAE and Dubai economy in particular has witnessed another boom and property prices always are the first kind of manifestation of what’s going on with the economy. So they’ve gone up significantly to buy for buying or investing property or renting.
So, and on the back of that, we had heard, had seen statements coming from various representatives of relevant government authorities that the RERA index might be updated, that the authorities are looking to potentially update to kind of make sure that it’s in line with the current market conditions. And perhaps a lot of it was in response to so many landlords wanting to increase rent because they are looking around and seeing that other similar properties are being rented for a lot more money. So they,
believe that on average the prices have gone up, so they want to be able to capitalize on their investments and rent out their properties for high amounts. And then a lot of these ended up in RDC, and perhaps RDC just goes back and obviously, as we said, looks at the RERA index and does not allow any more increase. And perhaps in response to that, there was some kind of encouragement from because of the number of cases that have ended up
the market conditions, and should that be reflected in the current base prices? So basically, I would speculate that’s what’s been going on. And so all of a sudden, the prices we’ve seen, the index to have been updated, but we didn’t really see any.
specific notifications or announcements from the authorities. We just noticed it only by virtue because of us actually looking for the RERA index for a number of our clients because we have a number of cases right now before RDC over these very issues. And so we just noticed, this is how we found out about it, we just noticed that the prices have changed. So in cases that recently…
Tim Elliott
Hmm.
Ludmila Yamalova
had one data point now said in the festival just a month later is a different price. So that’s kind of how we’ve come to notice it. So now we know that it has been updated, but it hasn’t up until now it had not been a frequent occurrence.
Tim Elliott
So it’s March 2024. Now this month at the time of recording is the last update. I can’t remember an update before this month.
Ludmila Yamalova
I cannot remember either. I agree with you. Yes, it is March 2024, which is when we’re recording and which is when we noticed the shift in the RERA index. As I mentioned earlier, we deal with a lot of RDC cases, a lot of rental cases, so we’ve had our eye on the RERA index ball for quite some time. As you rightfully said, we haven’t seen previous increases in the way we’re seeing them right now. So…
Ludmila Yamalova
It’s still only now as of March of 2024 that RERA seems to have updated the average rental value of properties in certain areas in Dubai.
Tim Elliott
Sure. Lots of people in Dubai keep their eye on the RERA index ball. I love that phrase that you use. Let’s look at some examples, notable examples of updates.
Ludmila Yamalova
Yes, so because there hasn’t been an announcement about how the RERA index has been updated and there hasn’t been this overarching, all the prices have gone up, for example, by 10-15%, there hasn’t been an announcement like that. And from what we’ve seen, that’s also not the approach that has been taken.
But rather, the authorities had looked at specific areas and kind of adjusted some of the prices on the basis of specific areas. So one notable example that we have noticed is in Jumerah Lakes Towers or JLT, where we’ve seen that the average rental value of the residential properties as reflected by the RERA index that is increased by 25% in comparison with 2023. So 25%.
since just a few months ago. There it is. So that’s Jumeirah Lakes Towers, perhaps not unusual because it is a very popular place to live. But then in Dubai, every area these days seems to be a popular place to live. So another case, so that’s 25% increase on average in Jumeirah Lakes Towers on the basis, again, compared to the data point that we have.
Tim Elliott
Huge!
Ludmila Yamalova
with us and that’s comparing apples to apples, a property that we would have perhaps litigated last year in JLT and what the baseline was then compared to what it is now for a similar property. Then some of the other areas also was the Palm Jumeirah and Golden Mile in particular, where we have observed a 33 percent increase in the average rental value of the residential properties.
in comparison with 2023. So Palm Jumeirah, obviously, once again, not another, not an unsurprising development because it is another very popular place to live with fairly limited supply. So Palm Jumeirah and Golden Mile in particular, 33% increase. And then also another area we’ve identified as Al-Wasil where the average rental value of the residential property is increased by about,
20% or 19% specifically. And this was on the basis because we have some clients now that have disputes before RDC involving this particular geographic location in Dubai. So we did these kind of the data points that we have noticed or identified, but I’m sure that similar increases have been observed in other areas. So whoever it is that would be.
perhaps affected needs to look at the RERA end specifically to their area.
Tim Elliott
I guess most people you talked to in Dubai would kind of back that up. The anecdotes from pretty much everywhere would reflect that. Just remind me, you work in Jumeirah Lake towers and you live on the palm. So, oh you.
Ludmila Yamalova
Yes, perhaps those two examples. Yes, indeed. Indeed.
Tim Elliott
But prices haven’t, according to the index, they’re not increasing everywhere. Not everything is higher.
Ludmila Yamalova
Correct. So, I mean, it’s just using those three examples, we’ve seen the increase from 19% to 25% to 33%. But we have also identified some areas, in fact, the prices have been decreased. And one such area that we noticed was the Jumeirah parks, where we observed a 5% decrease in the average rental value in comparison just to the beginning of 2024.
Tim Elliott
Hmm.
Ludmila Yamalova
So I imagine that if you just go area by area by area, which an exercise we have not done yet, because also we’d need to have, for us to even do this, we’d need to have a kind of a comparison, a data point for comparison. So we would have had to have a data point for let’s say 2023. But so whatever sort of made sense that we had the information, we did this kind of comparison. But I imagine that there could be many other areas where.
a similar decrease could also be the case.
Tim Elliott
Okay, and the thing to remember, I think it’s worth pointing out, isn’t it, that the RERA index applies to Dubai. This is not a UAE index.
Ludmila Yamalova
Indeed, yes, that’s a very important reminder is that when we talk about RERA index, it’s that RERA is a real estate regulatory agency that is part of a Dubai government. So and rental laws in the UAE are subject to individual Emirates laws. So Dubai has its own rental laws, Abu Dhabi has very different rental laws, and other Emirates are subject to their own rental laws. So this is a Dubai rental law that sets up.
under which RERA was set up to begin with, and therefore the RERA index was introduced. And therefore, the RERA index in particular only applies to Dubai, and by the way, it also excludes an area in Dubai that’s called the DIFC, because the DIFC, although it’s based in Dubai, it’s subject to its different laws. But that’s the only area in Dubai that’s excluded from the RERA index. But otherwise, yes, RERA index only applies to Dubai, but it does exclude the DIFC.
Tim Elliott
Okay, just to finish off Ludmila if to anybody listening now, and this is a podcast that has pretty broad appeal, because it affects so many people in the UAE in Dubai. What conclusions would you draw from what we’re seeing in the RERA Index?
Ludmila Yamalova
It’s important to be informed, well informed, and therefore to keep your eye on the ball, on the RERA index ball, because as we’ve seen, many eviction notices that we have observed recently have been issued, are currently being issued on the basis of the landlord’s belief that the rent, that the rental value has gone up, that the market has gone up, and therefore tenants should be paying higher amounts.
Tim Elliott
Thanks for watching!
Ludmila Yamalova
So, therefore, whoever it is, that’s all the tenants in particular who are renting right now and are either anticipating that this may follow or because their landlords are trying to increase rent by just by virtue of, for example, just negotiations, simple negotiations for the time being, or through the court proceedings, just you need to stay informed, you need to be aware.
that there has been an update and most likely there will be other updates or at least other areas that might not have been reflected yet might still be being updated. So therefore, if you find yourself in the situation before you pick up a fight, let’s say, do kind of go back and look at the RERA index and you see we’ve seen some differences between just beginning of 2024 and now we’re still in March. So it’s only
two months into it. So even if you have a data point from your index from let’s say six months ago or four months ago, don’t rely on that alone. Do look at what it is today because before you decide how to respond to your landlord, but equal so even for the landlords, you know, landlords because if they’ve been waiting and not to try to increase rent because they…
believe that RERA index does not allow them. So, I mean, I guess now we know that there have been updates and so this would benefit everyone to just be more informed, more proactive and not only check the RERA index today, but keep checking because there seem to be kind of ongoing updates and I anticipate that also this means that there will be.
perhaps a new wave of rent increases and perhaps a new rent, a new wave of potential evictions.
Tim Elliott
There really aren’t many more hot topics here in Dubai than the RERA index at the moment, the recently updated RERA index. That piece of legal advice you just gave, I think is worth its weight in gold. Keep your eye on the RERA index ball. That’s my takeaway phrase today. That’s another episode of Lawgical Thanks for watching, listening, both, if you did both. Thanks as always to our legal expert, managing partner, Yamalova and Plewka Ludmila Yamalova.
Ludmila Yamalova
Tim, thank you for being here and for an engaging conversation as always.
Tim Elliott
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