New Rental Index to Clarify Rates for Leased Homes in Abu Dhabi

Photo : WAM

Abu Dhabi is set to benefit from a newly established Rental Index, which aims to provide clarity on rental rates for new leases in the city. With more than 2,500 apartments and 1,000 villas scheduled for completion this year, many of which will be available for rent, this index is expected to play a crucial role in standardizing rental pricing.

The Abu Dhabi Rental Index, recently announced by the Abu Dhabi Real Estate Centre (ADREC), will offer transparent benchmark prices for residential properties across Abu Dhabi and Al Ain. This initiative is designed to help both tenants and landlords by providing clear and standardized rental values for various property types and locations.

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For instance, according to the Rental Index, the annual rent for a two-bedroom apartment in Saadiyat Island’s SDN1 sector is set at Dh138,614. In comparison, a two-bedroom apartment in Reem Island’s RR2 sector is priced at Dh59,476 per year. For those seeking more affordable options, a two-bedroom unit in Mohamed Bin Zayed City’s ME10 sector is listed at Dh33,165 annually.

The Rental Index offers a detailed breakdown of rental rates based on the property type and sector within different neighborhoods. The prices reflect the average rental values for specific areas and are subject to change based on the property’s particular features. The index can be accessed at adrec.gov.ae.

The introduction of the Rental Index is anticipated to have a significant impact on new rental contracts and price settings rather than on existing leases. Property market experts note that the index will help mitigate sharp rent increases, particularly in newly developed areas such as Yas Island, Saadiyat Island, and Al Maryah Island. According to a leasing agent, "By setting defined rental rates for different property types, the Rental Index should help curb steep rent hikes."

The Rental Index is part of Abu Dhabi’s broader strategy to regulate and stabilize the rental market, especially as new properties come onto the market. Prathyusha Gurrapu, Head of Research at Cushman & Wakefield, noted that "Abu Dhabi’s residential rental market continues to rise, with apartment rents increasing by 6.6 percent year-on-year and villas by 2.4 percent."

Regarding rent increases for lease renewals, current regulations stipulate that landlords may only raise rents by a maximum of 5% per year. Article 16 of the regulations states, “The landlord may not increase the rent specified in the contract except once each year by no more than 5 percent. It is permissible, by decision of the Chairman of the Executive Council, to increase, decrease, or cancel this percentage as deemed appropriate.”

If landlords exceed this allowed increase, tenants have the right to appeal to the rental disputes committee, which can impose fines up to the amount of one year’s rent for non-compliance. The committee also has the authority to lower the increase rate to the maximum permitted by law. Importantly, the committee can impose fines autonomously, even if not requested by the concerned parties.

The introduction of the Rental Index is expected to bring greater transparency and fairness to the rental market in Abu Dhabi, benefiting both tenants and landlords by providing a reliable benchmark for rental rates.

Aug. 23, 2024 11:57 a.m. 513

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