Landlords in Abu Dhabi are adjusting rental prices in response to the introduction of the UAE capital’s first official rental index. Industry experts suggest that in some areas, particularly where current rates are below the market average, new tenants may face rent increases of up to 30%. This potential spike is primarily driven by a shortage of available properties and a surge in demand from incoming tenants.
Despite the possibility of rent hikes, the rental index is also expected to provide tenants with a tool to negotiate more favorable terms, especially in locations where current rents are higher than the index values. The Abu Dhabi Real Estate Centre (ADREC) launched this index, which covers regions including Dhafra, Abu Dhabi, and Al Ain. This tool allows both property buyers and tenants to check indicative rental values based on the property’s location and the number of bedrooms.
In July, Abu Dhabi’s rental market demonstrated strong activity, particularly in high-end apartment and villa communities. Real estate consultancy Asteco reported modest increases in average apartment rents, with a quarterly rise of 1% and an annual growth of 2%. However, certain developments experienced more significant growth, with quarterly increases nearing 5% and annual growth reaching 10%.
Impact on Existing Tenants
For current tenants, rent increases may not be immediate due to Abu Dhabi’s 5% cap on rent hikes for renewals. As per the regulations outlined in Law No. 20 of 2006 (Article 16), landlords are restricted to increasing rent by no more than 5% annually, unless otherwise determined by the Executive Council. Prathyusha Gurrapu, Head of Research and Consulting at Cushman and Wakefield Core, highlighted this regulation, noting that landlords must adhere to the cap unless a decision is made to adjust this percentage.
Market Adjustments and Stabilization
Evgeny Ratskevich, CEO of Metropolitan Capital Real Estate, pointed out that the new rental index is likely to bring discrepancies between actual rents and market values into balance. He explained that adjustments could lead to gradual increases or decreases in rent, depending on whether current rates are below or above the market average. “These changes are expected to be gradual and balanced,” he said, emphasizing the index’s role in promoting fair market practices rather than causing drastic shifts in rental rates.
Svetlana Politova, COO at Whitewill Abu Dhabi, added that the rental index would likely stabilize rents, fostering more balanced rental agreements. She noted that in areas where rents were previously misaligned with market values, the index might lead to modest adjustments. For example, undervalued neighborhoods might experience rent increases, while overvalued areas could see slight decreases.
Ratskevich also emphasized that the index enhances the transparency and health of the real estate market by providing a standardized measure that helps tenants avoid overpaying and ensures landlords set competitive rental rates. Fouad Bekkar, Vice-President for Data and AI at Property Finder, echoed this sentiment, stating that the availability of reliable data would empower tenants and landlords, fostering trust and making informed decisions easier.
