The Dubai rent index is no longer being updated every four months, as it had been since 2009 when it was launched, the Dubai Land Department (DLD) has said.
The DLD confirmed that the rental index, which is used to map out maximum allowable rent increases on the expiry of a lease in developments across the city, would be only updated once a year, starting this year.
“After reviewing and studying the feasibility of issuing three indicators each year, and how it affects the submission of the increase in rates and the amount of impact coming from the data recorded in updating the index, we have adopted the issuance of one indicator per year starting 2015,” the DLD said.
The news comes after Dubai property brokers complained that the city’s rent index had been left behind by retreating housing rents, which JLL predicted in January would fall by 10 per cent this year.
According to another agency, CBRE, rents in upmarket areas such as the Palm Jumeirah and DIFC continued to fall during the three months to June by 2 per cent for apartments and 3 per cent for villas.
It also flies in the face of previous plans the DLD had proposed, which involved adding more detail to the index, including variable factors such as views, size of units and the age of the building.
The DLD added that the innovations were “in the stage of studying of the new properties, characteristics and specifications, and what affects the rents on all levels, both technical, locations or services”.
In May, the broker Cluttons complained that “with the Rera rent index yet to evolve into a complex rental matrix … it will continue to lag reality, leaving tenants somewhat constrained by a rental index that does not fully reflect market conditions”.
That may trigger more “off grid” deals in which landlords and tenants agree to rents that do not reflect the recommendations of the property watchdog, the broker said.
“We find this latest move by the DLD to be disappointing,” said Craig Plumb, the head of research for JLL’s Dubai office. “The index is widely used for setting rents and has become a useful and valuable tool. We would consider it necessary to update such an index every quarter or so.”
“By reducing the number of times the index is updated each year, the index will become a less flexible tool than it was in the past, and if rents were falling it could mean that tenants could be asked to pay rents that are above the real current market rate,” he added.
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