The Index, launched by the Dubai Land Department (DLD) in January 2025, has shifted bargaining power towards tenants and created what brokers describe as a more balanced rental market, with data from the first half of 2025 revealing divergent trends across different price segments and neighbourhoods.
Landlords are recalibrating their pricing strategies in response to the artificial intelligence-powered tool, which uses multiple data points including rental contract values, area averages, and building classifications to determine fair rental adjustments whilst requiring landlords to provide 90 days’ notice for increases.
“Tenants have successfully used the index to challenge unjustified rent hikes, leading to fairer rental agreements and reduced conflicts between landlords and tenants,” said Ronan Arthur, Director and Head of Residential Valuation at Cavendish Maxwell.
Experts say the framework has encouraged fair pricing by limiting landlords’ ability to raise rents beyond set thresholds.
Regulatory tool creates market discipline
The new framework has created what brokers describe as a two-speed market, with luxury waterfront communities continuing to post gains whilst budget-friendly areas experience corrections. Several mid-tier and budget areas experienced significant corrections as the regulatory tool took effect.
In Al Furjan, five-bedroom villas fell 12.9 per cent to AED 319,000 annually, whilst four-bedroom units declined 4.92 per cent to AED 234,000, according to Bayut’s latest half-year report. Certain areas in Jumeirah Village Circle also reported decreases of up to 13 per cent for specific property types.
International City and Discovery Gardens experienced rental declines during the first half, which Maxwell attributed to recent regulatory crackdowns on subletting and increased competition from higher-quality nearby units.
“The DLD Smart Rental Index, launched in January 2025, is beginning to limit extreme rental hikes, especially in communities with higher vacancy or ageing stock,” said Andrew Cummings, Head of Residential Agency at Savills Middle East.
“This is creating a more data-driven, transparent negotiation environment for tenants and landlords alike.”
According to Bayut, budget-friendly properties saw increases limited to nine per cent, whilst mid-tier rentals generally rose by up to seven per cent – a marked moderation from previous years’ double-digit spikes.
Prime areas maintain upward pressure
Despite the regulatory constraints, prime areas like Business Bay and Dubai Marina saw rental rates increase during the first half, driven by young professionals seeking proximity to Dubai’s financial districts.
“Business Bay saw rental rates increase in H1, driven by high demand from young professionals and its proximity to Downtown Dubai and DIFC,” Maxwell said. “Dubai Marina also saw rates increase, supported by continued demand for waterfront living, proximity to the beach and JBR.”
The luxury villa segment showed particularly strong momentum, with properties in Emirates Hills, Jumeirah Golf Estates, and Dubai Hills Estate recording rental increases of up to 11 per cent, according to Cummings.
“Mid-market apartments in Dubai Marina, Downtown Dubai, JVC and Dubai Hills Estate recorded the strongest growth in H1 2025, with luxury villas in Emirates Hills, Jumeirah Golf Estates, and Dubai Hills Estate up by around 18 to 45 per cent in sales prices and villas seeing up to 11 per cent rental increases,” Cummings said.
Dubai Hills Estate emerged as the standout performer in the luxury villa segment, with six-bedroom properties seeing a 52.5 per cent increase in asking rents to AED 2.31 million annually.
However, despite the regulatory changes, short-term rental conversions continue to affect pricing dynamics in prime locations. The conversion of units to platforms like Airbnb has tightened long-term supply in Dubai Marina, Business Bay, and Jumeirah Village Circle.
“Short-term rentals have kept rents elevated in areas like Dubai Marina, Business Bay, and JVC by reducing long-term supply and increasing demand for furnished, flexible units,” Cummings explained.
Arthur noted that in areas where landlords convert units to short-term rentals to capitalise on higher yields, fewer properties remain available for long-term tenants, driving up rents and making it harder for tenants to find affordable housing.
Landlords adjust strategies as market balances
The regulatory intervention has forced landlords to recalibrate their approach to pricing and tenant relations. Market experts emphasise that inflexibility on pricing could prove costly in the new environment.
“One crucial point for landlords: dead occupancy is expensive. Being inflexible on pricing can result in longer vacancy periods, especially in a market where tenants have more options,” Cummings warned.
Despite the regulatory constraints, Dubai’s rental market maintained robust activity levels. Data from Betterhomes showed 39,251 rental transactions in July alone, representing a 3.4 per cent month-on-month increase. New rental contracts accounted for 40 per cent of deals, up from 37 per cent in June.
Supply pipeline expected to continue moderation
Looking ahead, industry experts predict supply increases will help moderate rental growth in several key areas. Arthur expects rental prices may begin to moderate in developments within communities where high numbers of newly handed-over units are entering the market.
“Rental prices may begin to moderate and stabilise in certain developments within communities where a high number of newly handed-over units are entering the market,” Arthur said, pointing to Jumeirah Village Circle and Business Bay where high volumes of off-plan sales are being completed.
However, areas currently attracting tenants due to their affordability may still see increases. “Areas like Dubai South, Emaar South, and The Valley, which are currently attracting tenants due to their affordability, are likely to see further rental increases as demand rises and supply tightens,” he added.
