Spain’s new rental index (IRAV): What it means

The transition from CPI to IRAV

In Spain, residential leases have traditionally linked annual rent increases to the Consumer Price Index (CPI). This practice allowed rents to rise in line with inflation, providing landlords with inflation-proof investments. However, starting in 2025, leases granted after May 25, 2023, must use the new rental index, known as the Índice de Referencia de Arrendamientos de Vivienda (IRAV). This applies retrospectively to those leases and will govern all future residential lease agreements.

Why was the IRAV introduced?

The IRAV aims to prevent “excessive” rent increases, particularly in response to the sharp inflationary rises seen in recent years. Prepared by Spain’s government statistical office, this new index takes the lowest value among three measures:

The annual variation rate of the CPI,
The annual variation rate of the underlying CPI, and
The adjusted annual average variation rate.

By using the lowest rate, the IRAV ensures rent increases remain more predictable and manageable for tenants.

The impact on residential lease investments

While the IRAV stabilises rent increases, it also reduces the inflation-proof nature of residential leases as investments. For landlords, this means annual rental income may no longer grow in tandem with broader inflationary trends. Investors will need to factor in the IRAV’s potential limitations when assessing the long-term profitability of residential properties.

What does this mean for tenants and landlords?

For tenants, the IRAV provides relief from rapid rent hikes tied to inflation, making housing costs more sustainable. Landlords, on the other hand, may face constraints on maximising rental income, particularly during periods of high inflation. As a result, some landlords may shift their focus toward other property types or pricing models to maintain profitability.