Annual Rent Updates in Portugal: How the INE Coefficient Works

Every year in Portugal, landlords have the legal right to update the rent on their residential leases — but not by any amount they choose. The update is tied to an official inflation coefficient published by INE (Instituto Nacional de Estatística, the Portuguese statistics agency), and since 2023, there's a hard cap that limits increases even further.

If you're a landlord wondering whether you can raise the rent, or a tenant who just received a rent increase notice, this guide explains exactly how the system works and what the law requires.

The Legal Basis: Article 1077 of the Civil Code#

Article 1077 of the Portuguese Civil Code establishes that rent for urban leases can be updated annually, according to a coefficient published by INE. This is the coeficiente de atualização de rendas — the official rent update coefficient.

Key principles:

• Annual updates only: Rent can only be increased once per year
• Coefficient-based: The increase cannot exceed the official INE coefficient
• Written notice: The landlord must notify the tenant in writing before the update takes effect
• Contract must allow it: The lease should include an annual update clause (most standard leases do)

How the INE Coefficient is Calculated#

INE publishes the annual rent update coefficient every year, typically in October, for application in the following year. The coefficient is based on the Consumer Price Index (CPI) — specifically, the 12-month average inflation rate ending in August of the preceding year.

The Formula#

The coefficient is calculated as:

Coefficient = 1 + (CPI average inflation rate)

For example, if the average inflation rate is 2.16%, the coefficient would be 1.0216, meaning rents can increase by up to 2.16%.

Where to Find the Coefficient#

The official coefficient is published in the Diário da República (Portuguese Official Gazette) and is available on the INE website at ine.pt(opens in new tab).

Year of Application	INE Coefficient	Max Increase
2024	1.0694	6.94%
2025	1.0216	2.16%
2026	Published each October	TBD

The Mais Habitação Cap (Lei 56/2023)#

In 2023, the Portuguese government passed Lei 56/2023 (Mais Habitação) — a housing law that introduced significant tenant protections, including a cap on rent increases.

The 2% Cap#

Under Mais Habitação, if the property has been rented within the previous 5 years, the annual rent increase is capped at:

• 2% of the current rent, or
• €50 (whichever is higher)

This applies regardless of what the INE coefficient says. So even if the INE coefficient would allow a 6.94% increase, landlords are limited to 2% if the property was previously rented.

Who Does the Cap Apply To?#

Situation	Cap Applies?
Property rented continuously for years	✅ Yes — 2% max
New tenant, same property (rented within 5 years)	✅ Yes — 2% max
Property entering rental market for first time	❌ No — full INE coefficient applies
Property vacant for 5+ years before re-renting	❌ No — full INE coefficient applies
Commercial lease	❌ No — residential cap only

How to Apply a Rent Update#

Step 1: Check the Current Coefficient#

Confirm the applicable INE coefficient for the current year. This is published in the Diário da República and on the INE website.

Step 2: Check If the Mais Habitação Cap Applies#

Determine whether the property has been rented within the previous 5 years. If so, the maximum increase is 2% (or €50).

Step 3: Calculate the New Rent#

Apply the lower of:

• The INE coefficient increase, OR
• 2% (if the Mais Habitação cap applies)

Example:

• Current rent: €800/month
• INE coefficient: 1.0216 (2.16% increase)
• Property rented within 5 years: Yes
• Applicable cap: 2%
• New rent: €800 × 1.02 = €816/month

Step 4: Notify the Tenant#

Send written notice to the tenant at least 30 days before the update takes effect. The notice must include:

• The current rent amount
• The new rent amount
• The applicable coefficient or cap
• The effective date

Common Mistakes to Avoid#

For Landlords#

• Exceeding the coefficient: You cannot increase rent by more than the INE coefficient (or the 2% cap, if applicable)
• Skipping written notice: Verbal notice is insufficient — put it in writing
• Wrong timing: You must wait until the contract anniversary to apply the increase
• Multiple increases per year: Only one annual increase is permitted

For Tenants#

• Ignoring the notice: If you receive a valid rent increase notice, the new rent applies from the specified date
• Assuming no increase allowed: Even during high inflation, landlords are legally entitled to the annual update
• Not checking the math: Verify that the increase matches the published INE coefficient and doesn't exceed the applicable cap

Rent Updates and Your Deposit#

When rent increases through the annual coefficient, the security deposit (caução) should technically be adjusted to maintain its two-month equivalent. However, this adjustment requires mutual agreement — the landlord cannot unilaterally demand additional deposit funds.

Frequently Asked Questions#

Include the Right Clause in Your Lease#

A well-drafted lease should include a specific annual rent update clause citing Article 1077 of the Civil Code and the INE coefficient. This protects both landlords (by preserving the right to increase) and tenants (by limiting increases to the legal maximum).

CompliantLease automatically includes this clause with the correct legal references in every contract.

For a complete legal breakdown of how rent increases work — including the Mais Habitação 2% cap, re-rental limits, and step-by-step calculation examples — read our guide: Annual Rent Increase Rules in Portugal. You should also understand your rent receipt obligations, as receipts must reflect updated amounts, and how rent updates interact with lease renewal and renegotiation.

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