I hope your German is up to scratch :) [1]

Basically: It's based on a consumer price index with the starting point of May 2000 (100%) and which is published every few years.

A landlord can apply a maximum of 40% of the index increase in rent-increase, since the last time rent was adjusted. This is based on his equity investment into the object.

Does this make sense?

[1] https://www.mieterverband.ch/mv/mietrecht-beratung/ratgeber-...

edit: slight clarification

> A landlord can apply a maximum of 40% of the index increase in rent-increase

So if inflation goes up by 10%, rent can only go up by 4%? Does that mean rent will be nearly free in 100+ years?

If inflation is 10% a year for 100+ years you are going to have bigger problems than the rent 130 year old person is paying.

I chose that number for easy math. The point is that rent grows less than half as quick as inflation, which is definitely unsustainable.

That is if you don't renovate nor modernise the building at all. It is an incentive for landlords to keep the building up to date. In your corner case scenario, an outdated 100 years old apartment would be pretty lame and worth its fair price of "almost free".

Essentially yes, that's correct.