Rent to own properties in Dubai - How does the concept work?

  • December 02, 2021

Rent to own properties in Dubai - How does the concept work?

Dubai real estate is the most lucrative investment option and before researching on how to invest or where to buy properties in Dubai, investors are advised to double-check their budget. After moving to Dubai, a large number of expats prefer rental properties because they either do not have much to initiate the buying process. Factually speaking, rental properties can never give you the financial freedom that comes with owning a property. Rental payments are considered good for nothing because you can never consider rental property as your asset, even after years.

Being a savvy buyer, you must consider investing in Dubai properties, if you think about securing your future. However, if you cannot save enough to buy a property there right away, this rent to own Dubai properties plan is for you.

  • Rent-to-own is a viable, appealing, and cost-effective investment option, where you can rent a property in Dubai with the plan to acquire it in future.

Dubai real estate sector is bouncing back amidst COVID-19 led upheaval and developers are striving to capture potential buyers’ attention with attractive payment plans and new investment schemes. Different developers are offering these schemes due to the escalating demand and popularity for such projects in the recent time.

What is rent-to-own?

Rent-to-own is a unique investment plan, which is an agreement between a developer and buyer to use the equivalent of rental payments towards a down payment. It allows a buyer to pay rent and save for a down payment, simultaneously. It is beneficial for buyers, who are interested in a mortgage to buy a property but do not have enough to pay as a down payment.

  • The banks in the UAE require buyers to pay 20% to 30% upfront of the total property price – in order to be eligible for a property.
  • At the end of this contract, the rental payment will be considered as a down payment – allowing the buyer to complete the transaction through a mortgage or cash payment.

Rent to own properties in Dubai are for those buyers, who are ready to purchase by paying 20% to 30% of the total purchase price as rent, over the next three to four years.

Is it legal to buy rent-to-own properties in Dubai?

Yes, it is completely legal to buy rent to own properties in Dubai. The Dubai Land Department (DLD) has launched the rent-to-own service – a title deed to describe the legal framework related to such transactions.

How does Rent-to-own scheme differ from Lease-to-own?

It is a common practice to buy properties for sale in Dubai through bank lease (or mortgage), but the major hurdle that middle-income potential buyers face is the condition of paying 20% to 30% down payment (depending upon the developers’ requirement). And this upfront payment is the basic difference between rent-to-own and lease-to-own schemes. Moreover, the rent-to-own buying schemes cover the initial down payment only, while the lease-to-own schemes cover the entire purchase. Resultantly, lease-to-own schemes are longer and people mostly avail this service for 10 to 20 years. When it comes to buying Dubai properties, the upfront payment is the game changer.

Upfront costs for a mortgage:

  • 20% to 30% down payment in cash form
  • 7% to 8% of the total property price as DLD fees, agent fee, and bank processing fee

Upfront costs for rent-to-own scheme:

  • Approximately, 5% to 8% of the total property price to complete the initial purchase process.

What are the advantages of rent-to-own properties in Dubai for buyers?

Rent-to-own investment schemes are designed for potential buyers, who are willing to invest in Dubai Properties and it makes the procedure easier. Rental payments are considered as an instalment to acquire your property. Though the buyer is considered as a tenant during the initial contract for the first three or four years but the rental amount helps you build equity. Moreover, you can rent the property before initiating the purchase process, so you will have complete know-how about the purchase.

Take our expert advice…

Rent-to-own properties in Dubai are attractive for buyers but team Copperstones wants to make you aware of certain pointers such as:

  • Understand the terms and conditions of the agreement before proceeding with the purchase.
  • Consider market fluctuations, exit clause, and the timeframe for payment
  • You are paying in instalments, so you may end up paying more for a regular property so, consider every point and discuss your every concern before taking the final step towards property ownership.