Dubai’s real estate market offers lucrative investment opportunities to both buyers and sellers. People from all across the globe are investing in the market which provides a steady flow of buyers to the market. However, it is not feasible for all buyers to purchase property without seeking financial assistance from the bank. Several banks provide mortgages on easy instalments and conditions, but paying at least 20% of the total price as a down payment is necessary.
This condition serves as a major hurdle in a property purchase. To cater to this, real estate developers in Dubai offer rent-to-own payment plans. The rent-to-own scheme enables buyers to purchase a property without paying heavy down payments.
Let’s take a closer look at the rent-to-own properties in Dubai, the benefits it provides and the legalities involved in purchasing them.
What are Dubai Rent-to-own Properties
The rent to own is a payment plan in which buyers pay their down payment in the form of monthly rent. These instalments are collected by the developer for a certain period, after that buyer’s either exit the agreement or use the collected amount to purchase a property. Around 5% or less upfront amount is required for a rent-to-own payment scheme. The lower upfront cost enables buyers to purchase property without taking a mortgage from banks in Dubai.
The rent collected by the developer is generally higher than other market properties. This is because of the convenience of purchase provided to the buyer. Moreover, the amount of rent paid is non-refundable whether the buyer purchases the property or not.
Legalities of Rent-to-Own Properties
DLD provides a legal framework and title deed for rent-to-own properties in Dubai. The lease agreement signed between the buyer and developer provides complete property transaction details to avoid any inconvenience.
Here are the complete details regarding different types of rent-to-own agreements and the important postulates included in them.
Purchase Agreement
In a purchase agreement, monthly rent instalments, overall property price, future valuation of the property at a specific date and number of monthly payments are mutually decided. Buyers and developers draft these points as per the future price of the property and market trends.
Option to Purchase
In the option to purchase, the buyer is provided with an option to opt out of the agreement and continue as a tenant or purchase the property. Developers charge an option fee that is non-refundable if the buyer opts out of the agreement. The amount of the option fee is dependent on the total amount of the property.
Important Postulates of Rent to Own Property Agreement
Here are all the important points that should be included in the agreement signed before purchasing rent-to-own property in Dubai.
- The timeframe of rental instalments should be decided under the upfront cost.
- The future value of the property after completion should be agreed upon, as future payments depend on it.
- Discuss the penalty amount in case of defaulted repayments or delayed property handover.
- The upfront cost should be 5% to 8% of the total property cost.
- Exit terms in case of an unexpected financial crisis.
- Maintenance of property till the agreement ends.
Pros of Purchasing Rent-to-Own Properties in Dubai
The rent-to-own scheme is getting rapidly popular in the Emirate. Here are some pros of renting your payment plan that will justify its popularity among buyers.
Lower Upfront Cost
The rent-to-own payment plans exempt you from saving money for a down payment in Dubai by providing instalment options. Moreover, a minimum upfront cost is charged by the buyer that is lower contrary to what is required for a mortgage. This minimum amount is required to be paid in instalments which adds to the convenience.
Building Equity
The monthly rent instalments build your equity towards acquiring property in the future. Along with this, buyers are secured from the continuous increase in property prices, as they will buy property as per the current value.
Maintenance Cost
In rent-to-own properties, the buyers live as a tenant till the agreement ends. Generally, developers are responsible for the maintenance of the property till the buyer is paying rent instalments. However, this may vary from developer to developer. Therefore, it is necessary to discuss this term before signing the agreement.
Where to Buy Rent-to-Own Properties in Dubai
The demand for rent-to-own properties is increasing rapidly in Dubai due to its financial convenience. These are the areas that are suggested for purchasing rent-to-own properties in Dubai.
- Dubai South
- Jumeirah Golf Estates
- Al Furjan
- Business Bay
- Jumeirah Village Circle
- Dubailand
- Al Barsha
- International City
- Dubai Silicon Oasis
This was all about rent-to-own properties in Dubai. The rent-to-own scheme facilitates buyers, especially those who are living on a budget and unable to save money for the down payment. Make sure that the payment plan is elongated and if you are purchasing it for investment the ROI will be delayed. Therefore, for investment, it is suggested to purchase property through direct payments. You can browse through these properties for sale in Dubai for purchasing a property for investment purposes.
In case you are new to real estate, read our blog on the hidden costs of purchasing a property in Dubai.
Stay tuned to UAE’s leading property blog for more information on Dubai properties for rent-to-own.
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