A Detailed Guide About Rent-to-Own Properties in Dubai

Dubai is ranked among the top cities in the world. The development of high-rise infrastructure such as Burj Khalifa- the world’s tallest building, luxury living experiences, premium residential and commercial real estate investment opportunities, and a wide range of investment opportunities that come with flexible investment options such as rent-to-own properties, making Dubai an attractive location for property investment and attracting investors from all over the world. 

Undoubtedly, owning a home in Dubai is no less than a blessing. It has multifaceted advantages such as you can live your life as you desire and also generate rental income from your property or take advantage of capital appreciation. In short, owning a property is an exciting experience. However, it can be challenging at the same time, given the demands and cost of real estate in the metropolitan city.

The world’s elite can purchase and own every sort of residential and commercial real estate in this renowned city. Thankfully, Dubai welcomes everyone. No matter whether you are a super rich guy, a businessman, or a professional, you can make a purchase and own real estate in Dubai. Developers in Dubai come with several innovative payment plans to facilitate real estate investors and dreamers, enabling them to buy their desired properties for sale in Dubai.

The Concept Of Rent-To-Own Property In Dubai:

If you have a limited investment then do not worry because we have a suitable investment option for you. To your ease, developers have introduced several types of flexible payment plans. One of them is Rent-To-Own property in Dubai. This payment method allows a person to gradually increase the share towards down payments through monthly rental incomes. 

People who cannot afford extensive down payments on properties should consider this feasible plan because it is deemed an excellent solution for people who can hardly afford real estate investment in Dubai or those who seek mortgages. 

This is a property buying scheme that enables a tenant to rent or lease a property with an option to buy it in the future. So, a significant portion of the rent goes towards the purchasing payment, allowing people to build ownership in a feasible way. 

This scheme is quite beneficial as like mortgage payments, buyers are not supposed to pay 25% upfront cost as a down payment. Though the down payment is still there but in the case of rent-to-own property, the upfront payment is 5% of the total cost or even less.

How Does This Payment Plan Work?

Under this payment plan, a tenancy contract is signed between the buyer or tenant and the developer or seller of the property. Both parties agree on a fixed rental period, payment schedule and the total cost or purchasing price of a property.

Following the agreement, the tenant or buyer has to pay the decided down payment which is 5% or even less in most cases. Given this smaller down payment, this option is considered better than considering a mortgage. Monthly rental payments that the tenant has to pay contribute towards this purchase as a portion of those payments builds equity in the property. Furthermore, when the lease period finishes which is typically longer than normal rental durations, the buyer has the option to negotiate the final price based on the decided terms and conditions and make a purchase.

The Dubai Land Department is authorized to issue a Title Deed and develop a framework for such property transactions to ensure transparency and protect the interests of both buyers and sellers. An agreement that involves all terms and conditions related to the tenancy period and property purchase is signed by both parties.

Let’s Explore the Pros & Cons Of Rent-To-Own Properties:

This payment plan attracts real estate investment enthusiasts and allows them to own their homes or real estate in one of the most developed cities in the world. You can own your dream home and live your life as per your standards without worrying too much about hefty down payments.

Pros For Buyers

• First of all, this flexible payment plan makes it easy to buy property in Dubai by allowing tenants or buyers to start building equity through rental payments without paying 20% or 25% as down payments, making it easy and affordable to own real estate.

• This procedure does not bind someone to buy property but offers flexibility. It means a tenant or buyer can decide whether to buy this property or not while staying there as a tenant. This stay works as a trial period, allowing them to evaluate its offerings, neighborhoods, and available facilities and decide based on personal experience.

• A buyer does not have to worry about his payment because a portion of the rental payment gradually builds equity. It means he does not have to pay any additional payments along with rental payments unless this tenancy contract ends.
• Normally, the final purchase price is decided at the time of the lease agreement, preventing potential buyers from the impacts of a surge in prices. Somehow, it gives leverage to the buyer because the increase in the purchasing price of a property does not influence the agreed-upon payment.

Pros For Sellers

• This payment method attracts a wide range of investors, increasing the possibility of a better price, and allowing sellers to generate significant returns on investment

• The landlord also capitalizes on an extended lease agreement and receives rental income during the lease term.
• Tenants also take care of their rented homes or properties which also goes in the favor of the landlord or seller. Furthermore, the type of contracts also reduces the vacancy ratio of properties

Cons Of Rent-To-Own Properties For Buyers

• Rental payments are quite higher in this type of property purchase. A tenant has to pay a higher rental payment than a standard lease payment because a part of this payment builds equity in the property.

• If a tenant or buyer does not buy or purchase that property at the end of the agreement, he does not get his extra payments back that he paid via rental payments.

• Normally, the final payment is decided in advance at the time of the lease agreement. So, if the cost of property depreciates then a buyer does not get any advantage and he has to make overpayments.

• There are a very limited number of properties available that can be purchased through a rent-to-own-property payment plan.

Cons For Sellers

• Although a landlord receives a portion of the payment but he has to wait for years to reap the complete benefits of selling his property.

• The value of properties increases significantly in Dubai because of the increasing demand for real estate and the growing population. It means the seller may not obtain the maximum output from this sale.

• If the buyer does not go for the purchase at the end of the lease then the seller or landlord may have to find another tenant or buyer that can be troubling.

Required Documents To Buy Property Via Rent-To-Own-Property Scheme:

Generally, you must be at least 21 years old at the time of the purchase. Furthermore, you should also showcase a record of your employment, a monthly income record which must be at least AED 15,000 to AED 20,000 and a credit report to buy real estate via this scheme.

Further Documents Are Mentioned Below:

Residence Permit and Valid Passport

• Emirates ID
• Income Proof
• Credit report
• Employer’s No Objection certificate

Summing up

Dubai’s property sector investment comes with multifaceted advantages, attracting investors from all over the world. Some people desire to buy property in this city but they cannot afford it because of income constraints. For them, developers have introduced several types of payment plans such as rent-to-own-property. This payment plan allows people with limited budgets to buy property. A lease agreement is signed between the landlord and the tenant and a portion of the rental payments builds equity as it goes towards property purchase.

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