Rent to Own Properties in Dubai Guide - Schemes and Process
Author: Faizan Amin
Living in a rented home is usually considered a cost-effective way, especially if you haven’t yet accumulated enough money to buy a house. Realistically, it cannot be compared with the financial freedom that comes with owning a property, where you are no more burdened by periodic hefty payments going to your landlord’s pocket.
Rental homes might sound convenient if you don’t take a deeper look at things. As you can simply continue with your life, paying a considerable section of your earning regularly to keep a home, which doesn’t turn into an asset even after years of paying.
Moreover, the tenants will know that they have to consider their rental payment whenever making a financial decision, be it starting a business, switching a job, or anything else involving money.
Luckily for all, the UAE has one of the best environment to buy properties, with Dubai leading the charge with the most flexible regulations and some of the best financing solutions for owning your own home. You will find banks offering the most attractive mortgage solutions while property developers bring you ideal rent to buy Dubai property choices.
Rent to Own Dubai
With such increasing popularity and acceptance of rent to own deals, one might wonder about the concept they follow. In simple words, the buyers can purchase the property from a developer, and start paying on a monthly, quarterly, or annual basis as per the agreed-upon payment plans.
Through your monthly payments, you pay rent and also a fraction of the total property price. So this way, by the end of the total tenure, you will be the sole owner of the property and can enjoy all the perks of equity. Most importantly, by paying slightly more than your rent, you can one day be freed from this burden for the rest of your life.
What Companies Offer Lease to Own Dubai Solutions
In Dubai, there are a lot of credible property developers that churn out high-end residential properties. Along with the best residential setting, these Dubai Real Estate Companies also offer mortgage loans and rent to own deals.
So for those looking to purchase the property most suited to their needs, these financing options are the best opportunities. One can easily start living in their own homes without having to pay hefty prices in one go.
Rent to Own Properties vs Mortgage Financing
Mortgage loans have their own set of benefits, as they also allow you to buy properties in a convenient manner. Let’s discuss some basic factors differentiating rent to buy offers with mortgage financing.
Down Payment or Upfront cost
The major difference in terms of payments is that with mortgage loans, you need to pay at least 15% of the total property price in advance if you are a UAE national, while as an expat you will have to bear a minimum of 20% of the price at the beginning of the process.
With a rent to own scheme, you get to cut down on the up-front costs substantially and have to pay around 5-8% of the property price, which includes all registration charges, real estate agent fee, and other additional costs. The best thing is, you can take a bank loan to pay this initial charge and keep yourself burden-free to the maximum extent.
The second important aspect where rent to own arrangement differs from a mortgage loan is that the application process is much more simple and easy for the buyer. As with mortgage loans, there is the direct involvement of three parties, i.e. the seller, bank, and buyer, and as rent to own deal is between the property developer and buyer only, there are lesser complications and the application process is very quick.
Flexibility of Commitment
In a mortgage loan, you need to select a property, finalise all the process and get its ownership. It doesn’t give you room to change your mind at any point in time until you are able to sell the property off.
With rent to own, you can opt for an option to purchase scheme, which will allow you to easily decide against buying the property if you change your decision. So with rent to own Dubai scheme, you can keep your options open.
Rent to Own Apartments Agreement Types
You can pursue a rent to own setting in multiple ways. The contract type determines the overall flexibility, security and financial benefit there is for the buyer and the seller. Let’s take a look at both agreement types common in rent to own Dubai schemes.
Option to Purchase
This type comes with a choice for the buyer to opt out of the deal and continue as a tenant. The buyer has to pay a sum under ‘option fee’, which is basically the cost of having a choice for the buyer and some compensation for the seller when the deal is not fulfilled. So when the buyer decides to not proceed with the purchase, the option fee is legally kept by the seller.
This is the simpler form of the process, where buyer and seller agree upon a price, rent, and total monthly payments after considering the future value of the property as per the market trends.
Registration Process and Charges
Rent to own deals are regulated by the Dubai Land Department, where you have to register your agreement to make it legally binding. Buyers and sellers both have to pay specific charges to the department for registering the deal.
Charges for Seller
Developers and individual sellers have to pay 2% of the total property price to the Dubai Land Department.
Charges for Buyer
The buyers have to bear these costs for registering the agreement:
- 2% of the property price
- Fee for title deed issuance: AED 250
- Map Issuance Fee (For some property types)
- 0.25% of the agreed rent
- Registration charges of AED 4,000 for properties valued AED 500,000 or more. The registration fee is AED 2,000 for properties priced under AED 500,000.
- Knowledge Fee: AED 10
Benefits of Rent to Own Homes
Rent to own deals bring you the most beneficial and convenient way of entering the property market as a buyer. You can simply pay for your favourite properties through an agreed-upon tenancy agreement and payment plan, and make yourself the future owner of a coveted piece of real estate. Let’s take a look at some of the benefits you secure when you buy the property with this method.
If you don’t haven’t accumulated enough savings to get you your favourite property, you need not worry anymore as rent to own Dubai schemes are here to help your cause. You can easily continue paying the same way as you do with your current property for rent.
Capital Gain with Time
It is an established fact that the Dubai property market will continue to soar, which is a continuous trend in the past few decades. So if you start saving now to purchase a property in the future, you will find the increasing prices a major hurdle and you will also have to pay a much greater sum than you have to now.
With rent to own schemes, you can easily benefit from the current prices which are surely less than they will be in the years to come. This way, you get the better price and also an opportunity to get a good capital gain once you completely own the property in future.
Maintenance Cost of Rent to Own Apartments in Dubai
Another major advantage of opting for a lease to own deal is that the owner has to take care of all maintenance costs attached to the property. You read it correctly, you won’t have to pay for maintenance of the apartment or villa you have acquired until you become its sole owner.
Buy or Rent Property in Dubai?
Dubai is a city of many attractions, as it offers a pleasant living environment and plenty of earning opportunities. Along with that, it is also known for its quick progressing real estate sector, where investors can reap returns which cannot be imagined in other parts of the world.
So if you are living in a rented property while enjoying all other benefits of living in Dubai, now is the best time to take it a notch higher. It is very easy for someone with a bankable source of earning to become an investor in the city. You can break free from monthly payments of rent in Dubai property and become the owner yourself.
Though every individual has its own set of situations and plans for the future, buying a property is always advisable for anyone who can do so. The rent to own offers have brought the opportunity for everyone who can afford to live on rent, so now is the time to take advantage of these deals. Here are some of the benefits you can gain by simply becoming a property owner:
- Firstly, you become free from the periodic burden of rental payment, which allows you greater financial freedom and opportunity for further monetary gains.
- You get the benefits of equity, which means you can avail all financial services offered in Dubai for those with equity. Be it property loans, personal finance or business debts, so you can open new avenues of financial progress for yourself.
- Last but not the least, the capital gain is a major attraction. There will be a great difference in the price of the property on the day you enter the rent to own agreement and when you finally become its owner. Then you can choose to benefit by selling the property off, giving it out on rent or simply continue using it as your residence.
Rent to own solutions are your perfect route to owning a property in Dubai. The rental plans are convenient, flexible and come without big advance payments. So all those living in rented homes should consider this opportunity as owning a property in Dubai is extremely beneficial, and if it comes to you without having to pay the full price or even a down payment, there can be no better deal than that.
Frequently Asked Questions
How to buy an off-plan property in Dubai?
Dubai has a lot of off-plan projects that are offering apartments, villas, townhouses and penthouses for booking. You can simply find the best properties based on your financial strength and preferences, and contact the project developer for booking the property. You also should take into account the location and credibility of the developer, as these will determine the ease of living and the future property price.
Is it better to rent or buy property in Dubai?
Buying a property is always better than renting. The amount of money paid in rents doesn’t help you accumulate a future asset. Buying a property through mortgage loans or rent to own deals helps you use your money for building an asset for yourself, which will bring monetary benefits in the future.
So, considering the individual financial situation, one should always aim to buy a property in Dubai. The property market of Dubai is also very beneficial for investors, so one can expect good returns in terms of rental payments, price hikes, equity benefits and also legal benefits.
Are rent to own programs legit?
Rent to own programs in Dubai are legit, but one should always do some research on selecting the property. Projects by renowned property developers like DAMAC are very safe options and can bring good value for your money. Selecting a property by a major property developer will also ensure better facilities within the project and also better capital and rental gains.
What credit score do you need for rent to own?
The credit score gives an insight of an individual’s capability to pay off a loan, but as there is no lending involved in rent to own contracts, it isn’t a very important factor as it is in Dubai property mortgages. Some developers might choose to consider it for their own safety and convenience, but generally, you can expect to get the deal from most property developers even without worrying about your current credit score.
Can you pay off rent to own early?
Paying off the amount depends on the mutual agreement between the buyer and the seller. The contracts often carry clauses that allow or prevent early payoffs, so as a buyer you should check this at the time of the initiation of the agreement.
If there is nothing in the contract, you can discuss this with the property developer about it. Usually, the buyer has to pay some additional rent, but less than the overall rental amount as per the contract while the property price doesn’t change.
How does a rent to own mortgage work?
The process of rent to own scheme is very simple to understand. The buyer and developer enter an agreement, in which the buyer pays off the price of the property and the rent for that period according to an agreed-upon payment plan.
The buyer gets the benefit of pursuing property ownership without having to pay the full price or a hefty down payment, while the sellers get to make some profit out of the investment while also receiving beneficial cash inflow. There are two types of rent to own agreements, so buyers should learn about them and select the one that suits them more.
What are the steps to rent to own a house?
Rent to own schemes have a very simple process. You have to follow these steps:
- Find properties by developers offering rent to own plans.
- Select a property and enter the agreement with the seller.
- Register the agreement with the government authority and pay the charges.
- Follow the payment plan and eventually become the owner of the property.
These are all the steps you have to follow to buy a property through rent to own offers. The agreement details, rental charges, and several other aspects depend upon the agreement between the buyer and seller, but the steps to follow generally remain the same as there aren’t any more government or legal requirements.
Can I rent to own a home with bad credit?
In rent to own agreements, the credit scores are generally not considered. Some developers might prefer considering the credit history, but usually, it isn’t a factor that will stop you from getting a rent to own agreement.
But it is suggested that you only enter the agreement only if you are sure to oblige with the payment plan. If you think a certain property can become out of reach for you, you should choose a property that is priced lesser and enter the agreement.