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With Dubai’s property market witnessing a steady flow of new supply, developers have created attractive payment plans in a bid to capture the attention of buyers to purchase built up stock. Rent-to-own schemes are gaining popularity amongst buyers, assisting them in getting into their first home faster by removing the pressure of a large down-payment. For developers, this initiative provides access to a wider pool of buyers, who may not otherwise have the up front capital to purchase otherwise – a mutually beneficial arrangement.

What is rent to own?

Each rent-to-own scheme is unique but, simply put, it’s an agreement between a developer and buyer where the equivalent of rental payments are used toward a down payment. This arrangement allows a buyer to simultaneously pay rent and “save” for a down payment. Other schemes are on a longer time span, such as 20 years. The amount required up front is about 5% or less, and instead of obtaining a mortgage, monthly payments are made to the developer and the property is paid off that way. An upfront payment is required (though substantially lower than the 25% required to secure a mortgage plus additional upfront costs) and once the contracted timeframe has passed, the buyer can choose to purchase the property, or exit the agreement. 
The rent is typically higher than the market’s rate considering the convenience factor for the buyer, but the premium could be justified if you otherwise would not be able to save for a deposit.

For more insights check the Property Finder Talks Episode 2: Rent to Own in Dubai.

Two types of agreements

Is this a legal arrangement?

Yes. The Dubai Land Department (DLD) launched the rent-to-own (Ijarah) service, a specific title deed register to provide a clear legal framework to facilitate such transactions.

What is the legal framework for rent-to-own schemes in Dubai? To find out more check this.

How does rent-to-own differ from a mortgage?

Buying a home via a bank mortgage is common practice, but the main hurdle faced by Dubai residents is the requirement for a minimum 25% down-payment, per UAE Central Bank regulations. In addition to this, there are further upfront transaction costs that must be accounted for.

For a detailed breakdown of upfront costs, read out article on ‘Factors to consider when buying a home in Dubai.’

The key difference between a rent-to-own scheme and a mortgage is the upfront payment required.

Upfront costs for a mortgage:

Upfront costs for a rent-to-own scheme:

Benefits of rent-to-own

What to watch out for

How does the payment plan for rent-to-own schemes look?

The payment plan under each rent-to-own scheme is unique as the terms are individually decided under a contract between the developer and the buyer.

Whilst the DLD has issued guidelines and associated fees regarding registration, financing, transfer and cancellation of rent-to-own contracts, the schemes created to date have been developed individually, on a case by case basis.

Compare between various mortgage offers and interest rates

What should be included in a rent-to-own contract?

What are the fees for rent-to-own schemes?

As determined by the DLD, the following fees are applicable when entering a rent-to-own contract:

Seller (Developer) fees:

Buyer fees:

Read more about Rent-to-own schemes.

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Disclaimer: Property Finder Guides is published by Propertyfinder FZ-LLC 1505 Shatha Tower, Dubai Media City, PO Box 50954, Dubai UAE. For article reprints, permissions and licensing, contact info@propertyfinder.ae. The information contained in Property Finder Guides is intended to be for general use only. The views, information, or opinions expressed by non Property Finder employees are solely those of individuals involved and do not necessarily represent those of any company, or its employees. While Property Finder had made every effort to ensure the accuracy of the information, we will not be held responsible for any errors contained in the document. If you wish to use or copy any of the text, or other materials, found in this report, you must first contact Property Finder for a written copyright permission in relation to the proposed use.

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