Are you interested in investing in real estate, but lack the down payment? Considering rent-to-own schemes in Dubai might be a good idea.
Dubai attracts a large number of tourists each year thanks to its thriving economy, tallest skyscrapers, and world-famous attractions. A tourist, entrepreneur, shopper, job seeker, or newcomer is among these groups. While this is true, property prices in Dubai remain a major hurdle. A ready-to-move-in property in Dubai is a costly investment, particularly when it comes to properties. Nevertheless, purchasing a property in Dubai doesn’t have to break the bank. The program we are referring to is a rent-to-own scheme in Dubai. Here’s everything you need to know about this scheme!
What Is Rent-To-Own Scheme?
In essence, a rent-to-own scheme is a contract between the seller and the buyer. Rent payments deposited over the term of the agreement combine to form the down payment on the property. This means that the buyer won’t have to deal with both rent and down payment for another property they wish to buy, since the scheme combines both.
In layman’s terms, rent-to-own schemes give buyers the opportunity to own their rented properties in Dubai at the end of the lease. The remaining amount (after the down payment) can be financed or the agreement exited with no further obligation.
Due to the convenience factor for the buyer, rental rates in Dubai are typically higher than market rates, but the premium might be justified if you couldn’t save for a deposit otherwise.
Types Of Rent-To-Own Agreements In Dubai
- Option To Purchase: An option fee must be paid by the buyer at the time of contract signing. In most cases, it is based on a share of the total property price that has been agreed upon between the parties. There is a clause in this agreement that states that the buyer can buy the property in the future if he so desires. A non-refundable option fee will be lost if a buyer decides not to purchase the property.
- Purchase Agreement: There is no option fee associated with this agreement. A fixed purchase price is decided by the buyer and developer at the time of contract signing. Some agreements do not specify the price of the property when they are signed. On the basis of market conditions, it is determined at a later date.
Rent-To-Own Contract – Things To Be Included
A rent-to-own contract should mention the value of the property that has been agreed between the buyer and seller, the lease term timeframe, exit terms, title deed ownership, percentage of down payment, penalty clause, and clause related to sudden loss of job, and property maintenance clause.
Rent-To-Own Scheme In Dubai – Legal Value
Dubai has legalized this arrangement. Dubai Land Department (DLD) has introduced a rent-to-own (ijarah) service to facilitate transactions associated with this scheme. Rent-to-own deals and transactions are governed by a specific title deed register.
Benefits Of Dubai Rent-To-Own Schemes
- Easy & Inexpensive Method To Buy Property In Dubai: As tenants do not need to put down a large sum of money, this scheme allows them to become property owners in Dubai easily and affordably.
- Doesn’t Involve Any Complications: There are a lot of factors to consider when applying for a home loan. There are strict eligibility requirements that must be met by the applicant. Applicants who fail to follow these instructions may have their applications rejected. Rent-to-own schemes in Dubai eliminate these issues because the process is straightforward.
- Experience Unlike Ever Before: Rent-to-own schemes provide the buyer with the opportunity to live in the house before they purchase the property. As a result, they can get a feel for the dwelling and ensure it meets their needs.
- Easy To Exit: Once the contract has matured, a tenant is generally free to leave the scheme without purchasing the property. However, if they have paid the option fee, the developer will retain it.
Things To Keep In Mind While Pursuing Rent-To-Own Schemes In Dubai
Compared to the market value, the rent in this scheme is usually higher. Following the end of the agreement, you must apply for a home mortgage loan in Dubai. Rent-to-own scheme’s payment schedule will vary from property to property. Each party agrees to the terms and conditions that are included in the agreement. Understanding the contract’s terms and conditions is crucial. It is also important for you to understand all the terms of any exit clauses that may be included in the contract.
Rent-To-Own Schemes In Dubai – Fees
The fees of the rent-to-own schemes in Dubai are determined by the Dubai Land Department. The buyer must pay 4 percent of the sale price, title deed issuance fee AED250, 0.25% amount of rent, map issuance fee subject to the type of property, and AED10 knowledge fee per fee. For properties in Dubai worth AED500,000 or above, there is the AED4000 registration fee. And, for properties worth AED500,000 or less, there are AED2000 registration fees.
The Takeaway:
Rent-to-own schemes in Dubai facilitate tenants and allow them to achieve their goal of owning a property in Dubai. To avoid getting into trouble in the later stages of the agreement, it is crucial to seek professional advice before signing the agreement.