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Guide 2024: Rent to Own Properties – Schemes and Process

What’s the easiest way to own a property? Either you buy a home, or you rent it. Buying a home requires a large amount of investment. As a result, people prefer to pay a small monthly amount in the form of rent, rather than buying the property altogether.

However, there’s a third way for you to buy property. Enter the world of Rent to Own. Rent to own is a process where rather than buying a property, or renting it completely, you pay a premium amount as rent. A percentage of the rent is kept aside, and accumulates as the buying amount.
Fascinating, isn’t it? In today’s blog, we’ll dive deep into the world of rent to own properties. In this blog, we’ll explore notable areas with rent to own options. So stay tuned and keep reading. First, let’s explore how rent to own schemes operate in Dubai.

Rent to Own in Dubai

Now, why should you go for rent to own in Dubai? The answer is because it’s a simple method which helps you accumulate the amount needed to finance the down payment of the property.

Usually, around 20-30% of the amount of the monthly rent is cut and added as the down payment. When this amount accumulates, you can pay this as the initial payment, after which you can make other payments through cash or mortgage.
Next, we’ll explore how going for a rent to own property in Dubai is different from that of going for a lease to own property in Dubai.

Difference Between Rent to Own and Lease to Own Property in Dubai

A major fallacy is that various people interchangeably use the terms rent to own and lease to own, which is a major problem. So, what is the difference between both?
The basic difference lies in the terms and conditions of both contracts. In a rent to own agreement, the tenant has the right to purchase the property. Now, it depends on the tenant as to whether or not they want to exercise that right.

On the other hand, in a lease to own agreement, the tenant is obligated to buy the property once the term is over.

In either case, the modus operandi is the same. i.e. you are able to accumulate the initial amount needed to buy the property. However, in the case of a lease to own agreement, you must buy the property at the end of the lease term.

So, which is the better option? We’d suggest to make a decision based on your priorities. For example, if you really plan to own a home and are sure that you have a robust plan to arrange the necessary finance at a later date, then go for the lease to own option.
However, if buying the property isn’t your prime goal, then go for the rent to own option. This way, you’ll not be under the pressure to buy the property upon completion of your term. With that said, let’s look at the process that you need to go through in order to buy a rent to own property in Dubai.

The Process for Buying a Rent to Own Property in Dubai

Basically, the process runs on the basis of a mutual agreement between the buyer and the seller. The terms and conditions of the agreement are as follows.

  • Your contract is more or less like a regular tenancy agreement, whereby you are the tenant, and the owner is the developer.
  • As a result of this agreement, you and the developer are obligated to abide by the rights of both parties as per the laws of UAE.
  • The buyer and the developer agree mutually on the number of years that the property will be provided to you for rent. For example, you may agree to a contract for 20 years with a premium monthly payment which is usually less than the amount needed for a mortgage.
  • The amount that you pay above the market rent. I.e. premium, accounts for the convenience factor involved. Because, you don’t need to pay a huge amount upfront for the deposit.

Now, let’s discuss the various rent to own schemes available in Dubai.

Types of Rent to Own Schemes Available in Dubai

In Dubai, there are two types of rent to own schemes currently available.

1. Possibility to Purchase
Under this scheme you pay an option fee which adds a purchase option to your agreement. The purchase fee is non refundable if you decide not to buy the property at a later date. Usually the purchase fee is a percentage of the property’s purchase price. Now, why is it good to have this option in your agreement?
You might be wondering that paying the option fee is a sunk cost. Right? But this sunk cost is way better as it provides you with a lifelong option to decide about whether or not you want to purchase the property. As a result, if you have a change of mind, you can decide to opt out of the purchase at a minimal cost.

2. Purchase Agreement
In this case, there is a predetermined future price of the property, and the buyer is obligated to buy the property once the tenure of the agreement is fulfilled. Signing such an agreement is fruitful only if you are sure about your decision to buy the property.
Now, let’s explore the legal standing of these agreements.

The Legal Status of Rent to Own Agreements in Dubai

Yes, the agreements are completely legal and recognized by the DLD (Dubai Land Department). In fact, the Dubai Land Department has launched its own rent to own service to facilitate the provision of the legal documents needed to fulfill the agreement.
So, when you visit the website of the Dubai Land Department, go to “Request for registration of a rent-to-own property(initial).” In this section, you’ll be able to find all the documentation necessary to fulfill the rent-to-own requirements.

To set up an agreement, you’ll need a sale and purchase contract, a copy of your UAE ID and a valid passport for non residents. In case if you’re the representative of a company, you’ll need a valid trade license, or a copy of the company’s UAE ID.

Based on these documents, you can complete the transaction accordingly.

The DLD has further issued guidelines about the payment process and other implications involved while owning a property on a rent to own basis. Each scenario has been developed, based on the cases encountered by the DLD.
For further information, you can visit the Dubai Land Department Website.

Where Can You Buy Rent to Own Properties in Dubai?

There are many areas in Dubai where you can buy rent to own properties from notable developers like Emaar and Damac properties. These areas include names like Jumeirah Golf Estates, Business Bay, and Al Furjan.

The Takeaway

Getting a hold of rent to own properties in Dubai is a great way to own a home or an apartment without the need to borrow a huge sum as a mortgage, or pay a huge amount upfront. There is a major difference between rent and lease to own properties which results from a difference in the clause. In a rent to own property agreement you have the right to opt out of the purchase decision by paying the option fee.
However, in a lease to own agreement you are obligated to buy the property upon fulfillment of your tenure. As a result, before making the decision, set your priorities and then take a step.

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