For many, owning property in Dubai seems an unattainable dream due to high prices and large deposits. However, the innovative Rent-to-Own scheme creates new possibilities for those who are not quite ready for a traditional mortgage, but who want to invest in the future and stop paying too much in rent.
So, what is Rent-to-Own in Dubai?
It is a popular and flexible way to purchase your own home, especially if you do not yet have enough funds to buy outright.
The scheme is simple: tenants enter into a contract with the developer and make monthly, quarterly or annual payments consisting of rent and a portion of the property's value. At the end of the agreed term, the property becomes the tenant's sole property.
This approach enables you to do more than just rent an apartment or villa; it allows you to gradually purchase it, effectively turning your rent payments into an investment. Unlike conventional rentals, where your money is gone forever, every additional payment here goes towards building up your share of the property.
Why is Dubai chosen for rent-to-own?
Dubai is considered one of the most attractive real estate markets in the world. The emirate's government actively supports private home ownership by offering favourable legislation to foreign investors. Large developers are creating special rent-to-own programmes, and banks are complementing these with flexible mortgage offers.
For many buyers, this is an excellent alternative to a mortgage as there is no need to pay 20% of the property's value upfront, as banks require of foreign residents. It is sufficient to pay only around 5–8% of the price, including registration and agency fees.
So, what is the difference between a mortgage and a rent-to-own scheme?
In the UAE, a mortgage requires significant initial capital, a complex approval process, and mandatory bank involvement. The rent-to-own scheme is more flexible: the contract is concluded directly between the buyer and the developer, and the registration process takes less time.
Another important advantage is freedom of choice. If the buyer decides not to purchase the property, they can either remain a tenant or find another home. With a mortgage, there is no such flexibility; once the deal is signed, you are responsible for the property.
There are two types of rent-to-own agreement
In Dubai, two types of agreement are most common. The first is the Option to Purchase agreement. The buyer has the opportunity to purchase the property, but can withdraw from the transaction. In this case, a non-refundable 'option fee' is paid if the transaction does not go ahead.
The second option is a purchase agreement. Here, the parties immediately agree on the price, the amount of the rental payments, and the amount to be credited towards the cost of the property. This provides transparency and confidence for both parties.
Advantages and risks for buyers
Rent-to-Own provides an opportunity to start the path to ownership without making a large initial investment. Buyers can ‘try out’ the property to ensure it is suitable for them and that the local area has good infrastructure before making a final decision on the purchase. Additionally, rental payments gradually build up capital which, in the future, will become the buyer's property.
However, it is important to consider the risks. If the buyer is unable to make all the payments or decides not to purchase the property, they may lose some of the funds they have invested. Furthermore, until the property is fully registered in the buyer's name, control over it remains with the developer.
So, is it worth choosing rent-to-own in Dubai?
For those unable to make a large down payment immediately or wanting to test out life in a particular area, it is an excellent solution. It helps you build a strategy for purchasing a home gradually, without pressure or unnecessary financial risks.
In Dubai's growing real estate market, where prices for flats and villas increase every year, Rent-to-Own enables you to secure today's prices and shield yourself from future price hikes.
Thus, rent-to-own is a bridge between renting and full ownership of real estate. With its flexible laws and variety of offers, Dubai has become one of the best places in the world for this scheme.
