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Last modified on 19th January 2024. Dubai Real Estate Blog

By Ward Mohammad

4 minutes read


With Dubai's property industry seeing a continued flow of new supply, developers have made attractive payment plans to capture buyers' attention to purchase built-up stock. Properties for rent in Dubai are earning popularity amongst buyers, helping them get into their first home quickly by removing the tension of a large down payment. This initiative provides developers access to a broader pool of buyers, who may not otherwise have the upfront capital to purchase otherwise – a mutually beneficial arrangement.

What is Rent-to-Own?

As the name itself suggests, you rent a property to own it at a later date. The translation is: you lease a home for a certain period with the motive of buying it at the end of your lease duration. That's how it starts! A part of your rent goes towards the eventual down payment of the house. Now, that portion of the rent is laying a solid foundation for your own home. And, you are not merely throwing away money but contributing to building house equity.

Rent-to-Own: How it Works?

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 more extended period, such as 20 years. The amount required up front is about 5% or less. Instead of obtaining a mortgage, monthly payments are made to the developer, and the property is paid off that way. Again, an upfront payment is required (though substantially lower than the 25% needed to secure a mortgage, plus additional upfront costs). 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. Still, the premium could be justified if you otherwise could not save for a deposit.

Is this a Legal Arrangement in Dubai?

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 Are The Types of Rent-To-Own Agreements?

  • Option to purchase: Under this scheme, the buyer pays an (option fee), a mutually agreed percentage of the purchase price, in exchange for the right to buy the property later. You lose the option fee if you choose not to proceed with the purchase.

  • Purchase agreement: All terms are mutually agreed upon upfront, with the buyer and developer deciding on a fixed purchase price or choosing to determine the cost with a future valuation at an agreed date.

What Are Rent-to-Own Pros and Cons?

A Rent-to-Own agreement could be a win-win situation for both parties. Let's dive into some of its benefits and disadvantages.

For Landlords (Sellers):

  • Eventually, savings on maintenance – a long-term tenant taking care of your property lowers the risk even if the deal doesn't materialize.

  • If your city's real estate market is booming, your investment could not be the hottest because you can't get out of the contract once signed.

For Tenants (Buyers):

  • Do you have a low credit score? You'll get more time to boost it or build it from scratch.

  • You have a low income and insufficient reserves: Rent-to-own is at your rescue!

  • A piece of rent gets credited towards the mortgage down payment. A big sigh of relief for the aspiring homeowner!

  • You will also have the privilege to live in a home you own one day without the hassle of moving from one place to another.

  • Unlike regular tenants, you'll also be responsible for maintenance and repairs (That hardly matters if you are firm in your buying decision).

To sum up, not everyone has the luxury of buying a home. In addition, various financial and personal conditions could hit your investment decisions. Hence, rent-to-own can prove to be a smart move for many.

Suppose you want to know about specific apartments for rent in Dubai or rent-to-own villas in Dubai. In that case, Driven Properties has all your questions answered.