Do youu want to buy a unit, but saving the down payment is a hassle? With the rent-to-own schemes in Dubai, this is not a problem anymore. It’s a leasing program that allows you to rent a property for a certain period and then you can own it.
How can you enjoy the rent-to-own housing scheme in Dubai, and what are its regulations? You can find all the answers through this quick guide!
1. What Is Rent-to-own Dubai?
Renting to own is a property scheme that allows you to rent a unit for a specific period and then gives you the right to buy this unit; consequently, the rentals you pay are considered the unit’s down payment.
This is according to an agreement between a home buyer and the developer.
How it Goes
- During this period, you have a regular tenancy contract for the specified rental period and the developer acts like the landlord.
- Both parties enjoy the actual rights of tenants and landlords according to the UAE laws. The rent-to-buy option encourages those who want to own a home in the UAE to get one through this convenient option.
- The developer and buyer should agree on the number of years after which the home seeker could own the unit and the rental amount that they should pay during this timeline; Such periods could reach up to 20 years.
- The amount required up front is about 5% or less, so you don’t need to apply for a mortgage; this is as the asked-for down payment is less than 25% (of the unit price), which is the amount required in case of getting a mortgage.
In this case, the rent amount is typically higher than the market’s rate considering the convenience factor for the buyer; the premium is considered reasonable if you wouldn’t be able to save for a deposit.
2. What Are the Available Agreements?
There are two agreements, which are
- Possibility 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 at a later date.
If you choose not to proceed with the purchase, you will lose the option fee. Such an option gives you room to make up your mind about owning the property, as it’s an important step.
- Purchase Agreement: All terms are mutually agreed previously with the buyer and developer deciding on a fixed purchase price or choosing to determine the price with a future valuation at an agreed date.
This agreement is better in case you’re 100% sure about your decision.
3. Do These Agreements Considered Legal?
Yes, these agreements are legal. Dubai Land Department (DLD) has launched a rent-to-own service through its portal, which is the registration of a specific title of deed to provide a clear legal framework to facilitate such transactions.
4. What Is the Difference Between Rent-to-own in Dubai and Home Mortgage?
There are many differences between renting-to-own schemes and home mortgages in Dubai, although the main one is the down payment amount.
Rent-to-own schemes in Dubai offer you a unique opportunity to switch from renting to owning your home. This allows you to start off by renting a property with the option to buy it later. Over time, a portion of your rent payments goes towards the purchase price, making it easier to save up for ownership.
In addition, this can be an attractive option if you’re not ready to go for a mortgage but still want to invest in property. Rent-to-own in Dubai is a flexible path to homeownership thanks to the various options available across the city.
In the home mortgage in Dubai case, the buyer must pay at least 25% of the property value as an upfront payment, according to the UAE Central Bank’s regulation. However, this is not the case with the rent-to-own programe, which gives you more flexibility.
In addition, the eligibility conditions and processes of both are different.
5. What Are the Advantages of Rent-to-Own Schemes in Dubai?
You will enjoy different benefits if you’re considering the rent-to-own schemes in Dubai; here are some of those advantages:
- It increases your chances of owning a home in Dubai with reasonable prices, as you won’t suffer from a costly first payment
- Paying rentals is considered an indirect way of collecting your capital as it’s in an instalment payment form.
- It allows you to try the unit before buying it
- This scheme’s criteria and procedures are much simpler than getting a home loan.
6. What Are the Points You Should Consider Before Renting to Own?
There are some points you should consider before proceeding with the renting-to-own scheme. Find below some of the top things to bear in mind:
- Before signing the tenancy contract of the property, you should understand well all the agreement’s clauses, rules, and conditions.
This includes
- Knowing the price differences according to the market changes
- Having the title of the deed during the whole contract’s period
- Being aware of the time frame for the payment and termination clauses.
- You may end up paying a higher upfront compared to the going rate for the same or similar properties that are not under a rent-to-own scheme.
- In case you decide to buy the property, you should check your eligibility to apply for a mortgage to complete the buying process.
7. What Are the Payment Plans for Rent-to-own Schemes?
The payment plans for rent-to-own schemes differ from one case to another; this is because the conditions are defined individually according to the agreement between the developer and buyer.
Besides, 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 to suit each case.
8. What Should be Included in a Rent-to-own Contract?
In your rent-to-own contract in Dubai, there is some information that should be included, such as:
- The value of the property that the buyer and developer agreed on
- The time frame of the lease contract, according to both parties’ confirmation
- The title of deed ownership throughout the contract duration
- Exit terms
- Penalty clause for defaulted repayments
- Percentage of down payment (if any) to be refunded in case you decide to terminate the contract
- A clause related to sudden job loss, missed repayments, or mortgage rejection at the time of purchase (once the lease term ends)
- Property maintenance terms to define who is responsible for the upkeep of the property throughout the contract duration
9. How to rent-to-own a property in Dubai?
Rent-to-own properties in Dubai require specific documents for registration. The papers needed differ depending on whether you are an individual or a company.
Those are the required documents for rent-to-own scheme registration in Dubai.
Individuals
- A copy of buying contract
- Copy of the Emirates ID
- For non-residents, a copy of a valid passport
Sole Establishment
- Copy of the trade license
- For the license’s owner, a copy of valid Emirates ID and passport
- Power of attorney, if available
Limited Liability Company
- Copy of valid trade license
- The license’s owner, a copy of valid Emirates ID and passport
- Power of attorney, if available
- Copy of the company’s Memorandum of Association and its appendices (legally translated into Arabic)
- A copy of the shareholder certificate.
Foreign/GCC Companies
- Copy of valid trade license
- For the license’s owner, a copy of valid Emirates ID and passport
- Power of attorney, if available
- Copy of company’s Memorandum of Association and its appendices (legally translated into Arabic) and authenticated from the Ministry of Foreign Affairs
- A copy of the shareholder certificate
- No Objection certificate from the Free Zone areas, with one-year validity (for Forgeing companies
10.What Is the Process for Applying for Rent-to-own Schemes for Properties?
To apply for rent-to-own schemes in Dubai, there is a process you should follow. You can find below the simple steps to enjoy this program.
- First, through the Contract service on the DLD website, then you should choose ”register for rent-to-own”
- Afterward, you have to:
- ُEnter the financing entity and the amount
- Fill in the needed information
- Choose the payment method
- Attach the documents
- Finally, you submit the application online
- The renter will get the document through email.
11. What Is the Cost of Rent-to-own Schemes in Dubai?
The cost of making a rent-to-own agreement in Dubai is declared by DLD; here is it in detail:
- 0.25% of the rent amount
- 2% of the sale price (paid by each seller and buyer )
- Knowledge fee (added to each fee): AED 10
- Innovation fee: AED 10
- Self-registration fee for developers: AED 1,000
12. What Are the Rent-to-own Properties in Dubai?
There are different properties that apply to this scheme; there are various types of units that are available across the different communities of the city.
Here are the areas where you can find rent-to-own properties in Dubai.
- Al Furjan
- Downtown Dubai
- Dubai Creek Harbour (The Lagoons)
- Dubailand
FAQs
Can I Do Rent-to-Rent in Dubai?
yes you can rent to rent or sublease in Dubai. However, it requires adherence to legal guidelines.
Tenants must obtain written permission from the landlord before sub-leasing the property. This ensures a smooth relationship with the sub-tenant and compliance with local laws.
What is a rent-to-own deal?
In a rent-to-own agreement, the buyer pays the seller an upfront, usually non-refundable fee called the option fee, which gives the buyer the right to purchase the property by a future date. This option fee is often negotiable and varies, as there is no standard rate.
What Is the Meaning of Lease-to-Own?
Lease-to-own is among the known ways to own a home. It involves starting by renting property under a lease agreement. Over time, you make regular rental payments, and at the end of the agreed-upon period, you get the option to own the property. It’s a way to work toward ownership while living in the home, making it a flexible option if you’re not ready to fully pay in cash.
Getting the home of your dreams is possible now and no need to keep saving for years when all you need is to apply for the rent-then-buy scheme in Dubai.
