Developers are increasingly using rent-to-own schemes to woo residents put off by large down payments and high fees
Rent-to-own schemes can be an attractive option for aspiring property owners and have the advantage of offering the same protections to consumers set up by the Dubai Land Department for developers and developer sales, according to Propertyfinder Group.
According to Propertyfinder, while each rent-to-own scheme is unique, in the majority of cases rent is slightly higher than the same property not on a rent-to-own scheme. The increase, however, is justified, as this amount is put towards the down payment and purchase of the property.
Lynette Abad, the director of data and research as Propertyfinder Group, said that 70 percent of expats rent, largely due to a lack of a down payment to purchase property or because of uncertainty on how long they plan on staying in Dubai.
In Dubai, Propertyfinder noted that rent-to-own schemes work particularly well because of the high down payment needed to purchase a property and the large amount of empty stock that is available on the market.
Since 2016, Dubai has had over 33,000 units delivered into the market, with 7,839 more delivered in H1 this year and another 8,000 expected by the end of the year.
Some developers – such as Nakheel and 21st Century Property – are using rent-to-own schemes to woo UAE residents who may face challenges from large down payments and high fees.
“To purchase a mortgaged property that is less than five million UAE dirhams, one would need to have 25 percent of the property value plus approximately eight percent in fees,” Abad said in an interview with Thomson Reuters Projects.
According to Propertyfinder, the fees to register for a rent-to-own contract, are 2 percent of the sale price for a seller, or 2 percent of the sale price for a buyer in addition to AED250 as title deed issuance fees, map issuance fees based on the type of property, 0.25 percent of the rent amount and a AED10 “knowledge fee” added to each fee.
Registration fees are AED4,000 if the real estate property price equals or exceeds AED500,000, or AED2,000 if the real estate price is less than AED 500,000, according to the Dubai Land Department.