Dubai’s real estate market is full of possibilities. If you’re thinking about owning a home but are put off by the large down payment, Rent to Own (RTO) schemes could be your ideal solution. Let’s explore these RTO schemes in Dubai and see how they can transform the home buying journey for hopeful homeowners.
Understanding Rent to Own Schemes
In essence, Rent to Own schemes are agreements in which an individual commits to renting a property for a predetermined period, with the choice of purchasing it before the lease concludes.
There are primarily two types of RTO agreements:
- Lease-option – This arrangement grants you the flexibility to buy the property or abstain from doing so by the end of the lease. Although not legally bound to buy, choosing not to may result in penalties, such as forfeiting the initial option fee (usually up to 5% of the property’s sale price) and any money paid towards the property purchase during the lease.
- Lease-purchase – Under this agreement, you are legally required to purchase the property at the end of the lease.
Given how important these agreements are, it’s wise to carefully go through all the contract’s terms and conditions. If you need to, don’t hesitate to talk to a real estate lawyer. This can help you avoid any future issues. For example, if you’re late with your rent payments, you might lose your chance to buy the property and any money you’ve already paid. Make sure you look out for these kinds of clauses in the contract.
Legal Standing of Rent to Own Schemes in Dubai
The Dubai Land Department (DLD) delineates the legal framework for RTO schemes. This includes a governmental registry necessitating the precise documentation of RTO transactions and associated fees.
Rent to Own vs Mortgage: What’s the Difference?
Opting for a bank mortgage to buy property is still a prevalent practice in Dubai, but it usually demands a significant down payment, typically 25% of the property sales price, and an extended repayment period of 20-25 years. Additionally, satisfying the eligibility criteria, such as a minimum monthly income, can pose challenges.
In contrast, RTO schemes require a smaller initial payment (sometimes as low as 5%), with a shorter tenure ranging from 5 to 10 years. Although this might translate to slightly higher payments compared to rental prices for similar units, the important point is that your payments are contributing towards your property ownership.
Current State of Rent to Own Schemes in Dubai
At present, due to the upward trend in the Dubai property market, Rent to Own schemes are not as widely available as they once were. This shift is primarily because developers currently see less need to incentivize purchases. However, the market is dynamic and cyclical. So, for those interested in RTO options, patience may prove beneficial as these schemes are likely to become more prevalent again when market conditions change.
Final Thoughts
Buying a home is a big step. If the idea of traditional mortgages feels overwhelming, Rent to Own schemes can be a more flexible and straightforward way to achieve your home-owning dream. But like with any major decision, it’s important to explore your options and ask for professional advice. That way, you can navigate your home buying journey with confidence and ease. The key is to stay patient, informed, and ready to act when the right opportunity presents itself.
