Why rent when you can own? Are you considering to buy a home, but lacking a required downpayment amount? Learn about home financing, – rent to own schemes in Dubai (RTO) directly from a developer.

So, what are the rent to own schemes?

In simple terms, it is an agreement in which you commit to renting a property for a specific period of time, with the option of buying it before the lease runs out.

There are two types of the agreement available:

Lease-option – this option gives you a choice to buy the home or not to buy by the end of the lease. Legally, you are not obliged to make a purchase at the end of the agreement term. However, if you choose not to purchase the property, expect some exit penalties. Such as an entry ‘option fee’, – a one-time fee you pay upon signing the agreement, it’s usually 5% or less of the property agreed sales price. And you will forfeit any money you paid towards the property purchase during your lease.
Lease-purchase – means that legally, you have to purchase the home at the end of the lease agreement.

We suggest that you make a careful reviewal of your RTO contractual terms & conditions before signing the agreement. Involve a real estate attorney in this important step in order to avoid any possible pitfalls. For example, if you are late with your rental payments, you could lose the right to purchase the home and all the money you put towards the purchase. In other words, make sure you study the contract for similar clauses.

How legit are the rent to own schemes in Dubai?

A legal framework of the RTO scheme is outlined by the Dubai Land Department (DLD). The framework itself is a government register that requires an accurate recording of RTO transactions along with proceeding fees.

How does the rent to own differ from a mortgage?

While buying a property via a bank mortgage remains popular in Dubai, it still involves a substantial down-payment sum, usually 25% of the property sales price and a longer time span such as 20-25 years. Also, there is another eligibility criteria that can be of a hurdle, – it’s a minimum monthly income certificate, the salary should be in the range from AED 8,000 to 15,000.

This is where, the RTO initiatives from developers come forward. You are required to enter a rent to own agreement with your developer by making a small upfront payment (as low as 5% in some payment plans) with a time span from 5 to 10 years. Although you might end up paying a higher premium in comparison to rental prices of similar units, the major difference is that all your payments go directly towards your home purchase.

Who is offering rent to own schemes in Dubai?

More and more developers turn to the RTO schemes in order to facilitate an end-user interest to a home purchase, making the market entry affordable. Find popular Dubai’s RTO areas: