Rent-to-own scheme in Dubai: What is it?

The Rent-to-Own Scheme, also known as a hire purchase or rent-to-own scheme, is becoming increasingly popular in Dubai, especially among buyers who want to purchase their own home but do not currently have the necessary funds. This innovative solution combines renting and buying, allowing tenants to invest in a property while living there.

How does the Rent-to-Own Scheme work?

The concept of the Rent-to-Own Scheme is quite simple: tenants enter into a long-term lease with the intention of buying the property at a later date. Part of the monthly rent is offset against the purchase price, allowing tenants to build up capital over the long term. This process generally takes place in several phases:

• Tenancy agreement: the tenant pays a monthly rent, which is included in the purchase price.
• Option to buy: The contract stipulates that the tenant has the right to buy the property within a certain time frame.
• Purchase price: The price stipulated in the rental agreement remains constant during the rental period, regardless of how the market develops.

Advantages of the rent-to-own scheme

The rent-to-own scheme offers several advantages to both buyers and sellers:

• Cost sharing: buyers can make monthly payments without needing a large amount to buy immediately.
• Market fit: Tenants can test the neighbourhood and the property before committing to buy.
• Price certainty: The purchase price remains stable during the rental phase, which is particularly advantageous in a volatile market environment.

Disadvantages of the rent-to-own scheme

Despite the numerous advantages, there are also some challenges that potential buyers should consider:

• Costs: monthly instalments could be higher than a traditional lease.
• Obligations: If the buyer decides not to purchase the property, they may lose the right to the rental amounts paid.

What should you look out for in a rent-to-own scheme?

Before committing to a rent-to-own scheme, you should consult some important factors:

• Contractual arrangements: Seek expert advice to ensure that all relevant points are clearly set out in the contract.
• Market analysis: Check the current property market in Dubai to assess the value of the property.
• Financing options: Consider whether you will be able to secure financing for the purchase price before the time of purchase arrives.

Conclusion

The Rent-to-Own Scheme is an attractive option for many prospective homeowners in Dubai. It provides a flexible and low-risk way to invest in your own property while securing your right to live there. With careful planning and appropriate legal advice, this route can lead to a successful property purchase.

Illustrative example on the topic: Rent-to-own scheme

Imagine Sarah and Ahmed are a young couple living in Dubai who have long wanted a home of their own. However, they are unsure whether they can afford to buy a property. Through a friend, they find out about a rent-to-own scheme in their desired neighbourhood. Sarah and Ahmed decide to rent the property, with part of the rent being offset against the eventual purchase price.

After a year of living in the property, they have saved enough to finalise the mortgage for the purchase. They are familiar with the neighbourhood and their home, which proves to be the perfect solution. Ultimately, through the Rent-to-Own Scheme, Sarah and Ahmed can fulfil the property dream without having to raise the full purchase sum immediately.

If you are thinking about buying property in Dubai, you should also consider the property market conditions and property valuation options before opting for a rent-to-own scheme.