Why aren’t more developers offering rent-to-own schemes in Dubai? Is it not lucrative enough for them?
Each developer will be unique and will have different strategies in marketing their developments. The developer’s financial circumstance and risk appetite will definitely play a key part in their decision on whether they offer a rent to own scheme.
A rent to own scheme can be lucrative as it potentially brings a pool of more buyers as you can also market to renters who hope to buy in the future. In addition, you could charge a higher price as you’re providing renters an opportunity that they would not usually have and therefore they would be willing to pay for it.
However, some developers may not see it as lucrative due to it being ‘slow money’ as you get partial payments instead of a lump sum and there are higher risks of defaults as the renter might not pay during the period and therefore the developer would have to start all over again and find a new buyer.
What do buyers have to watch out for when opting for rent-to-own schemes in Dubai?
The buyers would have to watch out for three main issues:
- Forfeiting money: If you don’t make your payments you could potentially lose all of the extra money you paid already.
- Less control: You don’t yet own the property, so you don’t have total control over it.
- Late payments liability: Depending on your agreement, if you don’t pay rent on time, you may lose the right to purchase.
Will the rent be higher in such a scheme? Why is this?
Yes, the rent will be higher in such as scheme as the higher rental is contributing to the homeownership of the asset. Furthermore, the developer is essentially providing the renter an extended payment plan and a higher premium would justify this rather than selling this directly to a cash/finance buyer.
Are any developers currently offering this scheme?
We have seen many more developers starting to offer RTO like schemes. It started with micro developers in JVC and Sports city. Now we have seen prominent developers such as Nakheel and Emaar using RTO like schemes to potentially bring a bigger pool of UAE residents into the property market.
For how many years does one have to rent before one can buy the unit?
This depends on the developer again, but generally, we have seen the years ranging from 2 years to 10 years.
In which communities are we seeing RTO deals in Dubai?
We are seeing RTO like deals in locations where there are many micro developers such as JVC, Sports City, and DIP as there is much more competition in these locations and each developer has to distinguish itself from its competitors.