Rent-to-own Schemes To Boost Dubai’s Real Estate Market

Dubai is currently in the midst of oversupplied property market, that is why developers need to stretch all options to reduce the burden of unsold properties. The rent-to-own scheme is recently one of the marketing strong-points of property developers in Dubai to attract buyers.

Consequently, buyers are starting to look at ready properties rather than waiting for an off-plan handover. By seeing great potential in rent-to-own offers, property developers in Dubai are open to the idea of renting and later on convince those tenants to be the actual owners. The rent-to-own scheme will follow an agreement, the rents are structured as payment instalments towards acquiring that property.

In 2010 - 2011, some developers offered rent-to-own schemes, and quite went well. However, the revival in property buying brought by the Arab Spring as well as the inflow of investments to Dubai’s real estate market caused rent-to-own scheme to be set aside.

“This untapped segment of rent-to-own is for those end users who haven’t purchased their primary homes and still can‘t afford the 25-35 percent down payments,” said Firas Al Msaddi, CEO of fäm Properties. “Or they don’t qualify for bank finance, or lack an adequate employment history or have fluctuating cash flow situations in the case of the self-employed.” “The rent-to-own option allows a buyer to purchase the property within a specified time period at a set price, with the flexibility of pulling out without any liability if they change their mind.”

He added: “To be honest, developers in Dubai have no option whatsoever (other than trying out rent-to-own schemes). If the current outrageous flow of supply continues, then new demand must be created. The new 10-year residency visa announcement is one way to create such demand among end users.”

Also read: HH Sheikh Mohammed Announced A 10-Year Visa for UAE Investors, Professionals & Top Students

There will be around 15,000 - 18,000 new properties to be delivered in Dubai this year (2018). These numbers are somehow similar to what the market absorbed in each of the two years. However, industry experts believe that even with the lower-than-forecast handovers, new properties will be taken cared off by developers especially when they have unsold units.

Firas Al Msaddi also mentioned: “The true knock-on effect of the (unsold) inventory is likely to hit developers over the coming three to six months. Small and large developers are on the same page in terms of risk, but surely the master-developers will raise the red flag to the government who, I’m certain, will react accordingly.”

What developers should avoid with rent-to-own schemes?

Property developers in Dubai must not overprice their rent-to-own stocks. This will defeat the purpose and it will also require Real Estate Regulatory Agency (RERA) to move quickly to set the rules and regulations.

Firas Al Msaddi also added: “Developers need to be quick to introduce the right schemes to compete with landlords who offer reduced rents in multiple cheques and with more rent-free months among other incentives. “Rent-to-own rules must be perfectly clear to all to cover termination and protect both developers and buyers.