Rent-to-own property-try before you buy
Prospective owners are not forced to buy property before having lived in it.
The
rent-to-own scheme was put in place across the UAE with hopes of jumpstarting
the residential market. In effect, it works as a ‘’try before you buy’’ system
where prospective property owners are not forced to commit to an apartment or
villa before having lived in it, with rental payments being put towards the
sale price of the property if and when the tenant decides to buy.
Whilst you
would be asked to give a deposit of 10 percent based on the agreed market value
of the property before you move in, the remainder of your rent will be paid in
more affordable installments.
Most
rent-to-own contracts require a three-year commitment although some developers
offer a two-year option. The rental price is usually fixed in the first two
years, but may be subject to an increase in the third year. After the time
lapse, you would have to decide on whether or not you will purchase the
property. Alternatively, you would have the option to cancel the contract and
be simply considered as having rented the property for those years.
If it does
not turn out to be your dream home and you do not decide to purchase, you may
have to vacate the residence to make room for prospective buyers who may be
interested in giving the property a trial run.
Real estate
agencies like Smith & Ken say that this practice gives tenants extra time
to arrange a mortgage during the rental period, as well as enables them to use
the rental payments as investments.
Sounds
ideal. But before signing a contract, make sure you know a few things: are you
being charged a premium rent? What percentage of that rent will be converted
into equity? What mortgage options will be available if you buy and will you be
charged any penalties if you don’t? And most importantly, is the property right
for you?
The rental
price is usually fixed in the first two years
This
practice gives tenants extra time to arrange a mortgage
After the
time lapse, you have to decide to purchase the property.
