Are rent-to-own units a good option for property buyers in Dubai?

How many developers are offering rent-to-own options in Dubai?

Rent to own offerings are becoming popular in Dubai, but not many individuals understand what they include. In simple terms, rent-to-own properties involve the buyer purchasing the property from a developer by paying on a monthly, quarterly, or annual basis, as specified in the agreement. Nowadays, very few developers have this type of financial purchasing method, such as an example in Dubai South with a post-handover payment plan that can go for 10 years and in Villas such as California Village with a ready to move in and post-handover payment plan that can go for five years and few other options.

Is rent-to-own trend rising in Dubai and in which areas?

When there is a high demand in the real estate market, rent to own options are rarely seen; however, when there is a high supply in the market, developers will introduce rent to own as a second option to sell in order to move the stock, which is more common in projects located far from the city, such as Dubai Land.

What are the reasons for the rise/fall in rent-to-own trend?

The rent-to-own trend in real estate can be influenced by various factors that may lead to its rise or fall. Some possible reasons for the rise/fall of the rent-to-own trend include:

- Economic conditions: Economic conditions such as job growth, unemployment rates, and overall economic stability can affect the rent-to-own trend. In a stable economy with a strong job market, more people may be able to afford rent-to-own options, leading to a rise in the trend. Conversely, during an economic downturn with high unemployment rates, fewer people may be able to afford the option, leading to a fall in the trend.

- Housing market conditions: The availability and affordability of housing can also impact the rent-to-own trend. If there is a shortage of affordable housing or if home prices are rising quickly, more people may turn to rent-to-own options as a way to achieve homeownership, leading to a rise in the trend. Conversely, if the housing market is oversaturated or if home prices are falling, there may be less demand for rent-to-own options, leading to a fall in the trend.

- Interest rates: Interest rates can affect the cost of borrowing money to purchase a home, which can impact the attractiveness of rent-to-own options. If interest rates are low, it may be more affordable for people to purchase a home outright, leading to a fall in the rent-to-own trend. However, if interest rates are high, it may be more attractive for people to pursue rent-to-own options as a way to lock in a home purchase price and avoid paying high interest rates, leading to a rise in the trend.

- Demographics: The demographics of the population can also impact the rent-to-own trend. For example, if there is a large population of millennials who are struggling to save for a down payment on a home, more people may turn to rent-to-own options as a way to achieve homeownership, leading to a rise in the trend. Conversely, if the population is primarily older individuals who have already purchased homes, there may be less demand for rent-to-own options, leading to a fall in the trend.

What kind of properties are buyers more interested in rent-to-own?

Buyers who are interested in rent-to-own options are typically those who want to become homeowners but may not have the financial means to do so immediately.

Rent-to-own options can be an attractive choice for buyers who are unable to secure a traditional mortgage due to factors such as poor credit, lack of a down payment, or a high debt-to-income ratio.

The writer is Head of Off Plan and Investment at Betterhomes.