Rent-To-Own Scheme Exclusive to Dubai Freehold Area

The rent-to-own scheme gives an edge to developers by offering them the opportunity to sell their present properties instead of having them sit on the market, pulling down market prices, particularly when supply stays high and demand is restricted.

In a fast growing city like Dubai, the rent-to-own scheme has swiftly gained traction amongst aspiring property owners as an alternative option to owning a property, by paying rent under the scheme, which will ultimately be converted to equity.

Article 513 of the Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates stipulates that : “ (1) If the price is deferred or payable in installments, the seller may stipulate that the transfer of ownership to the purchaser be suspended until he pays the whole price, notwithstanding that the goods have been delivered. (2) If the price is paid in full, the transfer of ownership to the purchaser shall operate retrospectively to the time of the sale”.

This article might be considered as the source of the rent-toown scheme concept which enables tenant to pay rent to the owner over a fixed timeframe. The tenant’s accumulated rent is transformed into equity subject to the tenant’s decision to buy the property after the lease expires.

As stated by the Dubai Land Department, the rent-to-own scheme is exclusively limited to freehold areas in Dubai. Moreover, this type of contract is not new to the real estate market, as it has already been implemented by Islamic banks.