UAE Property: ‘Is fractional investing a good option if I don't have enough for a down payment?'

The eventual sale of a fractional unit may come with restrictions in terms of when exactly you could exit the investment. Bloomberg

Question: I don’t have the down payment required to buy a property in the UAE. However, I am keen to benefit from the price appreciation in the property market.

I am considering fractional ownership in UAE property. Is this a good model of property investment?

What are the risks I should be aware of? What are the benefits and disadvantages of this model? SC, Dubai

Answer: Fractional ownership is a perfect way to enter the property market and benefit from its current capital appreciation, without the need to stump up the full 100 per cent of the funds needed to buy through traditional methods. Other benefits include the sharing of additional costs associated with property ownership, such as maintenance.

Another major benefit would be the ability to diversify the investment portfolio, allowing you to invest in several properties in different areas and asset classes. This way of buying real estate is relatively flexible, as it offers an easy entry and exit compared with full ownership.

When it comes to disadvantages, there are limited financing options should you need to avail a mortgage and securing the loan could also be challenging. All decisions regarding the property will have to be agreed on by all parties, which could lead to disagreements or delays.

The eventual sale of a fractional unit may come with restrictions in terms of when exactly you could exit the investment. Lastly, some fractional ownership arrangements may restrict owners from using specific property management companies, which obviously would limit flexibility and autonomy in property management decisions.

As with all real estate or financial investing, you would need to do your due diligence to calculate the risks involved. Analysing the expected financial gains is key to ensure profitable returns.

Looking at rental returns and potential appreciation also needs careful consideration. Remember the market is currently buoyant, but this could stabilise or indeed decline in years to come. Therefore you should make sure you get all the data available, which can be found from market studies or reports from reputable real estate companies.

There are only a few regulated companies in Dubai that that offer fractional crowdfunded ownership to investors. With these companies you can invest as little as Dh500 ($136) and expect to currently earn in the region of 8 per cent to 12 per cent, which is a great return.

Q: My wife and I moved into a property as renters in 2020 and have renewed each year with the maximum allowable increase as per the Real Estate Regulatory Agency, so we are well aware the rental is below market rates. Our landlord served an eviction notice, stating that he intended to sell the property, and the year's notice will come to an end in December 2024.

During the past four years, the property has had leaks, as well as air-conditioning and water heater issues, and the landlord's agent has never been consistently quick or responsive to our complaints – we have had to fix issues ourselves at times.

Despite all this, we've fallen in love with the property and turned the apartment into a home, while we are expecting a new baby in January 2025. We have lived in Dubai for nine years now and worked and saved hard to get to a point where we were able to start a conversation to purchase the property on September 11, 2024.

The agent said he relayed this to the landlord and came back with a value, to which we made a counter-offer on October 3. It is now almost a month from when our lease expires and the agent says he cannot get in touch with the landlord, which makes us worried that negotiations are being dragged out purposefully to leave us with very little time. The landlord is a key client for the agent.

I suspect the landlord either wants to re-let the property at a higher amount, or force us to purchase it at a price he determines.

We just want to have a home and stability to prepare for our new arrival, but we are in a bit of a quandary as to what our best course of action is. GS, Dubai

A: The first thing to point out is that a landlord cannot evict one tenant and then go on to let the property to another, as this is not allowed. In the event this does actually happen and you find out about it, you can file a case at the Rental Dispute Settlement Committee for compensation.

The landlord served the eviction notice for the reason of selling the property and, since you made an offer, you have entered into negotiations so it is clear you are serious about buying the property.

What you do not mention is the asking price or your offer, but I’m sure you have done your research regarding this to give yourself a good chance of securing the property.

When it comes to the ghosting part by the seller to the agent, I can say that, unfortunately, sometimes these things do happen but they cannot go on for ever. If the seller is an important client for the agency, as you mention, I’m sure they will have a way of getting a hold of him to understand where he is regarding your latest offer and/or if he is serious about selling the property at all.

As we get nearer the expiration date of the leasing contract, the landlord will have to make contact, so I’m sure you will be able to resolve this period of silence.

Failing all of this, if you do have to vacate the property, please keep an eye on future inhabitants so you will be able to file for compensation should the landlord unlawfully re-let to another tenant.

Mario Volpi is head of brokerage at Novvi Properties and has worked in the property sector for 40 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [e-mail]