Lease-to-own a sign of things to come

Best buy Innovation in ownership options has become key as developers push to fill island projects in the capital.

October 1, 2009 / Abu Dhabi / Sun and Sky Tower on Reem Island October 1, 2009.   ( Sammy Dallal / The National)

Marina Square development at left. *** Local Caption ***  sd-100109-sunandsky-04.jpg

Uncertain times call for creative measures, at least if Sorouh Real Estate has a say in the matter. The developer recently opened up the remaining commercial space in its Sky Tower project, about 20,000 square metres, for a "lease-to-own" scheme. Under the plan, 75 per cent of tenants' annual rent will be held as equity on the property if the client decides to purchase, up to a maximum of 30 per cent.

Sorouh is hoping that special offers will help its developments on Reem Island reach critical mass. A few months ago, it lowered interest rates to 4.99 per cent for new buyers at Sky Tower and its sister building, Sun Tower. "People are telling us that they prefer ownership but at the moment they can't pay for it entirely out of cash," Mr Robson told The National earlier this week. "It was out of that that we started this project. This way they can make a decision after several years but gain the benefit of contributing part of the payments to buying the space."

No doubt having millions of dirhams worth of equity available to businesses that decide to buy their home permanently will entice some firms to sign up. But the concept is hardly new. Lease-to-own has been successful for many years in a number of other countries, and quite often with residential, as opposed to commercial developments. The many grey areas in property ownership laws in the Emirates means that innovation comes slowly. Sorouh said in a statement when announcing the plan that the lease-to-own plan was a specific benefit of Reem Island's status as an "investment zone".

Still, a new option for property ownership piques excitement for what might be coming down the line for residential owners. For instance, a popular property-selling gimmick in Europe and Canada is a home lottery, which is similar to UAE duty-free lotteries in that tickets are limited to a small number with a high price. And to the winner go the spoils. It seems unlikely that this practice will become widespread here anytime soon, but it does seem that the line between rent and buy will continue to blur.