Is fractional ownership a good model of property investment in the UAE?
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?
Answer: Fractional ownership is a viable option for entering the UAE property market without needing the full down payment required for traditional property purchases. One of the key advantages of this investment model is the opportunity to share the costs associated with property ownership, such as maintenance, which reduces the financial burden on individual investors.
Fractional ownership also offers diversification, allowing you to spread your investment across multiple properties in different locations and asset classes. This model provides flexibility, as it allows for relatively easy entry and exit compared to full ownership.
However, some downsides exist. Financing options for fractional ownership are limited, and securing a mortgage can be challenging. Additionally, decisions regarding the property must be made collectively by all owners, which could lead to disagreements or delays in decision-making. The eventual sale of a fractional unit may also come with exit restrictions, limiting your ability to sell at a time of your choosing.
Furthermore, certain fractional ownership models may limit your flexibility in choosing property management companies, reducing your autonomy in property-related decisions.
Before pursuing fractional ownership, it’s essential to perform thorough due diligence, considering expected financial returns, market trends, and potential appreciation. The UAE property market is currently strong, but market fluctuations should be kept in mind.
A few regulated companies in Dubai offer fractional ownership, allowing investments starting from as low as Dh500 ($136), with returns ranging between 8% and 12%.
What can we do if our landlord is delaying negotiations on buying the property?
Question: 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
Answer: First, it’s important to note that a landlord cannot evict a tenant and then lease the property to another tenant if the eviction was made for the purpose of selling the property. If this happens, you can file a case with the Rental Dispute Settlement Committee for compensation.
Since you’ve made an offer and entered negotiations to buy the property, it’s clear that you’re serious about purchasing it. Although the agent’s inability to reach the landlord is frustrating, this is not uncommon in certain situations, especially if the landlord is a significant client of the agent.
As the end of your lease approaches, the landlord will need to make contact to finalize negotiations. The key is remaining patient and continuing to stay on top of communications with the agent. If negotiations are delayed intentionally, it’s important to remain vigilant and ensure the landlord does not unlawfully re-let the property.
In the event you have to vacate the property, keep an eye on who occupies it afterward. If the landlord leases it to someone else, you can pursue compensation for unlawful eviction.
Source: The National News
