The fierce competition in the real estate market in Dubai is driving real estate developers to find more ideas to tempt real estate investors, so they sell more properties and projects whether they are ready or off-plan projects.
One of the growing ways nowadays is "Guaranteed Rental Return" which is apparently alluring, but when investigating it thoroughly, it hides traps that affect the real estate investor negatively and can cause him loses, and harm the real estate market subsequently.
The first notable point makes "Guaranteed Rental Return" seems suspicious is that none of the leading real estate developers (such as EMAAR, Dubai Properties, MERAAS, Nakheel, etc..) have ever used it to promote their projects.
Guaranteed Rental Return is a commitment the real estate developer takes to offer the landlord a percentage of the unit's price as a secured rental revenue for a period of time usually ranges from 1 to 5 years. For example, An apartment for sale in Dubai with a price of 1 million dirhams, and with a Guaranteed Rental Return of 10% per annum for 3 years means that the landlord will collect 100k dirhams annually for the mentioned period.
In the example, we assumed that the "Guaranteed Rental Return" will be 10%, in reality, several real estate developers raised the bar of "Guaranteed Rental Return" up to 15% and 20%, which is not sensible comparing to the indicators of the rental index in Dubai. According to rental indicators, annual rental yield ranges from 4% to 6% in urban areas such as Business Bay and Downtown Dubai, and 10% to 12% in rural areas and suburbs.
To identify the worthiness of the Guaranteed Rental Return, investigate the annual rental income in the same district for a similar property, if the average is less than the Guaranteed Rental Return, then it's either one of these:
1- The real estate developer won't pay the Guaranteed Rental Return.
2- The gap between the Guaranteed Rental Return and the actual is covered by the purchase price, then the unit's price will be higher than the average.
Both cases, you should be aware of dealing with these types of real estate developers, study the real estate market and gather the needed info.
Securing a stable job in Dubai
Case Study: Investor without a local bank account? Not a problem.
A CASE STUDY: 'HOW CAN WE HELP YOU?'
Case Study: International Seller living outside of Dubai without correct building permit
Will the Dubai real estate market experience a bigger sell-off?