What a guaranteed return is actually worth
Every brochure quotes a yield. This is how to work out what is left after the costs, what a guarantee is really paying you, and what happens the year it ends.
On this page
The short version
A guaranteed rental return is a promise from a company that it will pay you a fixed percentage for a fixed number of years, whatever the unit actually earns. It can be real value. It can also be a discount on the price, paid back to you in instalments, from a company that may or may not be there to pay the last one.
Three questions tell you which. Who signed the guarantee, and what do they own? What did the guarantee add to the price? And what does the unit earn on the day it ends? The rest of this page is how to answer them with numbers.
It applies the same way to an office, a hotel apartment or a branded residence. The vocabulary changes; the arithmetic does not.
Gross, net, and the number in the brochure
The yield in a brochure is almost always gross: a year’s rent divided by the purchase price. What you keep is net: the rent after the months it stands empty, the management fee and the service charge, divided by what you actually paid, including the Dubai Land Department’s 4% registration fee.
Here is the difference on one office, with every assumption visible.
| AED | |
|---|---|
| Purchase price, 1,000 sqft at AED 2,000/sqft | 2,000,000 |
| DLD registration fee, 4% | 80,000 |
| Total cost | 2,080,000 |
| Annual rent at the Business Bay average, AED 151/sqft | 151,000 |
| One month empty per year | −12,583 |
| Management, 5% of rent collected | −6,921 |
| Service charge, AED 20/sqft | −20,000 |
| Net income | 111,496 |
| Gross yield (rent ÷ price) | 7.55% |
| Net yield (net income ÷ total cost) | 5.36% |
Same office, same rent, and the yield falls by more than two percentage points. Nothing about the property changed. Only the question changed: not what does it earn, but what do I keep, on what I paid.
How a guarantee actually works
A rental guarantee is usually a separate agreement from the sale contract, and it is only as good as the company that signs it.
That matters more in Dubai than people expect, for a structural reason. Money you pay for an off-plan unit goes into the project’s escrow account, and by law that account is dedicated exclusively to building the project. So the guarantee cannot be paid out of your own instalments sitting in escrow. It is paid from somewhere else: the balance sheet of whichever company signed it. Often that is a single-project company created for the development. A high promised return from a company with no other assets and no security behind the promise is worth less than it sounds.
So before the percentage, read the signature line.
What a guarantee is worth once it is priced in
A guarantee costs the developer money. The question is whether that money comes out of their margin or out of your price. Here is the case where it comes out of your price.
| Without guarantee | With "8% guaranteed for 3 years" | |
|---|---|---|
| Price of the same unit | AED 2,000,000 | AED 2,200,000 |
| Annual income | AED 100,000 (5% net, market) | AED 176,000 (8% of the higher price) |
| Extra income over 3 years | — | AED 228,000 |
| Extra paid at purchase | — | AED 200,000 |
| What the guarantee was worth | — | AED 28,000 over three years |
Eight percent sounds like a yield. In this example it was a AED 200,000 discount, returned to you over three years, plus AED 28,000 — about 1.3% of the price, spread over three years. That is not nothing. It is also not 8%.
If the price with the guarantee is the same as the price without it, the guarantee is genuine value. That is why the first thing to ask for is the price of a comparable unit without the guarantee.
The year it ends
On the first day of year four, the guarantee stops and the unit earns what the market pays. In the example above, AED 100,000 a year — on a price of AED 2,200,000. Your yield on what you paid drops from 8% to 4.55%, overnight, and it stays there.
The resale price follows the same arithmetic. A buyer in year four is not buying a guarantee; they are buying the rent. If the market prices that rent at a 5% net yield, the unit is worth about AED 2,000,000 — the price without the guarantee. The premium you paid has become part of the income you already received. It does not come back a second time on exit.
This is the most common surprise in a guaranteed-return purchase, and it is completely predictable on the day you sign.
The rent a promised yield requires
Turn the question around. Instead of asking what a unit might earn, ask what it must earn to deliver the number on the brochure.
For an office bought at AED 5,000/sqft, with the 4% DLD fee and a service charge of AED 24/sqft, and before any vacancy or management fee:
| Promised net yield | Rent required, AED/sqft/year | Multiple of the Business Bay average (AED 151) |
|---|---|---|
| 8% | 440 | 2.9× |
| 10% | 544 | 3.6× |
| 12% | 648 | 4.3× |
At reported averages, a conventional office lease does not reach those numbers — even the Downtown average of AED 367/sqft sits below the 8% line. That does not make the promise false. It tells you what kind of promise it is. Where a unit is run by an operator — a hotel brand selling desks by the day, a serviced-office company, a hotel apartment in a rental pool — the return is not rent. It is the result of a business: occupancy, the rate charged, and the operator’s fee. Those three numbers decide the yield, and they are the three numbers a brochure almost never prints. Ask for them.
The service charge is not a detail
It is the largest cost most owners have, and three rules about it are set by law.
It is charged on your registered area. Under Dubai’s jointly owned property law, your share is calculated from the area of your unit as recorded in the property register. If a terrace or courtyard is part of your registered area, it is part of your service charge — even though it produces no rent.
It must be approved before it is charged. A management company may not charge owners without first obtaining RERA’s approval. Approved rates are published on the Dubai Land Department’s Mollak system, and you can look up comparable buildings before you buy.
On an off-plan unit, the figure you are quoted is an estimate. The charge you will actually pay is the budget RERA approves once the building is operating. Until then, the brochure’s number is the developer’s expectation, not an approved rate. Check what similar completed buildings in the same area pay.
Net of what? Tax
A brochure’s “net” is always before tax — and for a foreign buyer, the tax that matters is usually not in Dubai.
In the UAE, rental income a private individual earns from property they own personally is not subject to Corporate Tax, provided the activity does not require a trade licence. Where you are tax resident is a different matter. A German tax resident, for example, has had no double taxation treaty with the UAE since the old one expired at the end of 2021; rental income from a Dubai property is taxable in Germany.
We are not tax advisers, and this is not tax advice. It is the reason to ask your tax adviser one question before you compare yields: what will I pay at home on this income?
Before you sign: the questions to ask
- Who signs the guarantee? The developer’s parent company, a single-project company, or an operator — and what does that company own?
- Is there security for the payments — a bank guarantee, a deposit, anything beyond the promise itself?
- Is the guaranteed figure gross or net? Who pays the service charge during the guarantee period?
- What is the price of a comparable unit without the guarantee?
- What restrictions come with it? Mandatory furniture packages, limits on your own use, a required rental pool.
- What happens at the end? Does the unit stay in an operator’s programme, at what fee, and can you leave it?
- For operated units: what occupancy, rate and operator fee does the promised yield assume, and what have comparable operated buildings actually achieved?
- On what area is the price per square foot quoted — and on what area will the service charge be calculated?
A purchase with a guarantee should still make sense without it. If it only works because of the guarantee, it is the guarantee you are buying, and the guarantee is the weakest part of the deal.
What we do about it
Send us the unit and the offer, and we calculate its net yield on the registered area, at its real price, with every assumption written down — including what happens in the year the guarantee ends. If the numbers only work with the guarantee, we will tell you that, too.
Related guides
Sources
- Law No. (8) of 2007 Concerning Escrow Accounts, Art. 9(1) — escrow dedicated exclusively to construction
- Law No. (6) of 2019 Concerning Ownership of Jointly Owned Real Property, Art. 25 and 27(a) — service charge on registered area, RERA approval
- Dubai Land Department — approval of service and usage charges
- Dubai Land Department — the 4% registration fee is paid by the buyer
- Cabinet Decision No. 49 of 2023, Art. 1 and 2(2)(c) — no UAE Corporate Tax on a private individual's real estate income
- Germany Trade & Invest — the Germany–UAE double taxation agreement lapsed
- Engel & Völkers — Business Bay and Downtown office rental prices
- Al Ahli Law — due diligence checklist for Dubai off-plan property investors
Ask before you commit
Tell us the project, the unit number and the terms you have been offered. We will send back the net yield, the rent it requires, and the questions we would ask the developer before signing.