How blockchain affects Dubai real estate market

Dubai has been experiencing a rapid growth since two decades ago and is still progressing. Thanks to the government’s ambitious plan to make Dubai a multidisciplinary city, the city is now not only a popular tourism destination, but also the commercial hub of the middle east region.

Despite the hard work however, the real estate market along with other markets have gone into a downturn during 2008 GFC and 2019 COVID widespread.

The Dubai real estate market has shown its strength though, by coming out safe and sound from those two deep global recession. That’s why the Dubai real estate market is quite popular for many investors across the globe.

Investment methods in Dubai real estate market

1- Purchase a property and pay for the full price

This is the most straightforward method to invest in the Dubai real estate market by paying the full amount of a property and transferring the ownership under your name. Obviously, valuable properties in good areas and suburbs are quite expensive these days and not many investors are able to afford them.

2- Fractional ownership

A new method in which a property is divided into multiple equal shares and offered to investors. Through this method, more investors including small scale investors will be able to purchase a valuable property in Dubai. Currently, there are a few platforms and TRUSTs who offer fractional ownership in the Dubai real estate market.

We would like to discuss fractional ownership further and then see how blockchain makes fractional ownership more efficient. 

What is fractional ownership and its drawbacks

Like mentioned earlier, a property when divided into equal fractions, investors are able to invest in a fraction of the property. Even though there are a few advantages with this method such as suitability for small scale investors, investment diversification, lower maintenance and management cost and stable passive income from renting it out, it still comes with some drawbacks. 

Like purchasing a whole lot, fractional buying still needs middleman like lawyers, banks, brokers, etc to be in place and a lot of paperwork must be done in order to pay the price and transfer the ownership. Besides, even though the rental income collection is normally managed by the real estate agent, they charge a fee for their services.

The blockchain technology, by introducing the tokenized tangible asset has improved the process of fractional investment in the real estate market.

How blockchain is utilized in the real estate market

Blockchain as a breakthrough to the digital world has made big changes to the industry. Nowadays, almost all assets that have a value can be tokenized within a blockchain network. A valuable painting can be converted to one token which is called Non- Fungible-Token or NFT. Likewise, a barrel of oil or a ton of wheat can also be converted to a token and it is called fungible token.

As such, Blockchain technology provides an efficient response to the question; how to fractionally invest in the Dubai real estate market. 

Utilizing blockchain networks has created a lot of benefits for the real estate markets across the globe. In particular, the Dubai real estate market, as one of the best and most diverse real estate markets, benefits from blockchain along with investors who are interested in investing in this market with limited budget. 

How blockchain is revolutionizing the real estate sector

Here is how blockchain adds value to the real estate market by making fractionalized ownership more efficient than before.

• Liquidity improvement

Traditionally the real estate market is considered to be illiquid. The market is usually limited to customers who are located nearby and also have access to enough financial resources. The blockchain network is borderless and open 24/365. Besides, by tokenizing a multi million dollar apartment in Dubai Marina, more investors with less budget from all around the globe will be able to enter into the market. More investors means more liquidity!

• Cost Efficiency

Smart contracts which are created within the blockchain network take care of fulfilling a trade contract. Transferring the ownership will be done by smart contracts once all the requirements are met. That would eliminate the need for intermediaries like brokers, banks and notaries, which is how a lot of costs in the process of buying a property will be saved.

• Security and transparency enhancement

All transactions including payments and ownership transfer is securely stored in the blockchain network. The data can not be changed or replicated, so the chance of scam is minimized. The transparency is improved by making all parties capable of having equal and full access to all information about the token they are trading.

Bottomline

The Dubai real estate market has shown its strength and depth by passing through two serious recessions since two decades ago. The market is still growing and the demand for all types of properties are moving on a rising trend. The blockchain technology is adding great value to the market and is attracting small scale investors by creating considerable advantages to the Dubai real estate market.

If you are interested in fractionally investing in such a booming market, make sure to select the right project by making sure that it has all the required governmental approvals and allowances.