How Dubai real estate sector opens arms to small scale investors

Dubai has been growing fast over the past two decades. The Dubai government has followed an ambitious plan since then and made Dubai as one of the most popular tourism destinations across the globe. Besides, Dubai has now become the commercial hub of the region, thanks to the strong infrastructure and a well-developed legal and regulation system. Almost all international and regional firms who are operating in the Middle East region, have set up their regional offices in Dubai. As such, there are always a lot of opportunities for expatriates and entrepreneurs to follow their dreams in such a wonderful city.

How is the Dubai real estate market performing?

Due to the reasons specified above and many other reasons, there is always a considerable demand for all types of properties such as residential, commercial and office spaces in Dubai. The real estate market in Dubai, pretty much like other markets, grows constantly and is strong enough to come out of the global crisis, like COVID 19, safe and sound. That’s why investors are interested to invest in the real estate sector, not only to take advantage of the capital growth over time, but also from the passive income that such properties generate from being rented out.

However, the first barrier that most investors face is the amount of money that is required to invest in the Dubai real estate market. The financial difficulties to invest in the real estate sector in Dubai makes it crucial for investors to see how to fractionally invest in the Dubai real estate market.

How small scale investors are now able to invest in the Dubai real estate market?

Blockchain as a breakthrough to the digital industry is now emerging. Through blockchain, tokenizing tangible assets is easily possible. In other words, assume a luxurious AED 10 million apartment in Dubai Downtown. Obviously, small scale investors are not able to make it to invest in such a valuable property in the heart of Dubai. But, what if the same property is fractionalized to 1000 equal shares through a legal, regulated and secure procedure? In that case, each share would cost AED10,000!

That is exactly what blockchain does by tokenizing properties. A property can be converted to equally valued tokens and stored in the blockchain network. The blockchain network through smart contracts, paves the way for trading the tokens between different parties. Once investors buy one or a few tokens, they are the owner of a fraction of that property and entitled for capital growth as well as rental income on a prorata basis.

How does fractional ownership through tokenization work?

The process of tokenizing a property is not very complicated, however it needs a high level of blockchain knowledge. To briefly explain the process for your better understanding, once a property is chosen and bought for tokenization purposes, a reputable blockchain network must be selected. The next step would be developing smart contracts to automate all needed actions such as token issuance, distribution, buy, sell, agreement terms, money and ownership transfer, etc. Smart contracts eliminate human errors, scams and need for intermediaries like lawyers, banks and brokers, as all transactions are taken care of by smart contracts. Even the calculation and distribution of the rental income share for each token holder is on smart contracts.

Benefits of tokenized properties

Asset tokenization brings quite a few valuable benefits to the real estate sector in Dubai. Property tokenization makes fractional ownership possible. It makes a large number of small scale investors capable of entering into the Dubai real estate market. Consequently, the real estate market which traditionally suffers from illiquidity, becomes more liquid. Besides, property tokenization makes real estate investment cost-efficient, by eliminating intermediary costs such as lawyers, banks and brokers’ fees and charges. Furthermore, the whole process including tokens’ ownership and history of trade between different parties and authenticity is securely stored in the blockchain and is available to all users, so it improves transparency. Long story short, property tokenization makes real estate market more efficient by bringing more investors into the market and makes the market more transparent and cost-efficient.

Final words

The real estate sector in Dubai is considered to be a good investment option for interested investors. With the introduction of blockchain and property tokenization, it is even more exciting and is expected to become more popular in the near future. However, you must be very careful to invest in the right project to protect your money, as the industry is quite new and there are always fraudulent risks. As such, before making any investment decision in the blockchain and tokenized asset, make sure that you fully understand what to consider when buying a tokenized property.

Asset tokenization and blockchain is revolutionizing the real estate sector and providing exciting opportunities for investors. Make yourself familiar with the basics, go forward with care and invest wisely. Good luck!