How to fractionally invest in Dubai real estate market

Dubai has been growing significantly over the past two decades. Eye-catching skyscrapers, luxurious hotels and resorts, Mega malls and shopping centers and high levels of security have made Dubai a very popular destination for tourists as well as expatriates.

Besides, thanks to the strong infrastructure, Dubai has become the commercial hub of the Middle east region, so there are many businesses from all around the world who have set up their regional offices in Dubai.

Now, what we have in Dubai is an increasing demand for housing and office space, coming from newcomers, tourists and new businesses. That makes the Dubai real estate market an exciting place for investors from all around the world.

Dubai real estate market pros and cons

Pros

• The demand has always been good for both “for rent” and “for sale” properties. 
• Rental income is higher than the global average.
• Rental income is tax free (so far).
• The ownership for foreigners is secured and guaranteed by the local government.
• The market is quite transparent, as all important information is being made public by the local government.
• The historical data shows a considerable rate of capital growth in Dubai real estate market (Global Property Guide) 

Cons

• The property price including apartments, villas and office spaces are considered to be high for the majority of investors.
• The liquidity risk has always been an issue for investing in the real estate market, so there are instances in the Dubai real estate market that it suffers from illiquidity.

Now, let’s see how the blockchain industry helps to overcome such issues and concerns.

What is tokenized real estate 

Before jumping into the subject, let’s see what a tokenized tangible asset is. It basically refers to the process of converting any asset that physically exists in the real world into tokens within a blockchain network. A valuable artwork, a barrel of oil, a photo or an apartment can all be converted to either a single token which is called Asset backed NFT (Non fungible Token) or a limited number of tokens. The authenticity, ownership and all other important information will be securely stored in the blockchain network that can not be changed or replicated. Tokens that are created in the blockchain can be traded between the owners and interested buyers through smart contracts. There is no need for a middle man, as all required documentation and approvals are done by smart contract. It is like a 24/7/365 market where all people from all around the world can get access and trade the tokens. How good is that? 

How tokenization makes fractionalized real estate investment easy?

As specified earlier, almost all tangible assets in the world can be tokenized, so does a property. Assume that a luxurious 4 bedroom apartment on the 20th floor of a skyscraper in Dubai Marina costs AED 15 ‘000’ 000. This is obviously a very expensive property and out of most investors’ budget. Now, thanks to the blockchain technology, this apartment can be converted to for example 1000 tokens. Each token represents 1/1000 ownership of the property and it values at market price. In our case each token would cost AED 15’000 only! Now, buying a share of such a valuable property is easy for a wide range of small scale investors. 

Benefits of buying a real estate token

• No huge budget is needed to invest in the Dubai real estate market.
• The liquidity risk is mitigated as all investors have access to a 24/7/365 market to trade tokens that are affordable for many investors.
• Authenticity and ownership are secured by smart contracts in the blockchain network.
• Token owner is entitled to all rental income on a pro rata basis. That is one of the best ways to make a passive income in Dubai.

All the issues are sorted out! Sounds like a very interesting investment opportunity, doesn’t it?

Wrapping up and things to consider with care

Real estate tokenization has made a great opportunity for small scale investors to invest in the real estate market across the globe. However, you must be very careful and do comprehensive research to avoid falling into the trap of cyber criminals. The crypto and blockchain industry is fairly new and suffers from lack of knowledge and regulation that makes it a perfect place for scammers.

As such, if you want to invest in a tokenized real estate project, make sure that the project is approved, supported and allowed by the local government. It is the same thing in Dubai, so before making any investment decision, particularly in the blockchain industry, check it with governmental authorities. Good luck!