The rise of tokenisation and blockchain technology in Dubai – and larger UAE – is also boosting fractional ownership of real estate assets, even encompassing various high-value assets such as vacation homes
Tokenisation is the new buzzword in Dubai’s real estate sector, fast gaining traction with investors to own properties in the city through stablecoins and tokens on blockchains, with estimates of over 8 percent return on investments, industry experts said.
The rise of tokenisation and blockchain technology in Dubai – and the larger UAE – is also boosting fractional ownership of real estate assets, even encompassing various high-value assets such as vacation homes, they said.
Tokenisation involves creating digital assets backed by real-world assets (RWAs) such as real estate on a blockchain, enabling their sale-purchase transactions through smaller, tradable tokens, allowing investors to earn yield through tradeable stablecoins and tokens.
Industry insiders said the trend is fast catching up in Dubai, amidst Boston Consulting Group projecting real estate tokenisation to soar to $16 trillion by 2030 globally from an estimated mere $2.7 billion in 2022.
“One of the most significant benefits of real estate tokenisation is its ability to democratize investment opportunities,” Rachit Pant, Chief Operations Officer at Foremen Fiefdom, a leading Dubai-based real estate services firm, told Arabian Business.
“By lowering the barriers to entry, tokenisation allows a broader range of investors, including those with limited capital, to participate in the real estate market,” he said.
Tokenised real estate offers a property or its cash flows as a blockchain token to increase liquidity, streamline processes, and enable digital ownership.
Tokenisation enables inclusivity on a global scale
Pant said the biggest advantage of the innovative tokenisation initiative is that its inclusivity extends on a global scale, enabling investors from different parts of the world to invest in properties located in various regions, thus diversifying their portfolios.
He said the Dubai market is also seeing the entry of several players joining the bandwagon to cash in on the newly emerging opportunities in the real estate sector.
Mantra, a Hong Kong-based real-world asset (RWA) tokenisation protocol, focussed on the Middle East, recently partnered with UAE real estate developer MAG to tokenise $500 million of the latter’s real estate portfolio, starting with Keturah Reserve in Meydan.
The partnership, which will use Mantra’s Layer 1 blockchain to create a real estate financing vault, will also package a $75 million mega-mansion at ‘The Ritz-Carlton Residences at Dubai Creekside, part of the Keturah Resort.
The company said, that investors who will earn yield through stablecoins and Mantra’s OM token, are expected to receive yields of 8 percent from the stablecoins.
Investors will also be granted additional OM tokens.
Some of the industry players, however, said though tokenisation is gaining traction among crypto firms, its adoption across traditional industries is still in its early stages.
Fractional ownership of real estate assets gets a leg up with rise of tokenisation
Industry players said the rising trend of tokenisation has come as a major boost to fractional ownership in the real estate sector.
The fractional ownership model enables investors to own a percentage of a real estate asset – an apartment, a villa or even a commercial asset – with their ownership typically managed through legal entities like Limited Liability Companies (LLCs).
This setup allows for shared usage rights and costs that are proportional to the ownership share, giving investors access to luxury assets at a fraction of the cost.
“Resale and exit strategies are integral to fractional ownership. The rise of blockchain technology is addressing some of these challenges by providing secure and transparent transaction methods, particularly in the realm of digital assets and real estate,” the Foremen Fiefdom COO said.
“Blockchain can enhance the fractional ownership model by ensuring clear ownership records, reducing the potential for fraud, and facilitating easier transfer of ownership shares,” he said.
Pant said as this technology becomes more integrated, fractional ownership is expected to expand further, offering more diverse and accessible investment opportunities across a variety of asset classes.
