Dubai launches pilot phase of real estate tokenisation project to attract investment

Initiative seeks to diversify ownership by allowing several investors to co-own a single property

Dubai’s property market continues to perform strongly amid government initiatives and strong economic growth. Chris Whiteoak / The National

Dubai has launched the pilot phase of its real estate tokenisation project as it aims to attract more investment into the property sector to drive its growth amid a continued boom in the market.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said on Wednesday.

“Amid rapid technological advancements and the increasing reliance on digital solutions, real estate tokenisation emerges as a revolutionary tool driving fundamental change in the real estate sector,” said Marwan bin Ghalita, director general of the DLD.

“By converting real estate assets into digital tokens recorded on blockchain technology, tokenisation simplifies and enhances buying, selling and investment processes.”

Why Dubai property prices soared in 2024

02:33

Real estate tokenisation enables fractional property ownership, where each asset is divided into shares based on investors' budget and financial strategy. This allows investors to acquire a portion of a property without fully purchasing it.

The initiative “aims to attract global technology firms and open new opportunities for the investor market. It seeks to diversify property ownership by allowing multiple investors to co-own a single property through tokenised real estate assets”, the DLD said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

The latest announcement comes as Dubai’s property market continues to perform strongly amid government initiatives such as residency permits for retired and remote workers, the expansion of the 10-year golden visa programme and overall economic growth and diversification.

The emirate recorded real estate deals worth Dh761 billion last year, up 20 per cent compared to 2023, with the total number of transactions for the year increasing by 36 per cent to 226,000, according to data provided by the Dubai Media Office.

It also achieved a record in the sale of homes valued at more than $10 million last year, real estate consultancy Knight Frank said in a report last month. The emirate recorded 435 home sales valued above $10 million, up from 434 home sales in 2023 in the same category, with the total value of deals reaching $7 billion.

The DLD also launched other initiatives this year to support the growth of the property sector in the emirate, including the roll-out of the smart rental index with a classification and a rating system from one to five stars for residential buildings as well as allowing private property owners of all nationalities on Sheikh Zayed Road and Al Jaddaf areas to convert their ownership to freehold status.

Why is real estate tokenisation growing?

Tokenisation is becoming more popular within the real estate industry, with developers increasingly partnering with technology providers to explore the tokenisation of debt or equity. It happens when the actual property or its cash flows are represented as a token on a blockchain.

A tokenised asset has the same cash flow generating ability of a traditional asset, in addition to it adding value by increasing the asset’s liquidity and reducing transaction costs and administrative costs related to the investment, according to KPMG.

“Tokenisation is ideal for owners of a single asset or a small portfolio of assets because of the significant reduction of time and cost in offering investors the right to participate in fractional ownership and subsequent secondary trading,” it said.

The benefits of blockchain, therefore, are also carried over, including the reduction of processing time, lesser or elimination of fees and even taxes, transparency of transactions, protection from cyber threats and others. In addition, tokenisation will make real estate more accessible to a larger investor field, allowing fractional ownership.

“The tokenisation of real estate assets can play a significant role in the real estate industry. The notary visit, the considerable transaction costs or the land transfer tax become technically obsolete through the use of tokenisation,” analysts at EY have said.