Dubai has officially launched the pilot phase of its real estate tokenisation project, aiming to bolster investment in the city’s property market amid its ongoing boom. This initiative is designed to revolutionise property transactions by converting real estate assets into digital tokens, recorded on blockchain technology, which streamlines the buying, selling, and investing process.
Marwan bin Ghalita, Director-General of the Dubai Land Department (DLD), highlighted the project’s potential, stating, “In this era of rapid technological growth, real estate tokenisation stands as a game-changing tool, transforming how the sector operates.”
Tokenisation allows fractional ownership of properties, where assets are broken into smaller units (tokens) based on investors’ financial capacities. This opens the door for multiple investors to own portions of a single property, thus lowering the entry barriers for those interested in property investment.
The DLD aims for the tokenisation project to significantly expand Dubai’s real estate investment landscape, attracting global technology firms and broadening access to the property market. It is projected that the tokenisation market in Dubai will hit Dh60 billion ($16.33 billion) by 2033, which could account for 7% of the city's total real estate transactions.
This announcement follows a robust performance in Dubai’s property market, with real estate transactions surging by 20% in 2024, totalling Dh761 billion. Additionally, the number of transactions increased by 36%, reaching 226,000, alongside record-breaking sales of homes priced above $10 million. Dubai’s property market is experiencing sustained growth, driven by government initiatives like residency programs for retirees and remote workers, the expansion of the 10-year golden visa, and broader economic diversification.
In addition to tokenisation, the DLD has launched various initiatives to further support property sector growth, including a smart rental index system and new freehold ownership opportunities for property owners in specific areas like Sheikh Zayed Road and Al Jaddaf.
Why Is Real Estate Tokenisation Gaining Traction?
Tokenisation is gaining significant momentum within the real estate industry as developers partner with technology providers to explore new ways of fractionalising both debt and equity. Essentially, tokenisation enables the representation of physical property or its cash flow on the blockchain, offering the same potential for income generation as traditional assets but with added benefits.
One of the key advantages of tokenisation is the increased liquidity it offers, which makes real estate investments more accessible and efficient. By reducing transaction and administrative costs, it opens the door to fractional ownership, allowing investors to purchase shares of a property that align with their financial capabilities.
Additionally, the use of blockchain technology adds transparency, speeds up transactions, and eliminates intermediary costs and fees. Analysts note that tokenisation also mitigates the complexities of traditional real estate transactions, such as notary visits, transaction costs, and land transfer taxes, making them less relevant or even obsolete.
KPMG has pointed out that tokenisation is particularly beneficial for owners of individual assets or smaller portfolios. It provides a more affordable and efficient means of offering fractional ownership and facilitating secondary trading.
Through these innovations, real estate tokenisation is poised to make property ownership more accessible to a wider range of investors, reshaping the future of property investment globally.
Source: The National News
