Tokenization Set to Drive the Next Growth Phase in Dubai’s Real Estate Sector
Tokenization is rapidly becoming a buzzword in Dubai’s real estate sector, gaining momentum among investors looking to own properties in the city through stablecoins and blockchain tokens. Industry experts estimate that these investments could yield returns of over 8 percent.
The growing adoption of tokenization and blockchain technology in Dubai and the wider UAE is also driving the trend of fractional ownership in real estate, including high-value assets such as vacation homes.
Tokenization involves creating digital assets backed by real-world assets (RWAs) like real estate on a blockchain. This process facilitates the buying and selling of properties through smaller, tradable tokens, allowing investors to earn returns via tradeable stablecoins and tokens.
Industry insiders note that this trend is rapidly gaining traction in Dubai. Boston Consulting Group projects that global real estate tokenization could soar to $16 trillion by 2030, up from an estimated $2.7 billion in 2022.
Tokenized real estate allows a property or its cash flows to be represented as a blockchain token, enhancing liquidity, streamlining processes, and enabling digital ownership.
Tokenization enables inclusivity on a global scale
Pant said the biggest advantage of the innovative tokenization 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 tokenization
Industry players said the rising trend of tokenization 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.
Source: Arabian Business
