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NEW TOKENISATION PROJECT WILL BRING MORE LIQUIDITY AND DEPTH TO THE REAL ESTATE MARKET BUT SOME PITFALLS TO OVERCOME
In March, 2025, a pilot phase of the ‘Real Estate Tokenisation Project’ was launched by the Dubai Land Department (DLD) on Wednesday, aiming to implement tokenisation on property title deeds. The initiative seeks to diversify property ownership by allowing multiple to co-own a single property through tokenised real estate assets.
Real estate tokenisation transforms real estate assets into digital tokens using blockchain technology. Based on an investor’s budget and financial strategy, each asset is divided into shares, enabling fractional property ownership.
There are yet no full details of the project disclosed which will enable to analise the full impact on real estate market in Dubai. We will provide an update to this article once more details are available. However, there are certain benefits which is possible to ascertain already:
POSITIVES:
More investors interest to the market will likely generate additional demand
Given the long-term trend of loosening of global monetary policies investors will be looking for additional pockets of higher return. Dubai real estate market provides rental yields of 5-8% on average (this does not include potential appreciation of property). Thus, the new instrument may provide investors the luxury of floating rate bonds with potential additional return from unexpected appreciation of a principal. Many individual investors may seek to invest in real estate market, but the entry tickets are high. The new instrument will provide good opportunities for them as it reduces the barriers for entry.
Better liquidity of properties
Reduction of size of property lots by dividing them into tokens will likely improve liquidity of the properties as will increase number of trades. Simply said, it will be more possible to sell it given the broader base of potential buyers and smaller ticket size.
More efficient property and rental pricing
Better liquidity means that market eliminates potential price distortions. It will mean that the valuation of property will likely improve. The price will likely adjust to the current property yield taking into effect of individual positives and negatives, also enhancing property valuations. This will enable the real estate investors to take more informed decisions why investing in Dubai market.
More stringent requirements for real estate agencies
Serving both buyers and sellers the real estate companies provide investment advisers. This means elevated responsibility and deep analytical expertise. Currently lack of analytical expertise and professionalism is being hidden by the inefficiency of the real estate markets. However, once it matures and price mechanisms become more transparent (also as a result of property tokenisation) the competition will intensify and agencies with best customer approach and analytics will be more competitive.
QUESTIONS:
At the same there are some uncertainties and pitfalls to overcome for the impact on the real estate market to be estimated:
Dubai Land Department tax
During every purchase of property (apart from the off-plan sale) the buyer should pay Dubai Land Department tax which is equal to 4% of the property value in Dubai (see previous article FACTORS AFFECTING RETURN ON INVESTMENT). If the investors pay this tax on every transaction this will significantly decline attractiveness and liquidity of the new instrument because will significantly diminish potential investment return. The government of Dubai will likely address this issue and we will provide more updates on further developments.
Property pool and unification
It is still unclear which property will be tokenised and how it will be processed for different units and how differences will be disclosed to investors. Even in one building the price for property of the same size can vary substantially (up to 10%) depending on view and other perks. It is crucial to develop a holistic disclosure system which will enable an investor to access to the full information about specifics of the unit where they invest.
Eligibility criteria
We are waiting for more transparency on who will be eligible for accessing trades and the platforms where the trades will be done to better comment on the impact. Should it be limited to private individuals or also open for institutional investors will make significant difference.
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