What is Fractionized Real Estate? Can Investors purchase Fractionized Real Estate in Dubai? - Blythe & Company

August 15, 2022by Blythe & Company1



Tokenisation of Real Estate Asset is not new to the United Arab Emirates. Surprisingly, only a few Investors know about it given the traditional form of investing is still prominent and most investors feel more comfortable owning a hundred percent of their Investment or at least familiar with other owners of the Investment which is almost impossible with digitalized assets.

Tokenized real estate is the fragmentation of an asset into tokens governed by the contractual terms defined in the smart contract which is represented on a blockchain by a unique digital identifier, the “token”. The fundamentals is still the same as physical real estate purchase. However, real estate Tokenization allows people to own fractions of a physical real estate asset. A good analogy is thinking of this as purchasing a share of a company, being a share holder allows you own a part of the company and you can decide to sell your shares at anytime without any barrier. This is one of the advantages of tokenised real estate. Others include,¬†transparency, liquidity, accessibility as well as low barriers to entry.

  1. Transparency: Given the immutable nature of the blockchain, real estate token ownership is tracked and ¬† ensures that all transactions cannot be erased and Investor’s ownership cannot be contested. Also, if you do sell the real estate asset in the future, the new buyer can track the origin of the transaction as the history is recorded on the blockchain and can never be manipulated.
  2. Ease of asset liquidity : The digitalisation of real estate increases the ease of sale and access to a broad range of investors on a global reach. It eliminates third parties like brokers, banks and government bodies that would usually delay the transaction processing and add overhead to the already expensive real estate.
  3. Low Barriers to entry: Owning physical real estate asset comes with a substantial downpayment along with other criteria for qualification for mortgages which would already price some people out of the market. Tokenization of real estate demystifies the idea that real estate ownership is only restricted to the elites, owning real estate is more affordable and can be as low as $100 given tokens are fractionalized and allow Investors to own a small percentage of the property. Also, there are no restrictions on the trading of the token given the market is opened 24 hours daily.

Also, as with physical real estate, there will be a property management company tasked with the renting and overall maintenance of the properties owned by the token holders. In some cases, a Decentralised Autonomous Organisation (DAO) is formed by the token owners which gives them ability to make decision and vote on the overall management of the property.

Dubai being a smart city has been exploring decentralized real estate, there are a couple of developers selling Tokenized real estate on various blockchain platforms and have been able to sell their project successfully and reach a global scale of Investors.

In conclusion, as with any form of investments, there are risks associated which would have to be evaluated based on your existing portfolio and what could go wrong. At Blythe & Co, we aim to Independently uncover the strength, weakness, opportunities and threats of different real estate Investment types. Please reach out to us at info@blytheandcompany.com.


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