Ishrath Jaigirdar
Dubai, UAE
Thinking of investing in Dubai’s thriving real estate with a limited budget? Now anyone can seize the opportunity to earn a passive income by investing as little as Dh500 in the property market. The catch is crowdfunding. It is an increasingly popular method of raising capital on a digital platform from the public for a project or initiative with each person contributing a small amount.
In real estate crowdfunding, the process is as follows: invest your desired amount starting from Dh500 in a project and become a fractional owner, receiving a return on investment through rental income and capital appreciation proportionate to your investment once the project is complete. Unlike traditional investments that demand large capital, crowdfunding pools money from many small-sized investors, thereby mitigating heavy financial risks.
In Dubai, crowdfunding is regulated by the Dubai Financial Services Authority (DFSA), ensuring transparency and security of funds. There are a handful of real estate crowdfunding platforms in the UAE that make investment affordable.
Digital investment platforms fall under the Real Estate Evolution Space Initiative – ‘REES’, which was launched by Dubai Land Department to transform Dubai into a major innovation hub. REES is considered to be the most significant in the region in the field of real estate innovation. It is designed to support and attract companies specializing in real estate technology from Dubai, while also highlighting the most prominent PropTech solutions that align with both the local and global markets.
Marwan bin Ghalita, Acting Director General of the Dubai Land Department, said, “In our relentless pursuit to encourage and stimulate investment in the sector, we consistently embrace modern digital technologies, believing that digitization is now a fundamental pillar of real estate growth in Dubai. Our visionary leadership has always focused on making Dubai a global model of digital transformation, launching numerous initiatives and projects to usher in a new era in this journey. In turn, we are committed to providing a nurturing environment for investment and innovation and leveraging technology to enhance the sector’s readiness, sustainability, growth, and progress.”
Platforms like SmartCrowd, Baytukum, and Invest Dubai have witnessed significant demand among funders since their inception. They contribute to the global demand for crowdfunding platforms which is poised to grow due to the increasing number of construction activities in both residential and commercial sectors, along with the growth of the e-commerce industry. The global real estate crowdfunding market size is expected to reach US$793.47 billion by 2032, according to a new study by Polaris Market Research.
The Dh500 investment option has boosted SmartCrowd’s registered community to 100,000 in June, 2024. Since its launch in 2018, the MENA region’s first real estate-focussed crowdfunding platform has transacted nearly Dh200 million worth of properties across 149 units.
Siddiq Farid, Co-Founder of SmartCrowd, predicted greater expansion of crowdfunding in the next decade. Owing to digitization and stringent regulatory measures, he said, “I believe the real estate crowdfunding market in the UAE, MENA region and even globally is set for strong growth. It is one of the fastest growing digital consumer segments but least talk about. It is still a nascent sector but expected to grow significantly over the next decade. Homeownership rates are dropping all over the world mainly due to cost of ownership but also the younger generation doesn’t want to get bogged down with large debt as they value flexibility and experiences.”
The digital platform has distributed over Dh12 million in dividends and returned Dh39 million of capital representing of 43 percent return on investment (ROI) or 16 percent annualized return for an average holding period of just under three years (33 months), based on their 27 project exits to date.
Farid further added, “We founded SmartCrowd on the premise of democratizing real estate investment and making the asset class more accessible to individuals from anywhere, at any time. It’s been incredible to see this concept come to fruition and yield such phenomenal results in such a short time, which you can check out in our property exits. One of our most recent exits delivered its investors over 100 percent ROI in just 3 years, which is a testament to how effective our fractional ownership model is.”
What makes crowdfunding an even more lucrative option to make money is that it aligns with principles of Shariah or Islamic law. It revolves around the concept of sharing profits, instead of measuring interest. This has attracted many investors in the MENA region who are interested in Shariah-compliant ethical investments.
SmartCrowd is yet to obtain a Shariah-compliant certification. Farid said, “Shariah compliance is a key advantage for us in the Arab world. Though we aren’t Shariah-certified yet, we are actively pursuing certification as ensuring Shariah compliance is a top priority for us as we expand our services to better serve all our investors in the MENA region and beyond. By following Shariah principles as we don’t use any leverage and all investors share risk and reward, we attract those looking for ethical investments that meet religious standards. That way, we’re able to instill confidence in those investors looking to earn a passive income and benefit from real estate, as well as stakeholders seeking trusted, compliant avenues.”
The DFSA-regulated Baytukum offers its users investment opportunities from Dh5,000. Similarly, Dubai Invest has set a minimum investment of US$500 for its users. Transparency and regular monitoring by the government have further driven potential funders to entrust these platforms as sources of extra income. Now people of any income bracket can enjoy being real estate investors.
The latest on the list of real estate crowdfunding platforms is Stake, unveiled by the Dubai Land Department. As a local company launched in Dubai and expanding globally, Stake provides a fully comprehensive digital experience. This contributes to digitising buying and selling procedures, thereby leading the global digital transformation process and democratizing real estate, making such investment accessible to everyone.
Rami Tabbara, Co-Founder and Co-CEO of Stake, said, “We are excited to partner with the Dubai Land Department to revolutionize real estate transactions. At Stake, our mission is to make real estate borderless, accessible, and liquid for everyone, both in Dubai and globally. This aligns perfectly with the new REES initiative, driving innovation and accessibility in the real estate market.
With Stake, anyone can create a global real estate portfolio within minutes and start generating lifelong income to achieve their ambitious goals. The platform enables investment in real estate with a minimum stake of only Dh500, while managing all investor transactions from investment to exit, distributing monthly rental income, and capital appreciation returns directly into the investor’s Stake investment wallet.
The adoption of Bitcoin cryptocurrency by online platforms is fuelling the industry demand. The global market growth is expected to be driven by the increasing undertaking of blockchain technology in real estate crowdfunding. This is resulting in faster and more straightforward transactions through the use of smart contracts and tokenization. The blockchain-based platform is decentralized and regulated, enabling efficient property financing and management.
Adopting blockchain technology eliminates the need for intermediaries, making information more manageable and reducing the risks of fraud and deception. Furthermore, blockchain-based platforms can accelerate investment proceedings and risk evaluations.
The real estate crowdfunding market is experiencing steady growth. Institutional investors such as hedge and pension funds invest in the market, increasing credibility and capital. Debt investments are becoming more popular due to their lower risk and fixed return. ESG factors are important to investors, with a focus on projects that have a positive impact on the environment and society. Transparency is improving in the market, providing investors with more information. There is growing interest in international investments, which can provide a more diversified portfolio.
Ends
Also read: Property developers shift focus on resident’s well-being with healthy living solutions
