Dubai's second tokenised real estate project sold out in a record-breaking time of less than two minutes, the emirate’s Land Department said, illustrating the high demand amid a housing boom.
The property is a one-bedroom apartment in Kensington Waters, Mohammed Bin Rashid City, valued at Dh1.5 million ($408,441), offered at a discounted rate compared to its estimated market value of Dh1.8 million, project promoters Prypco said in a statement. It attracted 149 investors.
UAE residents holding valid Emirates IDs can pay as little as Dh2,000 for a share of this new property. The scheme is expected to open to international investors in its next phase, the company said.
Launched on May 25, it is being implemented by Prypco Mint platform, in collaboration with Dubai's Virtual Assets Regulatory Authority (Vara), the UAE Central Bank and the Dubai Future Foundation (DFF) through the Real Estate Sandbox.
The platform’s first property, a two-bedroom apartment in Business Bay, attracted 224 investors, with an average input of Dh10,714. Listed at Dh2.4 million, below its Dubai Land Department (DLD) valuation of Dh2.89 million, it was fully funded within one day.
The land department has invited those interested to register early and set up their accounts to take advantage of coming offerings before they sell out.
Tokenisation caters to a particular segment in the market, featuring people who wanted to join the real estate party but never had the invitation, said Mario Volpi, head of brokerage at Novvi Properties.
"It's relatively easy to buy in and buy out. However, there is just one company offering it now. So it's a bit of a closed shop in that respect."
What is property tokenisation? At a basic level, tokenisation converts a physical real estate asset into digital shares – known as tokens – recorded on a blockchain. Each token represents fractional ownership in the property, allowing a number of investors to participate at a lower entry point than traditional real estate, said P.P. Varghese, head of professional services at Cushman & Wakefield Core.
"In principle, it’s an alternative way to structure and record ownership, but the underlying asset remains the same: the property still exists, generates income and requires the same fundamentals to perform over time," he said.
"Tokenisation doesn’t replace the traditional drivers of value in real estate. Asset quality, location, tenancy, governance and market dynamics continue to be the factors that ultimately determine an asset’s performance. The technology may change how ownership is accessed and traded, but it doesn’t change what makes a property successful."
How to invest under this model? Currently in Dubai, investors are being encouraged to contact the DLD to express interest in available projects, said Matthew Green, head of research - Mena at CBRE.
"However, over time, we would expect the market to open up further, with different avenues to acquire these assets to emerge, likely through a combination of official government channels and also directly through other market participants, including developers, funds and other registered entities."
Risks and returns In terms of returns, tokenised real estate mirrors traditional property investment: rental yields, capital appreciation and long-term market growth. Where tokenisation introduces additional variables is in liquidity, pricing transparency, regulatory oversight and platform stability – all of which remain relatively early stage in most global markets, including Dubai, Cushman & Wakefield Core said.
"We advise investors to approach tokenisation with the same discipline they would apply to any other real estate investment," Mr Varghese said. "The structure may allow fractional access, but the underlying asset still requires thorough due diligence."
CBRE's Mr Green highlighted how the tokenised asset is open to fluctuations in the supply and demand of property, and related pricing. Outside of that, the risks are related to technology, the systems and platforms that house and trade these assets, he added.
Advantages and disadvantages Tokenisation ultimately helps to expand a market by diversifying the investor pool, creating liquidity, removing barriers to entry (time, location, investment size, etc) and facilitating an easier and quicker method to participate in the market, Mr Green said.
From a developer or owner perspective, it also creates another potential avenue for divestment, offering a tangible alternative for project fund-raising, while at the same time also attracting an entirely new source of investors to enter the market, he added.
However, Mr Varghese said the disadvantages are equally important to acknowledge. The regulatory frameworks are still developing, platforms vary in quality and oversight, and in many cases, secondary trading markets remain thin.
"Transaction costs can also become disproportionately high, particularly at the smaller investment sizes that tokenisation often targets. When you factor in platform fees, blockchain gas fees, legal expenses and regulatory compliance costs, the total cost of entry can easily exceed what investors might pay in a conventional real estate transaction," he warned.
"For very small ticket sizes - say, investments of $100 - these fixed costs can quickly erode returns. Even dividend payouts can be costly to process at scale, depending on the platform architecture."
There are also valuation challenges specific to tokenised assets, Mr Varghese said. "While fractional ownership creates access, it can reduce liquidity compared to traditional whole-asset ownership, which may lead investors to apply discounts when pricing tokens. Conversely, at times of heightened retail interest, tokens may trade at premiums that don’t fully reflect underlying asset fundamentals. That can create disconnects between actual property performance and token pricing," he explained.
Value of tokenised real estate market The land department projects Dubai’s real estate tokenisation market to reach Dh60 billion by 2033, representing 7 per cent of the emirate’s total property transactions.
"Dubai has many of the ingredients in place to explore tokenisation at scale: an openness to financial innovation, strong regulatory bodies, and significant cross-border capital flows," Mr Varghese said.
"The market is watching the evolution of tokenisation carefully, and we expect to see early activity particularly in smaller-scale residential and niche assets. It’s likely that tokenisation will find its place in the market over time, but for now, it’s more complementary than entirely disruptive."
