Blockchain technology in the Dubai real estate market: aiming for 2021
The Dubai International Financial Centre (DIFC) Courts announced that it is teaming up with the government-backed Smart Dubai initiative to form a task force that will focus on developing a blockchain-based legal platform. But this is not the only innovation that will affect the whole city: Dubai authorities aim to be the first to unveil a blockchain business registry and blockchain real estate registry. The cardinal changes in the commercial real estate market, caused by the introduction of new technology, will become visible by 2021.
According to JLL’s Global Real Estate Transparency Index Dubai has retained its position as the most transparent real estate market in the Gulf Region, moving up eight places in the global ranking to reach the 40th spot out of 100 markets covered by the report in 2018. The Dubai Government recognizes the importance of further improving the transparency and the quality of information available as part of its objective of increasing investments in the real estate sector. The government has also announced a number of other measures to support the real estate sector in the short-term. These include a reduction of the market fee imposed on business by the Dubai Municipality (from 5% to 2.5%) and the relaxation of existing regulations to allow 100% foreign ownership in business located outside of free economic zones. These measures should have a positive effect on both occupier and investor confidence, boosting demand for office space across the city. JLL also reports that the dynamic will remain and the growth of the commercial real estate market will provide not only regulatory, but also technological solutions.
The Dubai Land Department (DLD) has announced that it has rolled out a new blockchain-based system for all transactions. The initiative in is line with the Dubai Blockchain Strategy launched by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Board of Trustees of the Dubai Foundation for the Future. The system was developed with Smart Dubai and several other partners and was unveiled during GITEX Technology Week back in 2017. The DLD says its system is the first in the global real estate sector and was launched under the slogan of ‘Simple, Secure, Fast’.
DLD has created its Blockchain system using a smart and secure database that records all real estate contracts, including lease registrations, and links them with the Dubai Electricity & Water Authority (DEWA), the telecommunications system, and various property related bills. Blockchain’s secure, electronic real estate platform incorporates personal tenant databases, including Emirates Identity Cards and the validity of residency visas, and allows tenants to make payments electronically without the need to write cheques or do any paperwork. The entire process can be completed electronically within a few minutes at any time and from anywhere in the world, removing the need to visit any government entity — this is an official information published by DLD not long before the DIFC Courts’ announcement.
Another innovation is the Dubai Blockchain Strategy, launched by His Highness Sheikh Hamdan, a result of the collaboration between the Smart Dubai Office and the Dubai Future Foundation to continually explore and evaluate the latest technology innovations that demonstrate an opportunity to deliver more seamless, safe, efficient, and impactful city experiences. The Dubai Blockchain strategy will usher in economic opportunity for all sectors in the city, and cement Dubai’s reputation as a global technology leader, in line with Smart Dubai’s mandate to become global leader in the smart economy, fueling entrepreneurship and global competitiveness. Dubai has a long tradition of leading digital innovation for the region. Now, for the first time, Dubai will be pioneering the application of new technology for cities, and sharing it with the world. When successful, Dubai will be the first blockchain powered government, driving the future economy. With the adoption of Blockchain technology Dubai stands to unlock 5.5 billion dirhams in savings annually in document processing alone — equal to one Burj Khalifa’s worth of value every year.
This decision may lead to the growth of crypto-currency transactions in the local real estate market. The Knox, one of the key local market players ant the largest developer, has recently put up LCD Aston Plaza and Residences for sale in bitcoins. The complex was estimated at $250 million. The cost of studio apartments is 29.9 BTC, and the two-bedroom apartments — 85.2 BTC. Sales started in September 2017, before taking off the bitcoin rate to $20,000 (in December). Sold about 40 apartments, investors received additional benefits: investment in real estate and investment in bitcoin.
The success of crypto-currency transactions of the key real estate market players in Dubai was the result of the idea of total tokenization of the whole industry. But what is tokenization? In blockchain, tokens are units of value that are issued by private entities; they may represent rights over business idea or assets. Tokenization in real estate allows people to buy fractional ownership of properties and create their own property portfolio hence making the real estate market more affordable. Tokenization is one of the most vivid examples of the concept of the shared economy in the real estate industry. Imagine, if tokenization was available while selling projects like Aston Plaza and Residences. Tokenized real estate assets could have been sold to a larger group of people, which would potentially increase the demand for the property.
Presently, there are a number of companies in blockchain working to offer tokenization services for real estate assets. Dubai and the Gulf Region in general, as part of a vibrant emerging market, have been pioneering this newest #Proptech, while some older developed markets in the EU have taken a slower pace. With a primary focus on European cities, Thaler.One sees itself as one of the players with the potential to speed up the rate at which innovative blockchain-based solutions are introduced into the commercial property market. Besides technology per se, there is a complex regulatory framework which such companies need to comply with. Thaler.One is proud to be the frontrunner in regulatory compliance and setting up the legal framework to facilitate the mass tokenization of real estate assets.
