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Dubai’s property tokenisation vs REITs: Key differences, who can invest, minimum amount and more
Tokenised real estate in Dubai offers direct ownership, unlike REITs which offer indirect ownership, explains Stephen Flanagan of Knight Frank MENA
The Dubai government’s plan to integrate its real estate registry with blockchain and property tokenisation represents a significant innovation that could substantially benefit investors. Firstly, the entry barriers are lower, requiring a minimum investment of AED 2,000 for fractional ownership in the UAE. Instead of purchasing entire properties, investors can acquire fractions of assets, making Dubai’s real estate market more accessible, Stephen Flanagan, Regional Partner and Head of Valuation & Advisory, Knight Frank MENA told HT.com
One of the key benefits of blockchain tokenisation is enhanced liquidity. It enables the creation of secondary markets where tokens can be traded more easily than traditional real estate assets.
However, Indian nationals looking to invest in tokenised Dubai properties should note that only individuals aged 18 and above with a valid Emirates ID can invest through platforms like Prypco Mint.
In terms of ownership, tokenised real estate offers direct fractional ownership through digital tokens, while Indian Real Estate Investment Trusts (REITs) provide indirect ownership via trust units.
Here’s the full interview.
1. The Dubai government has announced plans to integrate its real estate registry with property tokenisation through blockchain technology. Will this have an impact on Indian investors looking to invest in Dubai's real estate market?
The Dubai government’s plan to integrate its real estate registry with blockchain and property tokenisation represents a significant innovation that could substantially benefit investors. This initiative should enhance transparency, liquidity and accessibility in the property market, by allowing real estate assets to be divided into digital tokens, each representing fractional ownership.
Two apartments have been successfully tokenised so far, a two-bed apartment in Prive, Business Bay, and a property in Kensington Waters at Meydan was fully funded in less than two minutes. For investors, this offers a number of potential advantages.
Firstly, the entry barriers are lower, requiring a minimum investment of AED 2,000 for fractional ownership in the UAE. Instead of purchasing entire properties, investors can acquire fractions of assets, making Dubai’s real estate market more accessible.
Another advantage is the increased liquidity associated with blockchain tokenisation, which can create secondary markets where tokens are traded with ease compared to traditional property sales.
An intrinsic advantage is the heightened transparency and security, thanks to immutable transaction records through blockchain, buyers are at risk of less fraud, and the required due diligence for overseas investors is also simplified.
Investors can also diversify their portfolio across multiple properties and potentially even different asset classes with ease.
2. Will Indian investors be allowed to purchase fractional ownership through tokenisation?
Currently, only individuals with an Emirates ID who are aged 18+ can invest in tokenised properties in Dubai via Prypco Mint.
The first tokenisation attracted more than 40 nationalities, and the most recent tokenisation attracted investors from 35 countries, suggesting the market is open to all. The confidence provided by VARA and DLD should also ensure trusted, compliant tokenisation.
Indian investors should consider compliance with India’s Foreign Exchange Management Act (FEMA) regulations and Liberalised Remittance Scheme (LRS), which governs overseas investments.
As of now, only Indian nationals who hold a valid Emirates ID can make use of the system.
3. How does tokenised real estate differ from investing in a REIT in India?
The two systems differ fundamentally in structure, liquidity and control.
In terms of ownership, tokenised real estate offers direct fractional ownership via digital tokens, whilst an Indian Real Estate Investment Trusts (REIT) offers indirect ownership via units in a trust.
Transparency for tokenised real estate comes via the blockchain ledger, offering real-time, immutable transaction records. Through an Indian REIT, owners receive periodic disclosures by REIT managers.
The liquidity of tokenised real estate is emerging, some platforms may offer peer-to-peer or exchange-based trading, whereas Indian REITs are listed on stock exchanges with established secondary markets.
In terms of asset control, investors in tokenised real estate may have visibility into the specific assets, while investors in a REIT hold units in a portfolio managed by a trust.
Finally, the regulation of the two systems differs. VARA (The Virtual Assets Regulatory Authority), DLD (Dubai Land Department), and the Central Bank participate in tokenised real estate, which is governed by UAE property and securities law. Indian REITs are regulated by SEBI under REIT guidelines.
4. What should Indian investors with Emirates ID consider before investing?
Indian investors with an Emirates ID considering this route to invest in Dubai real estate should first of all know that the minimum investment amount is AED 2,000.
Also Read: Here’s what’s driving super-rich Indians to invest in Dubai's real estate market
At this time, only Emirates ID holders aged 18 and above can invest, though the platform is working to make investment accessible to all.
There is a three-month lock-in period, after which the tokens can be sold in the platform marketplace. If the majority of the investors vote to sell the property itself, it will be sold, and the proceeds will be distributed to investors based on their ownership share.
The resulting profits, such as rental yields or capital gains, can be repatriated after applicable taxes and fees, subject to UAE tax laws and Indian taxation regulations. In the UAE, there is no capital gains tax, and no personal income tax (as of now), though VAT may apply to certain commercial properties. In India, gains may be taxable under Indian law and must be declared.
Finally, investors must be ready to report foreign assets in their Indian tax returns (if required) and adhere to Liberalised Remittance Scheme (LRS) conditions.
