Digital ways try to go mainstream in Dubai’s real estate

Digital may just be starting to go mainstream in Dubai’s real estate marketplace.
Whether buying an Azizi-built apartment at Meydan using Bitcoins on a 3 per cent down payment or invest in Dubai through a “blockchain-based” real estate investment trust, digital payment is being offered as a viable option in what has been a cash-obsessed industry.

For the Azizi project in Meydan, the marketing literature from Diamond City Real Estate says investors can use Bitcoins to make a booking at 3 per cent of the property’s value. A studio unit is being advertised from Dh550,000, with a “limited offer” of a 4 per cent discount. The units are scheduled for handover in the fourth quarter of 2018, and 50 per cent needs to be paid on completion.

Now, another entity, Evareium, is launching a $90 million, Dubai-focused real estate investment fund, where institutional investors can use digital currency to get in and for which they will be issued with digital tokens. Up to 150 million tokens are available, of which 10 million are reserved for distribution to promoters, supporters and associates. The tokens hold a “beneficial right” to the net proceeds distributed from the fund, with each token having the same weighting.
What the fund intends to do is pick up mid-market furnished apartments in Dubai, which stand a better chance of generating stable returns in a still depressed market. The fund will also commit to industrial units, another category that has continued to turn in a relatively stable performance in the last two years.
It plans to retain the assets for a three- to four-year years holding period per investment. This would give time to generate “strong maintainable earnings, which drives the optimum valuation upon exit into a real estate investment trust or an alternate form of sale,” according to the fund’s promoters.
They will be hoping that investor interest in digital investment and payment options is still intact despite Bitcoin frenzy at the start of the year flaring out.
“We believe Evareium represents a new era for digital tokens and away from the baseless digital currencies, which have and will continue to make headlines going forward,” said Stefan Hickmott, founder and CEO of Evarei.
“Most digital currencies do not have an intrinsic value attached to them, which is why they fluctuate wildly. Evareium is a digital token but not technically a digital currency. With the EVM token, our aim is to provide a compelling investment product to qualified investors seeking asset-backed and cash flow-oriented investment fundamentals.
“The exchangeable value of the token will accordingly be determined by the market ultimately. But the manager’s role will be to develop the intrinsic value of the token, to underpin the fundamental basis of its net asset valuation.”
Now, the laws of the land are yet to recognise digital currency as a legal tender. However, the authorities have said they are looking to create a framework.
“As of now, two of the biggest issues for digital-based investments relate to price variations of the digital currency and an absence of regulation,” said an industry source. “These will need to be addressed for more investors to commit to digital ways in local real estate.”
But Hickmott reckons that the initial attempts need to be made. Moreover, the Evareium fund is targeting institutional investors, and who tend to have a more informed view of the risks.
“The fund-raising works in a similar way to any other private fund whereby people contribute digital currency online, or cash through a bilateral/subscription agreement basis in exchange for tokens,” said Hickmott. “Initially, Evareium is a private placement only to qualifying investors. However, our aim is to bring liquidity in the future by listing the token on digital token exchanges globally.

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