Dubai's second tokenized real estate project sells out in less than two minutes

The property is a one-bedroom apartment in Kensington Waters, Mohammed Bin Rashid City, valued at Dh1.5 million ($408,441)

Dubai's second tokenized real estate project, launched by Prypco, has sold out in less than two minutes, highlighting the high demand for such investment products in the emirate.

The project, which is being supported by the Real Estate Sandbox initiative, saw 149 investors fully subscribe to a one-bedroom apartment in Kensington Waters, Mohammed Bin Rashid City.

The project, launched on May 25 by Prypco's Mint platform in collaboration with Virtual Assets Regulatory Authority (Vara), the Central Bank of the UAE and Dubai Future Foundation (DFF), is currently open to UAE residents only, who can invest a minimum of Dh2,000.

The project follows the successful launch of Prypco's first tokenized real estate project in March, a two-bedroom apartment in Business Bay, which attracted 224 investors with an average input of Dh10,714. The project, which was listed at Dh2.4 million, reached its full funding in one day.

This project also saw strong interest from investors, with the project fully funded despite having a higher minimum investment amount of Dh15,000.

The property, which is valued at Dh1.5 million, was offered at a discounted rate compared to its estimated market value of Dh1.8 million.

Investors who missed out on the first project, and those interested in future offerings, can register their interest early and set up their accounts to take advantage of coming projects 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."

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."

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."

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.

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