UAE Tokenisation and Real Estate Investment Simplified  

Tokenisation has been steadily gaining traction as a means of modernising financial market infrastructure and creating new alternative investments. As outlined previously, tokens can represent equity, debt, or existing assets, which by nature makes them applicable to virtually all industries for a variety of different purposes – from raising capital to fractionalising assets to unlocking liquidity. Some notable examples have already emerged across industries. 

What is Tokenisation? 

Tokenisation is the process of replacing sensitive data with a non-sensitive equivalent that has no intrinsic value. In simpler terms, it is the process of creating a digital representation of a real thing. 

How did the UAE enable Tokenisation? 

The UAE has enabled tokenisation through supportive regulations, advanced infrastructure, and public-private collaboration. While the Central Bank encourages tokenised payments and initiatives like the Digital Dirham and mBridge, free zones like ADGM, DIFC, and VARA offer defined foundations for digital assets.  

National initiatives such as the Blockchain Strategy and UAE Pass support secure digital services. The UAE is now a regional leader in tokenisation as fintechs and exchanges took advantage of this climate to introduce tokenised securities and real estate platforms. 

What is Real Estate Tokenisation?  

Real Estate Tokenisation is the process of converting physical assets into digital ones or, to put it in another way, transforming the value of a property into digital tokens or blockchain. These tokens can be bought or sold like any other asset. Essentially, it is blockchain-powered fractional ownership.  

Core Benefits of Tokenisation:  

• Accessibility: Investment in Real Estate without the need for large Capital  

• Liquidity: In contrast to conventional real estate, tokenised assets can be traded in an instant on secondary markets.  

• Security and Transparency: Blockchain keeps a record of every single transaction, which boosts security and trust while simultaneously reducing fraud. 

How is the Tokenisation of Real Estate being adopted in Dubai?  

Dubai is establishing itself as a global leader in real estate tokenisation and has long been renowned for its cutting-edge infrastructure, progressive governance, and a strong emphasis on digital innovation. In 2023, the Virtual Assets Regulatory Authority (VARA) and Dubai’s Land Department (DLD) started looking into the legal framework in 2023 aimed at encouraging investments in digital assets and tokenised real estate. This move reflects the city’s strategic vision to integrate blockchain technology into traditional sectors, particularly real estate. The UAE is now home to over 1000 blockchain-related businesses, with Dubai being the main focus. Due to the rapid growth and strong focus on fintech and digitalization, Dubai is emerging as a major worldwide hub, ideal for tokenised real estate. Real Estate is widely regarded as a prime sector for the application of tokenization, with industry leaders underscoring its capacity to facilitate fractional ownership and enhance market liquidity. In the United Arab Emirates, the real estate industry is a cornerstone of economic growth, consistently ranking among the top contributors to the nation's gross domestic product. In 2018, real estate and construction activities accounted for 14.4 percent of Abu Dhabi's GDP and 13.6 percent of Dubai's GDP. Given this economic prominence, both residential and commercial properties are particularly well-suited for security tokenization, which enables investors to acquire fractional shares of property ownership. This approach reduces barriers to entry, attracts new capital, and broadens investment opportunities for individuals. The establishment of robust secondary markets for these tokens could significantly improve liquidity, providing access to investors who have historically been excluded due to high capital requirements and the relatively illiquid nature of real estate as an asset class. 

Tax Implications of Tokenization in Global Regulatory Frameworks 

Governments worldwide adopt diverse approaches to regulating digital assets. Certain jurisdictions proactively support this emerging sector by implementing progressive legislation to foster its development, while others take a more cautious stance, preferring to monitor developments before enacting policies. Nevertheless, most regulators align with the Financial Action Task Force (FATF) guidelines, which emphasize risk management for digital assets and associated service providers. A common priority among regulators is ensuring consumer protection, preventing illicit activities such as money laundering, and enforcing customer identity verification requirements. These standards apply universally to platforms involved in issuing, trading, or managing digital tokens, which must adhere to rigorous processes for vetting assets, issuers, and investors. Tokenization, the process of converting assets such as real estate or securities into digital tokens on a blockchain, is gaining significant interest. These tokens facilitate the digital trading and transfer of assets. Startups, corporations, and governments are increasingly exploring tokenization within existing or newly developed legal frameworks. A notable trend toward establishing clear regulations is evident globally. For example, Liechtenstein and Switzerland have enacted specific laws governing tokenized assets, while China is developing a digital currency that may encourage broader adoption of digital assets. In contrast to cryptocurrencies, which often function as payment methods or service access tools and lack ties to tangible assets, tokenized assets, frequently referred to as security tokens, are linked to traditional financial instruments, such as stocks or bonds, and are subject to established financial regulations. In conclusion, global regulatory approaches to digital assets and tokenization can be categorized based on the level of engagement and oversight, reflecting the varied strategies employed by jurisdictions worldwide. 

What is PRYPCO? 

PRYPCO, a Dubai-based Proptech company founded in 2022, is transforming UAE real estate with its digital platform. This section of the blog explores PRYPCO’s offerings, operations, investor impact, and the UAE’s corporate tax implications. They have capitalised on recent advancements in blockchain to use it for real estate and property tokenisation allowing property to be owned by thousands of individuals instead of a traditional 1 or 2. 

What Does PRYPCO Do?  

PRYPCO streamlines real estate investment and transaction 

• PRYPCO Blocks: Enables fractional ownership of rental properties starting at AED 2,000 ($544 at time of writing). Regulated by the Dubai Financial Services Authority (DFSA), it has funded nine properties, offering 8-12% ROI. PRYPCO manages tenants, maintenance, and legalities.  

• PRYPCO Mortgage: Facilitates home loans, disbursing over AED 500 million ($136 million), simplifying the process with pre-approvals.  

• PRYPCO Exclusives: A forthcoming service offering brokers access to 250+ secondary market listings across 70 projects.  

• PRYPCO Golden Visa: Assists with UAE residency through property investments (AED 2 million+), handling paperwork.  

PRYPCO makes real estate accessible, supporting investors, buyers, brokers, and residency seekers.  

How Does PRYPCO Work?  

PRYPCO uses blockchain-related tokenisation technology via apps (PRYPCO Blocks, PRYPCO Agents) and a web platform: 

• PRYPCO Blocks: Investors browse properties, buy fractional shares, and receive rental income. PRYPCO handles management, with DFSA oversight ensuring compliance.  

• PRYPCO Mortgage: Connects buyers with banks for tailored loans, streamlining applications and approvals.  

• PRYPCO Exclusives: Will allow brokers to list and market secondary properties, enhancing efficiency.  

• PRYPCO Golden Visa: Manages visa applications for property investors, ensuring regulatory compliance.  

The platform integrates banks, developers, and brokers for a seamless experience.  

How Does Real Estate Tokenisation Affect You?  

The impact varies by role: 

• Investors: PRYPCO Blocks offers low-entry investment with 8-12% ROI but limited liquidity. Try to verify platform security due to a 2023 Scam Detector review of 65.7/100. 

• Homebuyers: PRYPCO Mortgage simplifies loans, ideal for expatriates, but review bank terms for hidden fees or costs.  

• Brokers: PRYPCO Exclusives will boost sales via secondary listings; it is still pending launch.  

• Residency Seekers: PRYPCO Golden Visa aids residency but requires AED 2 million+ investments.  

What are the Challenges to Adopting Tokenisation? 

Asset tokenization presents significant opportunities for transforming industries, yet its broader implementation requires addressing critical challenges in regulation, governance, and infrastructure. As in numerous jurisdictions, ambiguous regulatory frameworks have led token issuers to adopt conservative approaches, prioritizing risk mitigation, which can sometimes disadvantage investors. Many tokenization initiatives currently operate within incomplete legal and operational structures, resulting in uncertainty regarding investors’ ownership rights and protections. This lack of clarity impacts essential elements such as voting rights, financial reporting, and the calculation and distribution of returns. 
 
To enable tokenization to scale and attract institutional investment, there must be transparent and comprehensive dialogue regarding the structure, compliance requirements, and risks associated with token issuance. Investors require clear information about their investments, including whether tokens confer legally enforceable ownership rights and how these align with existing civil and corporate legal frameworks. Comparable uncertainties surround other digital assets, such as payment tokens, particularly with respect to their exchange and practical application. These issues remain under active consideration, emphasizing the need for continued efforts to establish a secure and scalable tokenization ecosystem. 

Conclusion  

The potential for tokenization to revolutionize real estate in the UAE is undeniable, offering innovative pathways for fractional ownership and enhanced market liquidity. As a cornerstone of the UAE’s economy, with real estate and construction contributing 14.4% to Abu Dhabi’s GDP and 13.6% to Dubai’s in 2018, the sector is well-positioned to leverage security tokens. These tokens enable smaller investors to participate in property ownership, lowering entry barriers and attracting new capital. Robust secondary markets could further increase liquidity, broadening access to an asset class historically constrained by high costs and limited liquidity. However, tokenization does not eliminate traditional real estate risks, such as construction delays, financing uncertainties, or economic shifts driven by inflation or demand changes. 

Despite its promise, the path to widespread tokenization faces significant hurdles, particularly in regulation, governance, and infrastructure. Ambiguous legal frameworks in many jurisdictions have led token issuers to prioritize risk mitigation, often at the expense of investor clarity and protections. Current tokenization efforts frequently lack comprehensive legal and operational structures, leaving uncertainties around ownership rights, voting privileges, financial transparency, and return distribution. For tokenization to scale and gain institutional trust, clear and transparent frameworks must be established to address compliance, investor protections, and alignment with existing legal systems.  

Why DP Taxation Consultancy & CYGAL Attorneys?

Our experts can help you navigate tokenised real estate, ensuring compliance, optimising investments, and mitigating risks. Unlock the potential of UAE’s property market with confidence.

Contact us by booking a consultation on: dptc.ae

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