(Bloomberg) — Dubai’s transformation into one of the world’s hottest property markets is increasingly pricing out buyers, leading to a revival of interest in real estate investment trusts and prompting many to turn to fractional ownership apps that require as little as $136 in payments.
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Buying property remains the most straightforward route to gain exposure to the market, but 17 consecutive quarters of price appreciation has put that option out of reach for many. Of the few stocks listed on Dubai’s bourse, Emaar Properties PJSC has surged nearly fivefold from a 2020 low and office landlord Tecom Group has risen about 18% since a 2022 listing.
Against that background, firms like Stake are gaining traction. Its online platform allows investors to buy fractions of properties for as little as 500 dirhams ($136), and the company recently drew funding from Abu Dhabi’s Mubadala Investment Co.
Meantime, real estate investment trusts that give investors exposure to a pool of income-generating properties without having to directly own them are also emerging as attractive alternatives. The latest push to create such structures is coming straight from the top echelons of the city’s government.
Dubai Holding, an investment conglomerate owned by the city’s ruler, is weighing plans to list its residential and retail property portfolios as early as next year through REIT structures, Bloomberg News has reported. That will give investors access to prime assets, from malls to residential neighborhoods, managed by one of the largest and – crucially – government-linked developers.
“REITs provide the market with greater accessibility, as investors can access real estate with comparatively small amounts of capital,” said Thierry Delvaux, chief executive officer of Equitativa Group, which is the manager of Emirates REIT. The firm is one of Dubai’s three REIT managers.
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Checkered History
REITs lower entry costs for investors, while also giving them the liquidity of publicly-traded equities, according to Sanjay Vig, managing director at Al Mal Capital REIT. They also allow buyers to benefit from professional management, he said.
Still, any potential comeback for REITS in Dubai would come amid gloom in the sector globally. Private equity giant Blackstone Inc.’s second-quarter results were hit by its real estate woes with the firm having to cope with a spike in redemptions in the middle of the year.
Locally too, there have been challenges. Emirates REIT’s manager was probed four years ago by the Dubai Financial Services Authority over its corporate governance and later fined by the government agency. That vehicle as well as ENBD REIT have also posted losses in recent years, failing to keep up with the surge in Dubai property values.
But there are key differences this time around. United Arab Emirates’ reforms, such as long-term visas for property investors and relaxed rules around foreign ownership, have created a more favorable environment for international capital, which enables REITs to benefit from a broader base of investors, Equitativa’s Delvaux said.
A wave of new REITs would further bolster the government’s attempts to deepen domestic capital markets, a key goal for the emirate whose stock market has been one of the most active globally and has recently hosted a raft of listings.
“We see an opportunity for REITs to grow in the United Arab Emirates, supported by strong sponsors who will bring robust governance practices,” Samer Deghaili, HSBC Holdings Plc’s regional co-head of investment banking.
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“Just like on Amazon”
Aside from REITS, a slew of new technology-related companies have surfaced in recent years, underlining the growing interest in Dubai’s property market. Online property management platform Keyper, founded by a former Goldman Sachs Group Inc. banker, raised $34 million earlier this year.
Stake, meanwhile has raised $27 million and purchased over 300 properties worth 540 million dirhams since its launch in 2021, the Dubai-based firm said.
“We wanted to create a digital and easy-to-use platform that gave investors a ‘shopified’ investment experience on an app that enables them to own a piece of Dubai in under 3 minutes,” said Stake co-founder and co-CEO Rami Tabbara. “Just like shopping on Amazon.”
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