Paying for real estate using cryptocurrency is becoming increasingly accepted by real estate development companies in Dubai and other emirates. Is this payment method only used as a marketing stunt or is this how we will pay for new projects in Dubai from now on?
How do cryptocurrencies work?
Before purchasing real estate using cryptocurrencies, or use them for other investment purposes, it is fundamental to understand these tokens work. The definition of cryptocurrency is code-based money. This means that a single unit of the currency (for example 1 Bitcoin (BTC) is indicated by an encrypted string of data. A peer-to-peer protocol oversees the entire cryptocurrency as a protection mechanism. Nowadays, there are hundreds of cryptocurrencies on the market of which Bitcoin, Ripple, Ethereum, and Libra are some of the most popular examples. When an individual or company wants to use a cryptocurrency, they will have to create an online crypto wallet to be able to send and receive tokens. The safety of the transactions and balances is guaranteed by cryptography.
.Setting up a wallet is easy and quick
.Cryptocurrencies are anonymous
.No transaction fees
.Faster transactions than the regular banking system
.Hackers can steal your wallet and tokens
.Cryptocurrencies are subject to huge fluctuations
.Few merchants accept cryptocurrency
.Increasing rules and regulations for cryptocurrencies may cause a negative impact
How can cryptocurrencies be used when purchasing an apartment in Dubai?
The government of the UAE, as well as leading real estate development companies in the country, envision crypto as the payment method of the future. However, there is still a long road ahead with lots of bumps along the way. Although technologies are advancing with the speed of lightning, there are many other things that have to be kept in mind when considering the implementation of crypto in the real estate world. Below is an analysis of some of the most newsworthy crypto developments in Dubai and the rest of the UAE of the past year.
Emaar Properties doesn’t accept crypto, or do they?
Famous all over the globe because of flagship developments such as the Burj Khalifa and the Dubai Mall, and being one of the leading real estate development companies in the UAE, Emaar Properties is a real estate giant that is unrivaled in the Middle East. According to an official statement of the company, it does not accept cryptocurrencies as a payment method for its real estate developments. The company claims that the majority of its transactions are done in either US Dollars or UAE Dirhams. However, according to investigative research in the list of transactions of the company, it shows that Emaar does accept cryptocurrencies, such as Bitcoin and Ether, for its objects.
In Q4 2019 it was announced that Emaar has plans to launch a blockchain loyalty token of its own, called the EMR. The tokens are given out to customers and business relations of the company as a sign of loyalty appreciation. However, they could also be presented as a reward for business referrals. With the help of EMR’s customers can pay for accommodation (such as hotels), buy goods at retail shops, or pay for real estate. At the same time, the tokens can be traded with other users of EMR. Managing your EMR’s is done with a dedicated app that is available on both Android and IoS. The ultimate goal of launching EMR is increasing sales by engaging the modern digital-native, mobile-first generation.
First development sold in Bitcoin ($325 million) on hold :
Launched in 2017, the Aston Plaza in Dubai was the first project allowing investors and homebuyers to purchase an apartment by paying in Bitcoin. Of the total of 1.300 apartments, 150 units were designated to be only sold in Bitcoin. At the time a 1-bedroom apartment would sell for 15 BTC, while a 2-bedroom apartment would cost investors 45 Bitcoins. The project was launched successfully and the construction process reached about 25%. And that is where it ended. Governmental inspections have shown that construction has come to a halt and that the site has been inactive for years now. The original handover date of august 2019 has also been missed. The Aston Plaza site is still online but it seems highly unlikely that the building will ever be completed and that investors will receive an apartment for their invested BTC’s.
Fäm Properties and Huobi start joint venture :
In the middle of January 2020 news broke that Singapore based Huobi, a digital asset exchange provider, inked a deal with Fäm Properties, one of the largest brokerage firms in the UAE. The latter has recently received an award from the Dubai Land Department (DLD), as over the past 10 years the company recorded a total sales value of 10 billion AED. The cooperation between the two companies allows Fäm Properties to offer customers payments in some of the most in-demand cryptocurrencies available right now, such as Bitcoin, Ethereum, Ripple and three additional tokens. Huobi’s part of the deal includes converting the cryptocurrencies received by Fäm Properties to fiat currencies, such as Euros, US Dollars, British Pounds, UAE Dirhams and others. All transactions carried out by Huobi are secure, safe, and compliant with all rules and regulations, as the company is DMCC-licensed. In a joint statement, the companies claimed that both market stability and liquidity will be improved by offering these new payment methods. Asked who will fuel the growth of cryptocurrencies in 2020, Huobi stated that it expects that the main demand will come from individual millionaires and institutional investors.
Partnership between Arms &McGregor and Bloom Technology to draw property investors from South Korea to the UAE :
Dubai real estate company Arms&McGregor will offer its customers the opportunity to pay for their new villa or apartment in the UAE using cryptocurrencies, starting from 2020. The company teamed up with Bloom Technology, a blockchain company from South Korea. The partnership allows customers to pay for their real estate by using the Locus Token, a cryptocurrency distributed by Bloom Technology. Digital payments with this token are free of remittance charges and are likely to increase transparency. Both companies expect to attract about 1.000 real estate investors from South Korea as a result of the collaboration. Digital platform integration is supposed to further enhance the possibilities for technological advancements of transactions.
Is crypto the future of real estate in the UAE?
Cryptocurrencies are rapidly gaining in popularity on a global scale, leading to the transformation of a wide range of industries, including the real estate business. Even though technological developments allow crypto to be used for swift and safe transactions, it will take years to update the legal and regulatory frameworks, limiting the implementation of the currencies on a broader scale. Always at the forefront of global real estate development, Dubai aims to be a pioneer when it comes to the implementation of cryptocurrencies in the real estate sector. However, it is hard to tell at the moment in what timeframe these changes will be applied.