Dubai: Would you settle your rents using a crypto currency? Or buy that freehold apartment in Dubai by shelling out a few Bitcoins?
With the volatile ride Bitcoin’s having of late, much of it spent in shedding value, it will take quite a bit of courage on the part of investors and property owners to seal the deal via a cryptocurrency. But that is not the same as saying players in Dubai’s real estate market are not trying.
A developer or two have said their upcoming sales programmes will have a place for these alternative currencies. But what has been gaining traction is landlords holding commercial properties saying that rents could be settled this way; the owner of Star Business Centre is the latest to do so.
But will Bitcoins and various other cryptos ever emerge as an integral part of a real estate transaction in Dubai? Or will it be more of a show on the sidelines?
Any laws that could provide some basis are as such still far from being a reality. “For now, there is no regulatory activity that restrict its usage or regulates its oversight,” said Sameer Lakhani, Managing Director at Global Capital Partners. “The UAE Central Bank has joined others — it was actually one of the earlier ones — in warning about the speculative nature of Bitcoin. Since then, clearly there have been increasing calls to regulate the “commodity”, it is increasingly likely that this will happen.”
So, when a developer or landlord says they can settle a transaction using a crypto, it does not mean they are accepting it as a “legal tender”. Instead, they are accepting the equivalent in Bitcoins or any other form of cryptocurrency.
“Given the fact that they are accepting the equivalent amount, the volatility falls on the buyer who is contemplating the purchase in any other commodity rather than the legal tender,” said Lakhani.
But for now, that volatility has ratcheted up quite a bit. Chances are that Bitcoin could drop below $10,000 (Dh36,731). And to place that in context — just weeks ago it soared all the way to just under $20,000. (That was the time when everyone wanted to have a piece of the action … or at least were still thinking about buy-ins.) Other cryptos — look at what is happening on the ether counter — too are under duress on their pricing. Given this kind of dizzy price falls, why would anyone want to use it to settle a property deal here? It was on January 17 that Star Business Centre announced it would be open to taking cryptos for rental payments. (When the property owner made the decision, a Bitcoin was commanding upwards of Dh51,200 on average. That lofty level has since come down to Dh39,449.) So how would a landlord lower the risks if his rent gets paid using cryptos? “The answer to volatile market is very simple — we take the cryptocurrency and straightaway convert them into a cash position,” said Imran Farooq, CEO of Star Business Centre and Group CEO of Samana Group. “On the basis of transfer of cryptocurrency, the same position is closed.
“The transfer may take few minutes … but as soon as the deal is confirmed the currency is converted to cash. Therefore, we have zero risk.
“We don’t believe that cryptocurrency holders are small in number. All modes of settlements are accepted be it cash, transfer or foreign currency — so crypto is again another medium.
“We often get clients with foreign currencies and we are used to handle multiple currencies and their settlements. The client does not need to inform us well in advance. At the time of settlement, the rate is locked and at the same time we close our crypto position into a dollar one.”
The big push for cryptos in real estate will come when developers in Dubai — even a handful of them — confirm their willingness to accept such payments on off-plan sales. Doing so sure could boost their chances of pushing property to the digital crowd. That can only be a good thing.
The pros and cons of a crypto-based real estate transaction
For Star Business Centre, it allows them to add a new mode of payment that could find favour with some overseas clients or even start-ups. “Start-ups will find it very convenient and faster rather than going through a complicated process of bank transfer, as in some countries bank transfers are controlled due to foreign exchange (regulations),” saidImran Farooq, CEO, who has “limited investment” in cryptocurrencies such as Ethereum, Ripple and IOTA. “So they may like to make the payment through cryptocurrency.”
Buying or selling Bitcoins these days can be a dizzying experience — short of $20,000 one day and dropping to below $11,000 on another. Sure, change could also happen with prices shooting up overnight. But such changes make it an asset to watch out, but can it be used as a payment method? “Currently, there are no mechanisms that exist on the exchanges that would be able to hedge risks,” said Sameer Lakhani of Global Capital Partners. “These are being considered and it is likely some regulatory oversight and standardisation of contracts are achieved.”
