Dubai: Got a ‘share’ on a property in Dubai? Then, start trading in it.
A crowdfunding platform, SmartCrowd, is allowing its investors to do that, buying/selling shares they own in properties bought by it through their funds. Typically, such investors need to hold on to their ‘shares’ in that particular property until it appreciates in value.
With the launch of the new add-on, these shares can be transacted at any time they choose to buy or sell. For instance, an investor holding a share in a particular property could add to his holdings by acquiring a stake in another.
In effect, this is creating a ‘secondary market’ for their stakes. “What’s both exciting and important for us is that not only have we enabled people to make micro-investments, but investors can now realize their gains on the secondary market,” said Siddiq Farid, CEO and co-founder of SmartCrowd. “In fact, all sellers on the secondary market were able to sell some of their shares listed.”
The company's 'secondary market' went live last month, and will be operational twice a year. The thinking behind this is that six-month cycles would give ample time for a property to appreciate in a market that's still heading higher.
In the August sale, sellers realized an average total return of 21.1 per cent (comprising both rental income and capital gains from their exits), according to SmartCrowd. Buyers outnumbered sellers 2.3 times over.
Finding a crowd to fund
Crowdfunding on property investments came into its own over the last year, when property values were picking up again in Dubai. This was for those investors who had limited funds, but still wanted to invest in Dubai property. Crowdfunding portals such as SmartCrowd thus collect the pool of funds investors bring in and then deploy those in their property investments.
So, each investor gets a ‘share’ in that property.
“The success of our secondary market shows that those in need of liquidity can access their funds more readily, while investors looking to increase their exposure are able to buy shares in a convenient, transparent manner,” said Farid. “Our secondary market structure offers investors more control, allowing them to manage their portfolio and plan their exits more appropriately.
“More importantly, it’s never been done before in the region, so being the first ones to make this possible is a major milestone for our organization. We fundamentally believe this is the future of real estate investing.”
SmartCrowd Limited - which is a DFSA-regulated platform - was launched in 2018 by Siddiq Farid and Musfique Ahmed, and is a wholly owned subsidiary of SmartCrowd Holding Ltd, a Hub71 company. Since inception, the platform has crowdfunded more than 75 properties and distributed over Dh4.0 million in rental income.
Under crowdfunding, the individual investors do not get any deed, and that would still vest with the platform.