Tokenization of Real Estate using Blockchain Technology

In a landmark decision, the Dubai Land Department (DLD) launched the Real Estate Tokenization Project on March 19th, 2025 under the Real Estate Innovation Initiative ‘REES’. This launch aligns with the Dubai Real Estate Sector Strategy 2033 and makes DLD the first Middle Eastern real estate registration entity to implement tokenisation on property title deeds. 

However, for the uninitiated, these jargons can seem a bit confusing and overwhelming. After all, what is real estate tokenisation to begin with, how does it work, how does it benefit investors, and what are the challenges involved with it? We uncover the answers to all these and more as we provide you with an all-inclusive guide to real estate tokenisation in Dubai.

What is Real Estate Tokenisation?

Real estate tokenisation refers to the process of converting physical assets into digital tokens on a blockchain. As each token represents a fraction of the property, it allows investors to own a piece of the property without spending money on buying the entire asset. 

So essentially, real estate tokenisation turns a big property or building into numerous small digital pieces referred to as tokens. As an investor, you can just purchase how many tokens you want without having to commit to buying the whole property. This makes you own a small part of the property and you become a co-owner of a single property along with several other investors. 

It is believed that this pioneering project is the first major step towards expanding access, enabling fractional ownership, and shaping a more inclusive and smarter real estate market in the city. Furthermore, blockchain technology helps reduce the possibility of fraud in real estate transactions and ensures records are safe and can’t be changed. 

Blockchain functions like a digital ledger, a notebook of sorts, where you can record every transaction. But instead of keeping it to yourself, everyone involved has a copy of it. Therefore, whenever someone makes an update, your copy simultaneously and automatically gets updated, paving the way for transparency and accuracy. 

This ongoing project has been implemented in a collaborative effort by the Dubai Virtual Assets Regulatory Authority (VARA), Dubai Future Foundation (DFF), and the Central Bank of the UAE.

Primary Objectives of Real Estate Tokenization

The Government of Dubai has a futuristic vision behind launching the Real Estate Tokenization Project. A closer look into the primary objectives will give you a broader perspective. 

• To attract global tech innovators and position Dubai as an enticing platform for top-tier technology firms specialising in virtual assets, proptech, and blockchain.
• To expand investment opportunities by opening the real estate market to a larger pool of both individuals and institutional investors. 
• To allow various investors to co-won a single property, enabling fractional ownership in the process and lowering entry barriers.
• To promote awareness about tokenised real estate products and virtual asset investment tools. 
• To ensure governance and transparency by establishing a safe regulatory-backed framework that boosts trust and confidence among investors.

How Does Real Estate Tokenisation Work?

Blockchain technology is the heart of real estate tokenisation. It serves as the backbone of the mechanism and provides a transparent and secure platform for managing transactions. In blockchain technology, data is stored in blocks and chained together, making sure that once a transaction is recorded, it remains virtually free from tampering. 

This feature is crucial in real estate as the sanctity of transaction records and property rights is paramount. Smart contracts are an important pillar of this ecosystem as they help automate and enforce the trading, selling, and buying of tokens, minimising the need for streamlining processes and intermediaries. Thanks to this automation, it not only helps in cutting down expenses and time but also helps in eliminating human error. 

The essence of real estate tokenisation is similar to crowdfunding in which a large asset is divided into smaller portions through a smart contract. If you purchase a token, you have a claim on the underlying asset of a part of the property, including any profits or losses that it might incur. 

As such, it helps in improving the efficiency of real estate transactions. Moreover, Non-Fungible Tokens (NFTs) can help serve as the ownership certificates for these real estate deals. In addition, transparency in blockchain technology helps in instilling confidence among investors. 

In recent years, there has been a surge in the popularity of buying properties with cryptocurrency in Dubai. Crypto also works on blockchain technology which serves as a decentralised database. As you can see, blockchain strategy initiatives implemented by the government is a move in the direction of making Dubai a technologically advanced city. 

As part of the project, DLD has organised a special work on ‘Real Estate Tokenisation’, bringing together some of the most prominent proptech companies, including international firms with expertise in real estate asset tokenisation. 

7 Benefits of Real Estate Tokenisation

Tokenisation has the potential to dramatically change and improve real estate investments. While trading in traditional real estate investments involves compliance checks, tons of paperwork, steep entry points, and high costs, tokenisation enables investors to invest small stakes in varied properties without the ineffectiveness of traditional processes. 

Let us take an in-depth look into the many benefits of real estate tokenisation.

Fractionalisation

Traditionally, real estate is viewed as an illiquid and fixed asset. However, it can be broken down into small fragments and represented as tokens through the help of tokenisation. 

As such, it helps in fractionalising the underlying asset and provides new opportunities for investments. Not to forget, it also greatly eliminates illiquidity discounts to a larger degree. 

Automated Compliance

Artificial Intelligence (AI) has a great role to play in real estate tokenisation as it helps enhance transparency, accuracy, and speed in tokenising properties. In addition, it helps automate strict compliance reports for international jurisdictions and assists leasing workflows through smart contract automation. 

Know Your Customer (KYC) and Anti-Money Laundering (AML) measures can be easily incorporated into a token itself through smart contracts. 

Access to Global Markets 

Real estate tokenisation enables investors to purchase tokens representing shares in assets in any part of the globe. This contributes to more diversified investment portfolios and depth of liquidity. 

Therefore, investors are not restricted to exclusive and local circles. Instead, they can participate in purchasing real estate assets worldwide from the comfort of their home. An investor in New Zealand can hold tokens underlying in Poland or an investor in Kenya can hold tokenised debentures of a small enterprise in South Korea. 

Potential Interoperability of Assets

Since real estate tokenisation thrives on the interoperability of assets, an investor can hold ownership claims to early-stage equity, family residences, commercial buildings, a Data Ledger Technology (DLT) application, and corporate bonds, among others, on a single platform.

Tokens representing property can be sold and purchased on different decentralised marketplaces and exchanges. The use of blockchain technology makes sure that tokenised assets can be traded across varied platforms. This offers greater flexibility for trading to the investor and also expands the potential investor base. 

Operational Efficiency

The presence of smart contracts in real estate tokenisation, which are essentially programmable actions on the blockchain, helps facilitate the automation of varied processes. This includes dividend distribution and exit, investor onboarding, and compliance checks, among others. 

For instance, a tokenised crowdfunding platform not only assigns voting rights depending on the tenure of holding the token but can also automatically release dividends on a pre-determined basis. 

Data Transparency and Security

When compared to data on centralised servers, DLT-based applications are more resilient to cyberattacks and online fraudulent activities. As the transaction information is publicly visible and trackable on the blockchain, it helps promote data transparency and security. 

Real estate tokenisation helps in establishing a safe regulatory-based framework that boosts the trust and confidence of investors. As the technology builds a tamper-proof and transparent record of transactions and ownership, it makes it more difficult to falsify or alter information. 

Reduced Settlement Times

Real estate tokenisation significantly reduces settlement time when compared to traditional transactions as tokenised real estate transactions can be settled within minutes or even seconds. Traditional transactions can take months to do the same.

As such, real estate tokenisation leverages the speed and efficiency of blockchain technology. It contributes to quicker trading of real estate assets and increased liquidity. Not to forget, the platforms that provide tokenised offerings operate 24/7 and are not closed on the weekend like traditional real estate platforms. Tokenised products are settled in real-time and this breaks down time zone differences for global investors tremendously. 

Challenges and Considerations of Real Estate Tokenisation

As lucrative and beneficial the field of tokenisation is, it can’t be denied that it is still relatively unknown and there are still many unanswered questions and unexplored territories within the process which raises a certain amount of ambiguity on some of its aspects. 

So, the field is not completely immune from its challenges and problems. Therefore, before you dive into it, we recommend you get acquainted with the issues and considerations that you may have to undertake. 

Let us take a look into some of the challenges and considerations associated with real estate tokenisation.

Regulatory Hurdles

A major drawback of real estate tokenisation is the lack of a clearly defined globally consistent regulatory framework for asset tokenisation. As different jurisdictions have different rules for digital properties, assets, and securities, it makes it difficult for investors to understand their rights and developers to structure offerings. 

Security Risks

The operating systems need to be just as safe as blockchain to safeguard investors. Strict security measures must be put in place to protect against theft, hacking, and other allied security breaches. Smart contracts can at times contain vulnerabilities and errors that can be exploited. As such, thorough and regular testing and auditing must be done to mitigate risks.

Property Valuation

Properties must be evaluated for their liquidity, suitability for tokenisation, and most importantly, their investment potential. Meticulously and accurately valuing tokenised properties, especially in cases of complex and unique assets, can be extremely challenging at times. This is vital for evaluating digital tokens and making sure fair market prices are being maintained. 

Custody

Pragmatic and safe custody solutions for tokens are paramount to safeguard the assets of investors. This requires the proper and adequate storage and management of private keys alongside security measures. 

Market Volatility

Market volatility can disrupt tokenised real estate assets. This is why investors must remain updated and be aware of the potential for price fluctuations. Not to forget, sometimes the presence of intermediaries in the tokenisation process can make investors vulnerable to varied risks of compliance and reliability. 

The Future of Real Estate Tokenisation

DLD estimates the real estate tokenisation sector will drive major growth for the economy as its market value is estimated to reach AED 60 billion by the year 2033, which counts for 7% of the total real estate transactions of the city. 

Property trading may become safer and quicker if blockchain technology keeps getting better. As such, investing in the real estate market of Dubai through tokens can become a standard global practice. Predicted to majorly transform the real estate market, the innovative approach of this process promises to enhance transparency, improve security, increase liquidity, and break the barriers to entry for investors. 

To Conclude

The Real Estate Tokenisation Project is going to pave the way in strengthening the position of Dubai as a global leader in property technology. It is believed that this game-changing movement will drive major growth in the real estate tokenisation sector.  Even though it is in its infancy stage, once it takes off, the sky will be the limit. 

Open to a wide range of participants including individual investors, institutional investors, real estate developers, proptech start-ups, virtual asset firms, international entities, and property management companies, among others, the Real Estate Tokenisation Project will significantly diversity property ownership. This is the future of real estate transactions and Dubai is steadily preparing itself to be a world leader in it.