Buy in Bitcoin and cash out is trending with Dubai property

Dubai: Choose a property in Dubai… and buy with Bitcoin. Once the deal is done, the seller then gets to cash out.

This, in a nutshell, is what’s starting to happen more frequently in Dubai’s real estate market as buyers and sellers get more comfortable with using cryptocurrencies to pick up traditional assets.

“All the sellers we dealt with received their payments in the form of fiat currency (which is government-issued),” said Firas Al Msaddi, CEO of fam Properties. “As per the rules of Dubai Land Department, there has to be a manager cheque made by the buyer to the seller and handed over to the seller on the date of transfer.”

That the sellers have opted to receive their payments immediately in cash rather than hang on to the Bitcoins is interesting. Given the bouts of extreme volatility that these assets are prone to, cashing out seems the safest option.

When Bitcoin prices were scaling up in 2018-19, there were quite a few local developers willing to complete crypto-backed sales. Al Msaddi was party to a deal that saw an entire building in Dubai being sold for Dh600 million plus entirely using Bitcoins as the medium of exchange.

“We engineered the bitcoin gate payment mechanism where the buyer paid in bitcoin and the seller received in fiat,” he said. “Unfortunately, we are not in position to disclose details of the transaction.

“This isn’t the only transaction – we do at least one per month of different ticket values based on Bitcoin. In the last three years, we facilitated real estate transactions paid via Bitcoin north of Dh1 billion.”

There were also efforts by some developers to launch ICOs (initial coin offerings) backed by their ongoing projects. But these efforts did not manage to catch the fancy of investors, even when real assets – the land and the built-up property – was there to back up the value of ICO.

But Khurram Shroff, who heads the IBC Group and has exposures in both real estate and cryptocurrencies, reckons there will be a meeting point. “Gains in the value of the leading cryptocurrencies have certainly created a space for such transactions,” he said.

“One can imagine a situation in which sellers preferentially seek out payments in crypto, in the hope that their value will escalate further – and even offering buyers incentives to do so.

“However, the bigger change is likely to be in the rise of ‘tokenized digital securities’, which are backed by real estate. Real estate is an established asset class and a favourite among investors looking to park value, in hope of gains while retaining some characteristics of liquid holdings.

“I anticipate a rise in alt coins that will be used as a security token, backed by real estate, as a consequence of the meteoric rise in Bitcoin valuation to an all-time high. Institutional investors jumping on board the crypto bandwagon will add to investor confidence.

“And applications such as tokenization of real estate will become mainstream in the very near future.”

With Bitcoin prices now pushing through to new records each week, that future may be nearer than anyone thinks. Even if each new record setting is followed by a juddering drop…

I anticipate a rise in alt coins that will be used as a security token, backed by real estate, as a consequence of the meteoric rise in Bitcoin valuation to an all-time high

– Khurram Shriff of IBC Group