The UAE Central Bank
has issued warnings against trading of any digital currency as it hasn't given any licences for such currencies. As per sub-section D.7.3 Provisions for Virtual Currencies of the Regulatory Framework for Stored Values and Electronic Payment Systems published January 1, 2017: "All virtual currencies [and any transactions thereof] are prohibited". This is probably due to the speculative nature of this medium of exchange.
"It is our understanding that investors who allegedly purchased properties using cryptocurrencies, as per some media reports, did not make a direct payment using the technology. Rather, it was the equivalent value of the cryptocurrency in UAE dirhams," reckons Haider Tuaima, head of real estate research at ValuStrat.
"We haven't actually brokered any agreements where cryptocurrency has played a part. From anecdotal evidence, it has come into the market, but only at a very marginal level. There are too many issues with it at the moment, first and foremost its volatility. It's hard to structure a deal on something that can fluctuate in value so much from one day to the next - how do you set the value? On top of this, to actually transfer Bitcoin is still quite a complex and convoluted process and it's not a system that can handle a great number of transactions in one day. So to make it scalable for more regular usage would require a lot further development," observes Lewis Allsopp, CEO of Allsopp and Allsopp, a Dubai-based brokerage firm.
Dubai became one of the first cities in the world where residential real estate could be bought and sold in Bitcoin or similar digital currencies when Aston Plaza and Residences in Dubai Science Park announced that its off-plan units could be purchased using digital currencies in September 2017.
Recently, Samana Developers, a Dubai-based developer, offered a 7 per cent discount to buyers of homes in its maiden project who want to make payments through cryptocurrency. MAG Lifestyle Development also said it is ready to accept payments in Shariah-compliant cryptocurrencies, including OneGram (backed by a gram of gold). The developer also announced in December 2017 a 5 per cent discount for digital buyers in any of its 8 current real estate projects.
The Star Business Centre, which operates and leases fitted out offices, confirmed in January that it would accept cryptocurrencies as a mode of payment for services rendered. Its tenants can pay rents and service charges by using digital currency along with the traditional payment systems.
"At the present moment, it appears as if this is another tactic by which developers can distinguish themselves, and is unlikely to go mainstream until and unless crypto assets themselves become more widespread in their usage," adds Malalla.
Cryptocurrency usage in properties is starting to gain traction in Dubai, however, it is yet to go mainstream. "This would hinge on local regulations, credibility of companies providing related products/services and willingness of people to adopt the innovation," says Murtaza Khan, CEO of Etherty, a blockchain-based, real estate-focused trading platform.
"I find it hard that a developer, given the enormous challenges in real estate development and the capital pumping business it is, would ever speculate with his product using a cryptocurrency dealing," comments Sailesh Israni, MD, Sun & Sand Developers Group.
"Investors should conduct enough diligence before investing. It may sound like a decent marketing opportunity for developers by using the latest technological advances to gain efficiencies and reach wider audiences, but it's more than that. Developers have realised that there is a fast-growing community of crypto-investors - a lot of them have become very rich in the last few years, and there are very few options for them to spend their newly-earned wealth. Since real estate is a lot more stable investment, this is becoming a massive market and a lot of developers will be vying for attention from these investors who are looking to diversify their portfolios by offering them deals and payment options that involve crypto-currencies," adds Khan.
Until regulation is released to control cryptocurrencies in the UAE, most investors have decided to stay on the sidelines despite the curiosity these crypto assets have attracted, say market observers.
"Clearly, given the volatility, the investor base that it has garnered has been for the most part speculative," says Malalla.
"We need to look at the technology behind Bitcoin and other cryptocurrencies. The technology that cryptocurrencies use will be what plays a big part in rent and purchase payments. Currently, it's still in a very embryonic state, so we need to wait for the technology to evolve and more players to come to the market before it starts to play a larger part in the property market," suggests Allsopp.- firstname.lastname@example.org
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