Why investors might be tempted by Dubai’s real estate market in 2021
According to the founders of a new investment platform, despite a slowdown in 2020, Dubai’s residential real estate market will offer opportunities next year.
Stake co-founders Rami Tabbara and Manar Mahmassani used their 15 years of experience in Dubai’s real estate and financial markets to bring the digital real estate investment platform to the market.
Residential property prices had fallen to almost below the replacement point in 2020, which means investors can buy property at a price that is below construction costs. With the introduction of vaccines and the recovery in the economy, prices are expected to rise in 2021 Tabbara, former senior vice president of sales at Damac.
Rami Tabbara, Co-Founder of the DIFC-Based Stake
“We also believe that with the introduction of the retirement and five-year visas, more people will come to Dubai,” said Tabbara.
“All of this creates a fantastic opportunity for people to get into the real estate market here. If we learned something in 2008 and 2009, Dubai is very resilient. If you come in on the lows, you will make money on the highs, ”he continued.
Stake, which launched Monday at DIFC’s FinTech Hive, offers potential property investors a digitized platform to browse pre-screened property listings, said Mahmassani, previously managing director of Falcon Group.
The listings include a due diligence report, a market report, financial projections, and a property appraisal report for each project, he added.
Stake, which is regulated by the DFSA, deals only with residential real estate and lists secondary real estate projects that the co-founders believe will provide a better return on investment.
“Visually, off-plan projects seem like good business as investors only have to pay a little upfront. However, from a risk perspective, they are concentrating capital, taking construction risk, and taking vacancy risk on the asset if it is delivered in three or four years. If you buy something that is ready today and that is already leased, you eliminate all of these risks, ”Mahmassani said. Properties at stake should already be rented for at least a year, he added.
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Stake also encourages investments in multiple properties.
“Rather than getting an investor to put all of their money into one unit, we are asking them to split that equity into five or six different units and generate returns. If one is not rented out, another is making money so diversify. The affordability issue is removed from the equation as long as you can afford a unit, and it gives you diversification as well, ”Tabbara said.
The minimum investment is AED 2,000, he added.
“You are essentially investing by financing your digital wallet with us using various payment methods. From then on, you decide how much you want to invest in each property by creating a diversified portfolio of multiple properties that you have a stake in in proportion to the amount you invested. We have split the asset for you to own a portion of it, ”said Mahmassani.
Stake encourages a five-year investment in the platform, for which shares are distributed quarterly, Mahmassani said.
“From then on, you can reinvest this proceeds or transfer it to your bank account. We provide full transparency reports on your property’s performance over six months, ”he added.
Manar Mahmassani, co-founder of Stake
Aside from affordability, the co-founders stated that Stake also meets the market need for transparency in real estate investments in the region.
“There are many shortcomings in real estate investment where investors are misled by developers and brokers into buying high-priced properties with low returns,” said Tabbara.
“There are people in other parts of the world who get burned by over-promising and investing in real estate, but in our part of the world this is more relevant because a lot of foreign investors come in and there aren’t any. t this broad access to information given to them, ”he continued.
Mahmassani said Stake makes its profits by taking a small percentage upfront and on an ongoing basis, but the main source of income is exiting after the investor has made money.
As a start-up, Stake raised $ 2 million from the co-founders themselves, their friends and family, angel investors, a London-based VC, and Madison Marquette, a leading US commercial real estate investment manager.
Stake’s investors were not only a source of financial support, but also opened up opportunities for the young start-up to expand.
“The nice thing about Dubai is that it appeals to a lot of international investors. Part of our roadmap is obviously to target investors outside of Dubai to invest in Dubai. However, one of our main investors is a developer in the US. We will then start listing US properties on our platform, ”said Tabbara.
“Another investor in our platform is a London-based real estate developer. So we will also focus on investing in the UK. It’s part of our roadmap, possibly in the second and third years, ”he added.
The duo, who met in high school in Lebanon, gave this advice to aspiring entrepreneurs: “The thing that holds people back most from starting their own business is fear of what will happen if it doesn’t works. But if it’s something that actually keeps you up at night and makes you lose sleep over it, then it’s definitely worth it. You should try to stay on course, not look back. ”