The real estate boom saw prices go through the roof in the UAE, which gave many of the early investors a huge return on their investments in the form of rent and capital gains. Today, in spite of the damp market, property purchases still remain largely inaccessible to the masses.
This is about to change.
As an investment class, real estate is a very expensive one by comparison. However, depending upon the property’s location, amenities and many other factors, it can offer a high return on investment, which makes it an attractive option for many. In case of Dubai, properties have been serving lofty ROIs by way of rent, ranging from 8% to 10% per annum, even as they’ve lost their capital value by a few percentile points in the past couple of years.
Due to it being perceived as a relatively safe asset, generating a considerable income year-on-year, many people have wanted to jump on the bandwagon to own properties of their own. Alas, with the current economic climate and still exceptionally high prices per unit, it remains unaffordable to many. The realisation of this gap in the market was what led to the foundation of Smart Crowd — the first and only real estate crowdfunding platform, regulated by a financial services regulator, in the Middle East.
Founded by Siddiq Farid, Musfique Ahmed and Abdul Kadir Faizal in 2018, Smart Crowd has built a platform that allows people from all walks of life to come together to own a property. They’re giving them the freedom to invest any amount they are comfortable with, minimum being AED 5000, and own their share of the property, post which they naturally earn the ROI on pro-rata basis.
Siddiq explains, “Smart Crowd is a fully regulated and licensed platform, which means the investors’ money is in safe hands. Plus, real estate is an investment asset that is compliant with the Islamic laws and we’ve seen increasing interest from locals in the region.” He elaborates further on the basic concept of Smart Crowd, “We founded this platform to offer the real estate investment opportunities to everyone. This platform is built with the principle of property being another asset in people’s investment portfolio, giving them the chance to profit from it.”
He adds, “We have a strict and transparent process behind vetting properties. Our combined experience in finance, technology and real estate means we provide in-depth research about the property and expected returns. We have a point system in place that ensures objective evaluation, in addition to our more experiential advice.”
Talking about their digital process and investment safety even if things go south, he reassures, “the DIFC regulation ensures that the property belongs to the people in the same share in which they bought it, and is independent of the company’s assets and liabilities.” However, that doesn’t mean they leave the owners to fend for themselves after the purchase. He says, “We manage the properties for them, which includes putting it on rent, doing the paperwork as well as managing the repairs for a small fee, just like an agent. This way everyone remains happy and doesn’t have to deal with any hassles, and can sit back and earn the returns; while incentivising us to manage the property for them.”
Traditionally, there have been many Asian families whose members have pooled funds to buy a property; and while that is still practised, it comes with its fair share of risk, such as the exact share of each member, the name on the registration papers, the one who manages the property, and so on. There have been many who have lost their money, been cheated upon, and are still fighting for their share in the court of law. When asked about this, Siddiq recommends, “families who wish to buy property units, are welcome to use our platform, it is easy, transparent and regulated, so even if one member wants to sell, they can do so without hindrances from the others.”
When asked about the slowing market that is predicted to bring down the prices even further, Siddiq explains, “the real estate goes through cycles, where there are downturns and opportunities for investment. Like any other asset, we cannot guarantee anything, but we can make an educated guess. The property prices may go down or may increase owing to EXPO 2020. Since the market has taken a dip, it’s a better point in time to take advantage of the lower prices to own a part of a property.”
Having said the above, one of the key questions to ask when it comes to investment assets, is the procedure and ease of divesting. Since the platform is still young, it may take some time to build the traction of customers as it educates the market, which is on its current agenda. Siddiq explains, “as real estate is a slow-growing fixed asset, it is meant to be a long-term investment, and I’d recommend waiting for at least a few years before one can see a sizeable return. When people do want to sell, we can help them do so.” However, if you do want to exit alone, you may need to find someone willing to take the same percentage of share that you currently have. This indicates that the exit process can be longer compared to other asset classes; however, it is similar to being a complete owner of the property, other than the fact that this concept is yet to catch on.
All things considered, the growth prospects for Smart Crowd are looking promising, with it having successfully completed two transactions via its platform, and continuously offering newly vetted properties. It also won the “FinTech of the Year” title at this year’s Arabian Business Technology Awards. While it is still in its initial stages and like every new concept may need an aggressive strategy to spread the word and confidence in the market, given the time and market trends, this could be an opportunity many average-income individuals have been waiting for.
**Interview has been concised