Why Investors may be tempted by Dubai's Real Estate in 2021
Stake co-founders say recent reforms will present opportunities for property investors next year after 2020 slowdown
Dubai’s residential real estate market will present opportunities next year despite a slowdown in 2020, according to the founders of a new investment platform.
Stake co-founders Rami Tabbara and Manar Mahmassani have leveraged their 15 years of experience in Dubai’s real estate and financial markets to launch the digital real estate investment platform.
Residential real estate prices in 2020 had dropped down to almost below replacement point, meaning that investors can buy property at less than the building cost, but with the introduction of vaccines and the economy picking up, prices are expected to pick up in 2021, said Tabbara, who was a former senior vice president of sales at Damac.
“We also feel that more people will start coming to Dubai with the introductions of the retirement visas and the five-year visas,” said Tabbara.
“All this will create a fantastic opportunity for people to come into the real estate market here. If we've learned anything in 2008 and 2009 it is that Dubai is very resilient. If you come in at the lows, then you'll make money at the highs,” he continued.
Stake, which launched on Monday in DIFC’s FinTech Hive, provides potential real estate investors with a digitised platform where they can browse pre-vetted property listings, said Mahmassani, previously managing director at Falcon Group.
Listings include a due diligence report, a market report, financial projections and a property valuation report for each project, he added.
Regulated by the DFSA, Stake deals with only residential properties and lists secondary real estate projects which the co-founders believe gives a better return on investments.
“Optically, off-plan projects appear to be a good deal as investors only have to pay a little upfront. From a risk standpoint, however, they are concentrating capital, taking construction risk and taking vacancy risk on the asset when it gets delivered in three or four years. When you're buying something that is ready today, and that is already leased, you remove all those risks,” said Mahmassani. Properties on Stake should be already leased for a minimum of a year, he added.
Stake also encourages investments in multiple properties.
“Instead of getting one investor to put all his money into one unit, we tell them to divide that equity across five or six different units and start making returns. If one isn't rented out, another one is making you money so it kind of diversifies. It takes the issue of affordability out of the equation, as long as you can afford one unit, and it also provides you with diversification,” said Tabbara.
The minimum investment is AED2,000, he added.
“You basically invest by funding your digital wallet with us through several payment methods. From there on, you allocate how much you want to invest in each property by creating a diversified portfolio of multiple properties where you own a stake in each one proportional to the amount that you've invested. We've fractionalised the asset for you to own a partial stake in it,” said Mahmassani.
Stake encourages a five-year investment into the platform, for which shares are distributed every quarter, said Mahmassani.
“From there on, you can choose to reinvest those proceeds or take them out into your bank account. We give you full transparency reporting on how your property has performed over six months,” he added.
Aside from affordability, the co-founders claimed Stake also answers the market need for transparency in real estate investment in the region.
“There are a lot of shortcomings in the real estate investment space where investors tend to be misled by developers and brokers to buy high priced properties with little return,” said Tabbara.
“In other places in the world as well, there are people who get burnt by over-promises and investing in real estate but in our part of the world it is more relevant because there's a lot of foreign investors that come in and there isn't that wide access to information that's given to them,” he continued.
Mahmassani said Stake generates its profits by taking a small percentage upfront and on a running basis but the main source of revenue is at the exit after the investor has made money.
As a bootstrapped start-up, Stake has raised $2 million from the co-founders themselves, their friends and family, angel investors, a London based VC and Madison Marquette, a leading commercial real estate investment manager in the US.
Stake’s investors were not only a source of financial backing, they also opened up expansion opportunities for the young start-up.
“The beauty of Dubai is that caters to many international investors so part of our roadmap is to obviously target investors outside of Dubai to invest in Dubai. But, one of our lead investors is a developer in the US so we will then start listing US real estate onto our platform,” said Tabbara.
“Another investor in our platform is a London based real estate developer so we'll start targeting investments in the UK as well. That's part of our roadmap, potentially, in year two and three,” he added.
The duo, who met in high school in Lebanon, offered this advice for aspiring entrepreneurs: “The thing that most keeps people away from actually starting their own businesses is the fear of what happens if it doesn't work out. But if it's something that's actually keeping them up at night, and they're losing sleep over it, then it's definitely worth it. They should go for it, stay the course and not look back.”
