Fractional Real Estate Investment in Dubai: How Does It Work?

Dubai has distinguished itself as one of the world’s most lucrative real estate markets. Spurred by sustained investor interest, the government has also been taking measures to make property investments more equitable and accessible, with one of the most popular recent developments being the rise of fractional or co-ownership of properties.

This method allows multiple individuals to become property owners by investing in the same property, which is usually managed by a company. It’s a great way for interested investors to dip their toes in the water without a massive hit on their finances. Here, we will delve into the concept of fractional ownership and its various facets.

What Is Fractional Ownership?

In essence, fractional ownership is a type of shared ownership. So, instead of one person owning the entire property, ownership is split between several investors, each one owning a specific percentage depending on the amount invested by them.

This allows both first-time as well as seasoned investors to enter the property market without having to consider footing the bill for the entire cost of an apartment, villa, townhouse or commercial unit by themselves.

Additionally, fractional ownership ensures returns proportionate to the owners' investments. This makes fractional real estate investments a form of home ownership, with investors having shared equity.

Explore the most essential factors to consider when buying a freehold property in Dubai.

How Does Co-Ownership Work in Dubai?

In Dubai, there are two distinct forms of fractional real estate investment. The first is via a real estate entity and takes a straightforward approach. In this case, the property ownership is established via the entity itself. An example of this would be PRYPCO Mint, a dedicated platform for fractional ownership. Users can choose from a list of available properties with minimum investment amounts starting at just 2,000 AED. One of the earliest properties to sell on the platform was a premium apartment in Sobha Creek Vistas Grande – fully funded in less than 10 minutes by more than 200 investors from 38 nationalities, showing the sheer attractiveness and rising popularity of this mode of investment.

The second form of fractional ownership is called Tenancy In Common, which allows investors to have shared ownership by holding a deed for the property, which shows their percentage of ownership.

Check out our guide on buying property in Dubai for more detailed information.

Benefits of Fractional Property Ownership

Like every investment avenue, shared or co-ownership of real estate also comes with certain obvious advantages. For example:

• Lower barrier to entry: Possibly the biggest advantage is that it opens up the real estate market to those who are either unable to afford a full property or are unwilling to make a large commitment. Platforms like PRYPCO Mint and others allow people with a bit of extra money to invest in property without having to take a loan.
• Greater ROI potential: One of the main reasons for Dubai’s property market being so popular is due to the ROI (return on investment) it generates. As co-owners of a property, investors can generate a good amount of ROI compared to conventional investments, especially since rental yields have been on the increase.
• Flexibility: The conventional method of property investment requires a long-term commitment along with the hassle of numerous administrative procedures, not to mention the financial burden. Fractional ownership allows investors to enter the market and invest in multiple properties – a studio, a villa, even office spaces – since the administrative aspect is usually taken care of by the company that manages these properties. Shared ownership houses have become an attractive way for investors to own a stake in premium villas without the full financial burden.
• Legal protection: The Dubai government has established a set of rules and regulations for fractional ownership. In addition, the Dubai Land Department requires every shared property to be registered with them. This provides investors with the assurance that their assets are secure and legal.

Challenges Property Owners Face with Co-Ownership

Although fractional ownership is a very compelling option for investors, those looking to be property owners should be aware of certain limitations:

• Restrictions on decisions: One of the main drawbacks of fractional real estate is that decisions regarding the property itself are usually made by the managing company. For instance, if you’ve invested in a property via a real estate company, decisions regarding maintenance, renovations, or even resale would be handled by the company, leaving investors with limited control over what happens to the property.
• Additional costs: Given that the company will be managing the property, it is likely that co-owners can be charged a fee for maintenance and other expenses, and these fees can cut into the ROI.
• Lack of financing: In the case of a conventional real estate investment, banks are open to providing financing options. However, with fractional property investment being a novel concept, banks and financial institutions are likely to see it as more of a risk, which can make it harder to secure loans.

Read our comparison on investing in apartments vs villas in Dubai to help you decide on your next property investment.

Fractional Real Estate Investments: Who Is It For?

Fractional ownership is a great idea. But before investing, it is important to find out if it is ideal for you. If you’re looking to break into the real estate market but have limited funding or are not ready to make a long-term commitment, this could be for you. Many investors today are opting for shared ownership homes in Dubai to enter prime locations with lower investment thresholds.

Fractional ownership isn’t necessarily limited to the budget-conscious investors. Even those with significant financial resources can consider spreading it out into multiple properties rather than going all-in on a single property. This helps reduce risk while diversifying your portfolio.

Learning more about real estate decision-making helps you determine the right property type and assess whether fractional property investment is the ideal choice for you.

How to Get Started with Shared Ownership of Property in Dubai?

Check out available platforms and companies like PRYPCO, Stake and SmartCrowd, which allow you to start investing in properties from as little as 500-2,000 AED. This is made possible due to tokenised real estate, where investors can own a part of the overall property through contract-based tokens backed by blockchain. This enables contracts to be made in real time, with complete transparency, in line with regulations set by the Dubai Land Department.

Overall, fractional investment in real estate is transforming how investors perceive property ownership in Dubai. However, it is important to note that this is still a new concept in real estate and comes with its own set of limitations. Therefore, it is prudent to do some research before you decide to invest in the fractional real estate market.