Tokenization is a topic that has had many in the traditional financial world excited for the last year. Particularly, this excitement has often steered towards highly valuable and previously illiquid real world asset such as art and real estate. This is because tokenization allows for fractional ownership while reducing the cost and time of many manual processes such as compliance, settlement, etc. However, tokenization is not a simple process and requires ample guidance on the brokerage, legal, tax, auditing and technology side. This is why Jibrel is proud to announce that it has become an approved broker of Emaar Properties, one of the largest real estate developers in the world.

Emaar Properties & Jibrel

As part of Jibrel’s real estate tokenization initiative, we needed to work with a property developer to provide the underlying assets for tokenization. In this instance, tokenization refers to tracking property titles and ownership rights, using distributed ledgers, as well as offering those real estate assets to customers on-chain.

As part of this initiative, Jibrel has become an approved Emaar Properties Broker (Approval: SR#22100), allowing Jibrel to sell Emaar owned properties on-chain.

In addition to becoming an approved broker, Jibrel is able to facilitate the purchase of Emaar properties using digital assets (BTC, ETH, JNT). Once investors are on-boarded to the Jibrel platform, they will be able to select from a portfolio of properties, complete a purchase using BTC, ETH or JNT and receive confirmation that the title has been transferred to their name.

After a purchase is completed, Jibrel will undertake all the necessary off-chain work to ensure that property ownership is transferred to the purchaser and the title is transferred to their name. In the future, Jibrel will explore technology solutions for this process, which is still very much hampered by off-chain regulatory limitations.

The Burj Khalifa

Emaar Properties is a Dubai-based Public Joint Stock Company listed on the Dubai Financial Market with a valuation of over $9.8 billion. Since 1997, Emaar has been a leading global real estate developer, operating internationally, in over 36 markets across the Middle East, North Africa, Pan-Asia, Europe and North America. Their holdings include the Burj Khalifa (world’s tallest building) and other iconic real estate assets.

Yet speed and innovation have not suffered due to their large size. Emaar has been a big proponent of blockchain for quite some time. They are considering an initial coin offering in Europe within a year of the internal launch of their blockchain platform and community token based on the Ethereum blockchain framework. Emaar’s community token will be accepted throughout the company’s various holdings in real estate, malls, hospitality, entertainment and office facilities.

How Does Real Estate Tokenization Work?

Real estate is widely known as a fundamental asset in any successful investor’s portfolio because of the security, consistent returns and value appreciation it offers. Unfortunately, many potential investors are turned away from real estate and forced into other investment types due to its inefficiencies and barriers to entry such as high capital requirements, management, etc. Real estate is perfect for tokenization because it provides all the upsides of ownership while minimizing the downsides.

When a piece of real estate, “Property A,” is tokenized, it is broken down into digital security tokens, “Property A Coins,” and distributed to it’s holders. Unlike utility tokens, each coin represents actual ownership percentage in the asset and any profits derived are distributed among Property A Coin holders. Investors can look through the list of investment properties for sale and easily become partial owners. If an investor decides they wish to sell their ownership in the property, they are able to list their token on a security token exchange for liquidity.

What Does This Mean for Investors?

Institutional investors: The benefits of liquidity are less pronounced for institutional investors like pension funds and sovereign wealth funds. These investors operate with extended time horizons and have long capital lockups periods. They also tend to be more risk-averse with capital preservation being the primary goal. Therefore, this investor class is unlikely to be a major initial adopter of this technology.

Retail investors: High net-worth retail investors, such as high net-worth individuals and family offices, stand to benefit from tokenization. These types of investors primarily invest in real-estate in one of two ways.

(1) They buy individual property, such as an apartment, house or building, which requires a lot of capital, a long-term commitment and carries a high single-asset risk.

(2) They buy into a public REIT (Real Estate Investment Trust), which holds a bucket of assets and, typically, tends to have lower returns.

With tokenization, retail investors can buy into individual assets and tune their exposure. Retail investors are also likely to desire liquidity in the short-term as their personal situations change. Ultimately, these steps towards fractional ownership will serve as the foundation for the internet of value and a tokenized world.