More investors turn to fractional ownership to enter booming Dubai property market

UAE resident Tim Prins, 28, from the Netherlands, signed up with fractional property investment platform Stake two years ago and invested €113 (Dh500 then) in a property.

Fractional ownership is a method in which several unrelated parties can share in, and reduce the risk of, ownership of a high-value tangible asset, usually such as real estate, a jet or yacht.

When he started receiving rent income and noticed the property's value was rising, Mr Prins increased the investment amount and spread it out over several units. He now has more than Dh100,000 ($27,229) invested across different properties and earns about 5 per cent to 6 per cent of the amount invested annually in rental yields. This is equal to about Dh500 in rental income per month that is transferred to his account.

The properties he has investments in are located in communities such as Jumeirah Village Circle, Mohammed bn Rashid City, Dubai Marina and Palm Jumeirah.

“I don't have enough money to buy a property outright. With Dh100,000, I would not be able to buy a property without taking a bank loan,” says Mr Prins, who works with a start-up.

“I can now invest in multiple properties at the same time, and the company manages it, so I don't have to make a decision. If I buy something myself, I might not know what to choose. The process has been transparent and hassle-free.”

Steps involved

Fractional ownership is emerging as an alternative entry point into Dubai’s real estate market, particularly for investors seeking access to premium properties without the burden of full capital exposure. It also enables diversification across locations or asset types, and in many cases, lowers the ongoing operational burden per investor.

Typically, this model is structured through a special purpose vehicle (SPV), where the SPV holds the legal title to the property and issues shares to investors proportionate to their contribution. While individual names do not appear on the title deed, the SPV structure typically provides a transparent and governed framework for shared ownership, offering clarity around rights, responsibilities and exit strategies.

Mr Prin said Stake offered to sell a few of his properties, but he declined because he believes values will rise more in Dubai, and he is a long-term investor. “I want my money to grow as much as possible,” he says. “You can sell your stake in a collective vote or during the exit window.”

However, he asks investors to be aware of exit fees, transaction charges such as the Dubai Land Department fee of 4 per cent and the property transfer fee, which are spread across all investors in the property.

Transaction costs are additional fees that are added to the purchase price of the property to complete the legal transfer of the asset from the seller to the buyer. These fees include the DLD transfer and registration fees, trustee fees, brokerage fees, property insurance, valuation fee and DIFC fees, according to the Stake website.

Rami Tabbara, co-founder of Stake, says fractional ownership makes buying property “more affordable” for people who do not have the amount for large downpayments or do not want to commit a lot of capital.

“It offers a much more transparent experience versus the open market and is digital, so you enable people to buy real estate on an app in under three minutes. It allows you to diversify and lower your risk,” he says.

“If you have $5,000 or $10,000, instead of placing all that capital into one property, you can put it across 20 properties.”

Rental yields

The minimum amount for investment in Stake currently is Dh500 and the rental income is paid monthly into the investor’s Stake wallet, which can be withdrawn to their bank account globally. The platform launched in 2021 and has more than a million users. Stake says it has transacted just under Dh1 billion across 400 apartments.

Stake’s portfolio today pays rental yields of about 5.7 per cent net annually, which is distributed every month, and offers capital appreciation of just over 5 per cent a year.

After a lock-in period of one year, the platform allows people to sell their stakes in two windows every six months. They can list their stakes on the secondary market to sell to other investors, according to Mr Tabbara.

“We've exited over 20 apartments when we received offers of higher prices. We send the vote to the investors on the app, and if the majority decide to sell, they can exit the property,” he says.

“Right now, we deal in ready apartments, villas and townhouses because there's a limitation of up to $10 million per asset by the Dubai Financial Services Authority. We're working with the DLD and the DIFC regulator to allow us to start selling off-plan. We hope the DLD’s tokenisation announcement will enable us to transact more asset classes outside residential and of higher value too.”

Stake charges a one-time acquisition fee of 1.5 per cent, a management fee of 0.5 per cent of the investment value taken from the rent annually, an exit fee of 2.5 per cent at the time of sale and a performance fee of 7 per cent on the appreciation profits, according to its website.

Riz Ahmed, chief executive of Dubai-based SmartCrowd, first interacted with the crowdfunding platform as a customer. He recalls that instead of putting $200,000 into one property, he spread it across 10 properties.

The company takes care of finding tenants, renewals, handling disputes, managing exits and documentation, while also offering investors the benefit of diversifying their assets, he says.

Democratising access

“The minimum you can invest from is Dh500. This is our way to democratise access to real estate. But we have people investing millions of dirhams and most of our investors are outside the UAE,” Mr Ahmed says.

The company has done 50 exits and funded more than 150 properties. It offers net returns of 17 per cent annually and the average hold period is three years. The platform charges a 1.5 per cent upfront free, 0.5 per cent a year management fee, and 2.5 per cent on exit, according to Mr Ahmed. It offers a “conservative” estimate of capital appreciation at 5 per cent to 6 per cent a year.

For every crowdfunding activity, SmartCrowd sets up an SPV that will own the property and investors own shares in it. This is done through the DFSA’s regulatory framework.

The platform opens a secondary window for two weeks every six months for users to sell their shares or buy someone else's.

“Our plan for the future is to start offering off-plan properties. At the moment, we only do units on the secondary market,” the chief executive says.

Changing structures

But equity crowdfunding is expensive, says Scott Thiel, chief executive and co-founder of Tokinvest, a Dubai-based Vara-licensed marketplace for asset investing.

“You need to set up a DIFC crowdfunding structured vehicle for every single apartment. That is a fairly high cost, particularly when you're talking about properties around the Dh1 million mark. It can cost a non-trivial amount of money to set up those companies, do share registrations and transfer shares,” he says.

“They are not liquid when it comes to selling the share since they are not publicly listed. Equity crowdfunding rules also restrict the amount that can be raised.”

Michael Kortbawi, partner at BSA Law, also highlights that the shared nature of the investment in fractional ownership means investors usually have limited control over decisions, especially when a management company or majority vote is involved.

“Selling a fractional share can also be challenging; liquidity is often lower than with traditional full ownership, and finding a buyer willing to purchase just a portion of a property may take time. Additionally, the resale value of a fractional share may not always match expectations, particularly if market conditions change or the structure lacks clear exit provisions,” Mr Kortbawi says.

“It’s also important to note that co-owners are bound by a right of first refusal, meaning they must first offer their share to existing investors before selling it to an external party. This pre-emptive right protects the current ownership structure but can delay exit plans.”

Due diligence remains key

Fractional ownership is still early in its adoption curve, but the concept is gaining traction, says Farooq Syed, chief executive of Springfield Property.

While a structured route, whether through an SPV or licensed fractional investment platform, offers transparency in ownership and enforceable agreements, there are complexities.

Liquidity remains limited, particularly where no secondary market exists for fractional shares. Investors may also have limited control over key decisions, depending on how the ownership is structured and managed. Transparency, especially around fees, timelines and exit options, can vary significantly between platforms, Mr Syed points out.

“Fractional ownership requires the same level of due diligence as any traditional real estate investment,” he says. “Key considerations, such as decision-making authority, distribution of returns, asset oversight and mechanisms for dispute resolution, should be explicitly defined and contractually secured prior to commitment.”

While informal arrangements, such as the pooling of funds among friends, may appear convenient, but they can quickly become complex when faced with differing expectations, personal circumstances or unforeseen market shifts, Mr Syed says.

Mr Kortbawi also stresses that engaging in fractional property investment through a formal company structure generally offers more legal protection and operational efficiency compared to informal arrangements.

Companies that offer fractional ownership services typically provide standardised contracts that clearly define each investor’s rights, responsibilities and exit options, which reduces the chance of future disputes, he explains.

On the other hand, informal arrangements can become legally complicated, Mr Kortbawi says. They may overlook important regulatory requirements set by the DLD or the Real Estate Regulatory Agency. Informal ownership without a proper SPV or co-ownership registration may even hinder the ability to enforce your ownership rights in court, he warns.

Impact of tokenisation initiative

Dubai’s recent tokenisation initiative will remove the need for SPV corporate structures to fractionally own real estate, according to Mr Thiel.

“The death of the SPV is going to be very significant, particularly for smaller investors and smaller properties, because the cost and inefficiency of having to set up those corporate structures are going to disappear,” he says.

“Another benefit is that the owner of these tokens will have their details recorded at the land registry. Also, tokenised assets can be used in collateral or alone. We're very bullish on the future of tokenised assets being used to create instantaneous capital.”