The first title papers for fractional property ownership are already being given in Dubai, which could significantly increase the number of investors in the local real estate market. In its most basic form, fractional ownership enables several investors to purchase a house, condo, or other types of property, each of whom will have ownership rights through the title documents. The present regulations state that a maximum of four investors may jointly acquire property. As long as the projects are approved by RERA (Real Estate Regulatory Agency) and the Dubai Land Department (DLD) and comply with all required standards, the fractional ownership regulations apply to both current and previous projects.
With its new SLS Dubai Hotel & Residences project, developer World of Wonders (Wow) set the bar high in this area by introducing fractional ownership. For the flats, investments begin at AED 460,000. It is a component of Downtown Dubai.
Real estate in Dubai is quite hampered by fractional ownership. Individual investors formerly had to purchase a unit in full. There may be additional investors, but only one is allowed to have his or her name on the title deed. (There is also the crowdfunding alternative, where investor groups own property rights but a special purpose corporation, rather than an individual, receives the title deed.) The decision to permit fractional ownership paves the way for governments and developers to appeal to a larger pool of potential consumers. For instance, an AED 2 million property becomes more affordable if a group of investors contributes money to it while still presenting individual ownership certificates as proof of ownership. There are also more than enough indications that the rental market is improving steadily and is finally favouring landlords after almost five years. This will encourage more investors to enter the real estate market and rent out their apartments for short-term leases or, a more recent option that has gained popularity, vacation homes. One of the fractional title deed owners can simply sell his part and transfer the deed to a new buyer if he decides to leave the business. The procedures go rather smoothly by seeking legal advice from a well-qualified real estate lawyer. In reality, a recent auction for a deed of fractional ownership invited bids.
Now, if fractional is not for you, there is the crowdfunding option. Here, a special purpose vehicle (SPV) company is set up and collects funds from investors in smaller ticket sizes. This establishes their rights to a property owned by the SPV company, and they get returns based on what the unit will fetch in rental income or a future sale.