In a regional first, individuals are now able to purchase properties in Dubai using OneGramCoin (OGC), the industry’s first Shariah compliant-certified cryptocurrency, reflecting the growing acceptance of virtual currencies in the real estate market globally amid different regulatory treatments on the digital assets across jurisdictions.
While bitcoins have been used to purchase properties in California, New York and Miami in the US and Bali in Indonesia, this is not quite the reality in the UAE. Several real estate players did announce plans to begin accepting bitcoins as payments for real estate projects in Dubai including Knox Group of Companies (based in the Isle of Man), however, these are still under negotiations or involve projects to be launched over the next few years. Knox for example, is pricing its planned Aston Plaza and Residence, valued at GBP250 million (US$332.97 million), in bitcoins. The Dubai venture, co-led by Scottish parliamentarian Baroness Michelle Mone, is expected to be completed in 2019. A Dubai real estate company, Fam Properties, in October began facilitating a select number of landlords whose properties are managed by itself to accept bitcoin rental payments. The company also revealed earlier in September that it was in discussions with two developers to begin accepting bitcoins as a method of payments for their projects.
On the other hand, MAG Lifestyle Development, the name behind six existing real estate projects in Dubai including Emirates Financial Tower and another eight in the pipeline, has begun accepting OGC payments for its existing and future portfolio of properties, bringing a virtual currency into the mainstream with a real-world application in the real estate sector.
“At MAG, we exist to inspire our customers to expect more from us, and we are delivering on this promise by allowing them to benefit from the growing potential of crypto-currencies with OneGram,” said Talal Moafaq Al Gaddah, CEO of MAG Lifestyle Development. “In Dubai’s forward-thinking real estate market, where embracing smart digital solutions is a key priority for driving sustainable growth in line with our leadership’s directives, we are proud to be standing apart from the pack by achieving another regional first.”
Speaking to IFN Fintech, Mohammed Ibraheem Khan, the founder of OneGram, the company behind OGC, called the development a “gamechanger” with OGC being “only the second crypto[currency] to get a real-world use case in the real estate market”, all this before OGC is even live – it is scheduled to go live in June 2018.
How it works
Investors will purchase OGC to the value of the property and receive a 5% discount on the property price as a result. OneGram will then remit to MAG according to the payment plan, which is 35% over six to nine months and 65% on completion at the end of 2019. Ibraheem explained that with this, investors are gaining exposure to two investment classes: there is a potential for an upside as the value of OGC – backed by physical gold – could appreciate in value over the duration of the project, which means, the properties could eventually cost fewer OGCs at completion date therefore allowing investors to gain the differential. Investors have the option to complete the entire transaction in OGC or a combination of the virtual currency and fiat money.
Like in most countries, the legality of cryptocurrencies in the UAE is steeped in uncertainty as regulators are still figuring out how best to treat this digital asset which have taken the world by storm. This means transactions in virtual currencies carry the risk of being banned altogether and nullified.
The UAE central bank governor Mubarah Rashid Al Mansouri did warn against using digital currencies a few months earlier but virtual currencies are not outlawed either. The regulatory authority of Abu Dhabi’s financial free zone, Abu Dhabi Global Markets, in October issued its stance on cryptocurrencies and initial coin offerings and in its nine-page supplementary guidance clarified that virtual currencies are not legal tenders.
“However, virtual currencies have “value” in that they can be exchanged for other things of value, with that value being dependent on considerations of supply and demand. In this respect, virtual currencies have much in common with physical commodities such as precious metals, fuels and agricultural produce. Therefore, from a regulatory perspective, virtual currencies are treated as commodities, which are not specified investments as defined under the Financial Services Market Regulations 2015,” the Financial Services Regulatory Authority noted.