UAE’s Metaverse and NetxGenFDI will rub off on real estate opportunities too

According to the World Bank, SMEs account for about 90 per cent of businesses and 50 per cent of employment worldwide. The reality is no different in the MENA region, where SMEs are considered a major contributor to job creation and economic development.

Since most SMEs today are tech-related—at least to some extent – the recently launched NextGenFDI and Dubai Metaverse Strategy that are set to attract massive numbers of entrepreneurs, startups, tech and Metaverse talent will likely drive further demand for housing and commercial properties in the UAE.

Driven by the two government initiatives, the influx of organizations and talent will create a ripple effect that will be felt across sectors, especially as NextGenFDI will provide commercial and residential real estate incentives for companies relocating to the UAE.

The issuance of the latest Royal Decree offering incentives for commercial property funds will also contribute to the growth of real estate. The incentives will include the provision of working spaces, warehouses and other industrial facilities. The establishment of a ‘Register of Property Investment Funds’ at the Dubai Land Department under the Decree will be crucial in providing a framework to regulate commercial property funds.

Digital startups are at the forefront of innovation. They often originate from ‘innovation hubs’ such as the US, India and other countries. By scaling up or relocating to the UAE, they will need offices and housing for their leadership and staff.

In 2018 alone, 50,000 startups hailed from India, with over 18 per cent of them being technology-based. A year later, the country saw the establishment of an additional 1,300 tech start-ups, implying that 2-3 new technology-based startups are being launched every day.

Nearly 90 per cent of startups fail. Success largely depends on where the business is based. Setting up base has a lot to do with the country’s or city’s enabling infrastructure out of which founders and their teams operate. For a digital startup, efforts to avoid failure include securing a business base where advanced digital infrastructure, facilities and incentives are prevalent.

In addition to the latest government initiatives, the UAE has enhanced its position as an attractive destination for tech companies. According to the World Bank, the UAE is one of the world’s most connected nations, with internet penetration exceeding 99 per cent.

Tech companies are increasingly opening up real estate opportunities to buyers without the need for a realtor, or by automating deals for investors, brokers and property managers. AI and machine learning are offering predictive analytics that bring a higher level of transparency into the real estate ecosystem.

The adoption of NFTs in Dubai is increasing and there is no doubt that the real estate sector stand to benefit from Web3 applications. Metaverse property sales reached $500 million in 2021 and expected to double this year. The market for virtual real estate is expected to grow at a CAGR of 31 per cent until 2028.

The proliferation of digital real estate is unprecedented. Financial houses are now lending money to support customers interested in purchasing virtual properties. With evolving market dynamics of this nature, digital properties are set to further increase in popularity.

These developments ultimately benefit investors in the Metaverse by increasing the valuation of their virtual real estate assets.

The new wave of talent that will enter the UAE because of these two new initiatives will likely invest in real estate, given the higher RoI compared to other markets. Dubai tops the list of cities offering the best rental yield for residential units, with an impressive annual RoI of around 10 per cent, compared to London (5 per cent), Paris (3.6 per cent), Singapore (2.5 per cent), Hong Kong (2.4 per cent) and New York (2.9 per cent).