Unlocking the Commercial Promise of Real Estate Tokenisation in a Regulated Environment
The United Arab Emirates is actively advancing its position as a global centre for financial and technological innovation. Among the more recent developments is the application of distributed ledger technology to real estate assets, commonly referred to as tokenisation. This approach seeks to enable fractional ownership, enhance liquidity, and expand access to investment in real estate. However, despite the commercial appeal, such structures must be underpinned by a robust legal and regulatory framework.
Tokenisation, in its most credible form, involves digitising the economic or legal interests in a real property asset, often through the issuance of tokens that are backed by enforceable contractual rights or equity in a holding structure. Without such foundations, the commercial proposition is significantly weakened, and investor protection is compromised.
The UAE’s regulatory ecosystem, particularly through the Virtual Assets Regulatory Authority (VARA), provides a structured yet flexible environment for tokenisation. Established in Dubai, VARA serves as the dedicated regulator for virtual asset service providers, offering comprehensive oversight that balances market innovation with investor protection. This forward-looking approach positions the UAE at the forefront of asset digitisation while maintaining the legal certainty essential for institutional adoption.
Legal Characterisation and Ownership Structure
Real estate ownership in the UAE remains governed by emirate-specific statutes and land registries, including those of the Dubai Land Department and the Department of Municipalities and Transport in Abu Dhabi. At present, these authorities do not recognise digital tokens or blockchain entries as substitutes for legal title.
Tokenisation models generally involve the use of a special purpose vehicle which holds legal title to the property. Tokens are then issued to represent either a beneficial interest in that vehicle, shareholder rights, or contractual entitlements to revenue and capital gain. For such arrangements to be enforceable, they must comply with relevant regulations governing securities, property transfers, and financial services.
Pilot initiatives such as the Real Estate Evolution System (REES) launched by the Dubai Land Department indicate institutional openness to digital transformation. These efforts, however, currently complement rather than replace existing legal frameworks.
Regulatory Considerations and Legal Exposure
Tokenisation platforms are increasingly marketed as turnkey solutions. These may facilitate the technological issuance and trading of tokens but often overlook critical regulatory obligations. From a legal perspective, several areas of concern must be addressed.
When tokens are structured as securities or investment instruments, they fall within the licensing remit of regulators such as the Securities and Commodities Authority, the Financial Services Regulatory Authority of Abu Dhabi Global Market, or the Virtual Assets Regulatory Authority in Dubai. Non-compliance with such regimes can lead to significant enforcement exposure.
Where tokenised interests represent beneficial ownership in real assets, the lack of a formal trustee or licensed custodian structure may deprive holders of enforceable legal rights. This is particularly relevant in jurisdictions that do not yet recognise digital tokens as evidence of title.
Promoting or marketing tokenised real estate to investors without proper authorisation, particularly where retail or cross-border participation is involved, may also violate applicable financial promotion and offering rules.
Smart contracts, while potentially efficient, do not on their own provide enforceable protection. Their utility depends on integration with traditional legal instruments that clearly specify applicable law and dispute resolution mechanisms.
UAE Regulatory Architecture and Jurisdictional Scope
The legal and regulatory oversight of tokenised real estate in the UAE is distributed across several competent authorities. The Dubai Land Department regulates property ownership and registration in Dubai and is leading innovation efforts through the REES initiative. VARA, the Virtual Assets Regulatory Authority, supervises the issuance, trading, and custody of digital assets in Dubai . It provides licensing for tokenisation platforms and related service providers.
Within the Abu Dhabi Global Market, the Financial Services Regulatory Authority has developed a comprehensive virtual asset regime, covering the full lifecycle of security tokens and digital asset services. Meanwhile, the Securities and Commodities Authority maintains jurisdiction over onshore securities activity, including tokenised securities issued or marketed within the UAE mainland.
The Department of Municipalities and Transport in Abu Dhabi continues to operate the real estate registration system in that emirate. As of now, it does not incorporate token-based mechanisms into its legal recognition process.
Free zones such as the Dubai Multi Commodities Centre may serve as vehicles for incorporating SPVs or holding companies involved in tokenisation structures. However, such activity must still adhere to the licensing and regulatory requirements imposed by the above-mentioned authorities.
Structural and Legal Prerequisites
A credible tokenisation structure requires more than technological functionality. Legal enforceability, investor protection, and regulatory compliance are essential. A well-structured model should involve an SPV with clearly defined rights and obligations, a licenced issuance platform, comprehensive contractual documentation, and mechanisms for dispute resolution. Anti-money laundering compliance and investor due diligence procedures must be embedded from the outset.
Failure to address these legal foundations exposes both issuers and investors to unnecessary commercial and regulatory risk.
Legal Outlook and Regulatory Development
Tokenisation of real estate assets in the UAE will continue to evolve. Regulatory authorities such as VARA and the FSRA are laying the groundwork for a more integrated virtual asset ecosystem. The Dubai Land Department’s early efforts in digitising real estate registration provide a promising signal of future transformation.
For the UAE to become a global hub for tokenised real estate investment, the following developments would be constructive: formal regulatory test environments for real estate tokenisation, recognition of blockchain-based registries within official systems, differentiated licensing regimes for asset-backed tokens, and cross-border legal harmonisation concerning investor rights and enforcement.
Alsuwaidi & Company remains committed to supporting clients in structuring tokenised real estate transactions that are both legally sound and commercially viable. As legislative frameworks mature, tokenisation will likely become a standardised mechanism for property investment and finance.
About the Author
Awn Aburumman is an Associate at Alsuwaidi & Company. He advises on real estate structuring, tokenisation, and broader corporate and regulatory matters, with experience across ADGM, UAE mainland and free zones. His practice includes contract negotiation, compliance guidance, and company structuring. Awn supports clients ranging from SMEs to multinational institutions, offering clear, practical legal solutions aligned with their commercial objectives.
If you have any questions about this article or related matters, you can contact Awn directly at a.aburumman@alsuwaidi.ae.