Middle East property tech draws venture capital interest

July 16, 2024, 4:01 AM

Population growth in the UAE is driving the real estate industry in areas such as Dubai and thus increasing interest in property tech

VC investing heavily in property tech
‘The real estate market is on fire’
Overall VC funding is down

Venture capital is pouring into the Middle Eastern property technology industry, buoyed by continued growth in regional real estate.

Property tech offerings encompass listing websites, rental management services and investment products, among others.

In the first half of 2024 startups in the sector became the number one target for early-stage funding, beating fintech, which has traditionally dominated the space.

However, venture capital investments in general slowed down significantly in the region as geopolitical tensions rose.

Newsletter
Get the Best of AGBI delivered straight to your inbox every week

The Dubai-based accelerator Wamda said property tech in the Mena region attracted $200 million in venture capital through 14 deals in the first half of 2024, while fintech raised $156 million across 50 deals.

There was, however, a precipitous drop in total funding. At nearly $882 million by the end of June, it was down 46 percent from $1.6 billion in the same period last year.

The decline is a more modest 12 percent when accounting for the fact that the H1 2023 figure included $644 million of debt financing, Wamda said.

Omar Sati, managing director and co-founder of Dash Ventures, a Jordan VC firm, says fintech, business-to-business software as a service, and logistics or supply chain-focused startups continue to receive the highest flow of incoming deals, but property tech has registered a definite upswing in attention and funding.

The main reason, he says, is population growth, which, especially in the UAE and Saudi Arabia, has been driving the physical real estate industry and its ancillary tech-based offerings.

Sati remembers early property tech companies trying to introduce concepts such as fractional ownership of real estate a decade ago, but failing to take hold.

“Today I’m seeing a few more of those: maybe they will work, maybe they won’t,” he says. “But you see them coming back, because people are now interested in investing again, as the real estate market is on fire.”

Sati says it is likely that property tech’s overtaking of fintech as the most-funded sector stems from the enormous flow of money into fintech in recent years and VC firms’ need to differentiate their investments.

Dubai is pushing to be the lead regional player for property tech innovation. The emirate’s Land Department in May established a dedicated conference event, the Real Estate Evolution Space Initiative, partnering with several sector startups.

One of those startups is Stake, a fractional-ownership platform that enables investors to own parcels of Dubai real estate for as little as AED500 ($136).

Rami Tabbara, Stake’s co-founder and co-chief executive, says: “When Stake first started out in early 2021, the term ‘proptech’ was still virtually unheard of in the VC jargon.

“We now can see that proptech is a category of its own that is attracting a substantial amount of capital from both regional and international investors.”

In June Stake raised $14 million in a Series A funding round, the startup’s third after seed and pre-series A rounds earlier on.

“Although it concerns us that there is a drop in funding compared to last year, we are lucky enough to have closed a significant war chest,” Tabbara says about VC’s overall slowdown this year.

“We also believe that capital will be available in the market for the best-performing companies. There is nothing comparable globally to what the UAE and Saudi Arabia are achieving through their development plans.”

Big real estate developers are also entering the Dubai property tech fray. In May, Prypco Blocks, headed by Damac Properties heir Amira Sajwani, said it had funded its first fractional ownership property.

This month, the investment firm Mag Group said it would put $500 million of physical real estate assets on a blockchain and seek investors large and small for the equivalent tokens over the coming months.

Mag Lifestyle Development’s chief executive, Talal Moafaq Al Gaddah, says Dubai’s work to establish a serious regulatory framework surrounding digital tokens and the blockchain was a big factor in convincing the company to launch this effort.

“We have been working on real estate tokenisation since 2014, but we did not take any action at that time, because things were not clear when it came to cryptocurrencies,” Al Gaddah says.

“In the last two years, Dubai built a massive infrastructure, and it helped us to go that route.”