Generation Start-up: Dubai-based crowdfunding platform allows individual investors to take a fractional share in a rental property, with investment amounts starting as low as $136.15
As the name suggests, SmartCrowd offers a smart way to access the prime Dubai real estate market.
Founded in 2018, the Dubai-based start-up is a digital real estate investment platform that allows investors to crowdfund their property purchase. The platform allows individual investors to take a fractional share in a rental property.
“SmartCrowd came up as a personal need of wanting to invest in real estate and realising that it was very difficult for me to do so without putting a significant portion of funds in one single asset or trying to own a property without taking on a lot of debt,” says Siddiq Farid, who cofounded the company with Musfique Ahmed.
“So, the idea of micro investments came to mind as part of a better way to allocate capital to direct real estate, without being exposed to interest rate fluctuations. This idea served as the seed from which SmartCrowd continues to grow.”
This is how it works. SmartCrowd enables people to allocate some capital to real estate without requiring a huge amount of capital to buy the whole property. They can own a fraction of it.
It identifies prime real estate opportunities across Dubai and rigorously vets each project to ensure profitability and mitigate risk. Once a project is selected, investors can browse detailed profiles, financial projections and risk assessments before committing funds, says the company’s chief executive Riz Ahmed.
“With investment amounts starting as low as Dh500 ($136.15), SmartCrowd opens the door to real estate investment for a wide range of investors, from seasoned professionals to first-time buyers,” he says.
People contribute funds to acquire property via a Special Purpose Vehicle (SPV) in the Dubai International Financial Centre, which is allocated proportionally dependent on the size of investment, ensuring legal ownership.
SmartCrowd then administers the SPV and manages investments and properties using various strategies such as long-term rentals, holiday homes and short-term rentals. Upgrading properties enhances rental value, and refurbishment and flipping deals are also pursued.
Ultimately, investors benefit from generated income and capital appreciation upon property sale.
According to Mr Farid, people’s inability to invest in real estate due to the lack of capital, their inability to source deals and their lack of information or knowledge to assess whether or not it’s a good investment are key challenges.
“We solve them by giving them access by fractions like microinvestments. Second, we source the deals and vet them, so, we present good investible opportunities on to the platform. And third, we provide them with all the market data to help educate people to make effective investment decisions,”he says.
“We don’t just support in the initial investment like some others, but we [also] manage the properties, as well as the eventual sale of the property,” adds Mr Ahmed.
SmartCrowd says it generates revenue through a transparent fee structure. It charges fees for sourcing and managing properties throughout their life cycle, until a successful exit generates returns for investors.
The company has accomplished more than 20 exits, with an average annual return of over 15 per cent, according to Mr Ahmed. Since inception, SmartCrowd’s user base has expanded to more than 5,000 investors and it has managed to raise nearly Dh200 million, he says.
In sourcing properties, SmartCrowd works closely with real estate brokers as well as some of the largest developers in Dubai, Mr Farid says, without disclosing details.
Real estate is witnessing increasing investments in the UAE, as world economies open up and more people travel.
The Emirates has also introduced initiatives such as residency permits for retirees and remote workers, in addition to expanding its 10-year golden visa programme, giving further impetus to the property market.
Developers including Aldar Properties, Damac Group, Omniyat and Sobha Group are developing new projects as demand continues to remain strong.
Crowdfunding – a type of alternative finance – refers to the practice of funding a project or venture by raising small amounts of capital from a large group of people, usually through the internet.
The UAE government in March 2022 approved the use of crowdfunding as the country aims to open more streams of funding for smaller businesses and broaden the country’s liquidity pool.
The global crowdfunding market is predicted to triple in size to $39.8 billion by 2026 from $13.9 billion in 2019, according to Statista. The concept, which originated in the US, is gaining traction in the GCC’s six-member economic bloc.
SmartCrowd says that since 2019, its assets under management have grown by 33 times and investor base has expanded 43 times.
The company has secured more than $6 million in funding so far and is gearing up for another round within the next 12 months.
“Our revenue model, which charges fees as and when investors make money, means we don’t require any additional funding to continue to grow in our existing market, except if we’re looking to expand through acquisitions or expand into other geographies,” says Mr Ahmed.
After completing more than 150 Dubai residential properties to date, SmartCrowd this year is aiming to tap the commercial real estate in the emirate. It is also aiming to launch operations in Saudi Arabia.
“In terms of our investments, we are focused on Dubai at the moment and we are expanding to other emirates in the UAE, and then, we’re eyeing Saudi Arabia as another destination that we want to unlock and give people access to,” says Mr Farid.
At the moment, 60 per cent of SmartCrowd’s user base is UAE residents and 40 per cent from outside of the Emirates, “so we’re a global player already”, he says.
“Dubai’s global appeal attracts people worldwide,” he adds.
But while the investor base has been growing, SmartCrowd continues to struggle with certain challenges.
“Our biggest challenge is finding the right opportunities for our investors and not be drawn in by speculation in a booming or difficult market – we’ve operated in both and been successful,” says Mr Ahmed.
“We look at over 30 properties before finalising just one for our platform, ensuring that whichever property we select is going to hold and increase in value over the coming years, as well as deliver healthy rental income for investors.”
Meanwhile, lack of financial literacy remains one of the biggest challenges for the company.
“A big part of what we do is create educational content, and this is part of our go-to market strategy. We aim to enrich people’s understanding of financial principles,” says Mr Farid, who has more than 11 years of experience with companies like KPMG, Deloitte and EY.
Q&A with Siddiq Farid, co-founder and Riz Ahmed, CEO of SmartCrowd
Where do you want to be in five years?
Mr Ahmed: We’d like to be the premium real estate investment platform globally, allowing investors to diversify their portfolios across multiple countries. We are aiming to have more than Dh500 million in assets under management in three to five years’ time.
If you could do it all differently, what would you change?
Mr Farid: I would be slightly more aggressive on the marketing front to raise more awareness. It’s a great model so I would’ve taken more advantage of this.
What new skills have you learnt since launching your start-up?
Mr Farid: I’m a finance professional by background, a Chartered Accountant as well as CFA holder. But through this experience I’ve become deeply involved in product development and technology. Also, having built a regular business, I focused on the legal and regulatory and compliance side, and then, scaling teams. So, a lot of soft skills have been developed over this period.
What other successful start-up do you wish you had started?
Mr Farid: I don’t think of other start-ups that I wish I had started. I am pretty satisfied with what we have built, which is very unique. We are pioneers in the space and we have made a real impact for a lot of people, enabling them to invest in real estate for the first time ever.
Who is your role model?
Mr Ahmed: My role model is Nelson Mandela. I run a registered education charity, EqualEd, and have been doing work in South Africa. I really admire how he brought a divided country together through compassion.
Mr Farid: My role model would be my mother. She’s not a highly educated person but had built a couple of businesses on our own. That’s where I get my entrepreneurship inspirations.
What is your next big dream?
Mr Ahmed: To make SmartCrowd synonymous with smart and rewarding real estate investment, not just in Dubai or the UAE, but globally.
Mr Farid: I would love to see the company I started nearly six years ago, now become a household name.
Source: thenationalnews
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