Dubai’s SmartCrowd is using tech to give Pakistanis ‘transparent’ way of investing in properties

SmartCrowd, an app that allows users to invest in Dubai properties for as little as AED500, has plans to head to Pakistan now that the South Asian country is finally off the Financial Action Task Force (FATF) grey list after four years.

In the first phase, the app will be available for Pakistanis so they can use it to invest in Dubai’s real estate market. It is hoped this will be achieved by year-end.

In the second phase, SmartCrowd will allow both Pakistanis and international users to buy shares in properties in the South Asian country.

Rather than rental yields, which is the focus in Dubai, the model for Pakistan will aim to benefit users via capital appreciation.

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The founders believe the huge Pakistani diaspora abroad will want to invest in the country the moment they find the right platform to do so. They hope they can make this a reality by the first quarter of 2023.

“Very soon, we’ll open up for residents of Pakistan to be able to use our platform to make investments in Dubai. We’re quite excited about that because there are lots of opportunities there,” Siddiq Farid, founder and CEO, told Business Recorder in an exclusive interview.

“And in the near future, we have intentions to provide this service within Pakistan for domestic activity and for all the diaspora that wants to put money into the country but doesn’t have any organised or trusted way of doing so.”

He gave the example of the success of Roshan Digital Accounts, which offers banking solutions to Pakistanis living abroad, including the ability to buy Naya Pakistan Certificates.

These initiatives “brought a lot of capital into the country. So now imagine you introduce a platform like SmartCrowd and link it to your Roshan account … here’s a trusted platform for you to invest in real estate in Pakistan, sitting from the comfort of your couch in the US or Canada or wherever in the world that you are. I think that’s a game changer”.

“Technology makes it very easy, very transparent to do so.”

Farid, who has Pakistani parents and grew up in Canada, believes the opportunity in Pakistan is “massive” because of its “young demographic that is digitally very savvy and likes to invest” but has limited options to put their hard-earned money to work.

He believes, in Pakistan, land and gold are “a very big source of wealth creation, but a lot of people are priced out of it because it’s way too expensive”.

With SmartCrowd, you can choose the amount you want to invest. SmartCrowd will do due diligence on properties and find other people who are interested in it, and allow you to own a share of the real estate.

“You buy the land, you hold it or you develop on it, you construct on it and you sell it and you make nice profits,” he said.

The minimum amount that can be invested will be around Rs500,000 to Rs1 million to begin with, but Farid hopes it will come down to Rs10,000, making it accessible to more people.

The idea is that “low-income earners that would have never imagined they could invest in real estate are investing alongside multimillionaires that have a massive portfolio. This a little attempt at bringing about equality and levelling the playing field”.

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He believes the concept can “unlock wealth potential and create secondary sources of income beyond primary jobs”.

Farid is also excited about opening up Dubai’s property market to Pakistanis.

Pakistani expats are already investing in droves, and Farid is confident when the app launches in Pakistan those living in the country will want to do the same.

For one, it means they are “getting exposure to a dollar-denominated economy,

diversifying their wealth, and protecting their purchasing power. That’s the logical rationale”.

But he says there is a “massive emotional element to it” as well, “like pure bragging rights”.

“The status symbol attached with being able to say that I have an international property portfolio.”

The challenges of launching in Pakistan

One reason SmartCrowd is not in Pakistan yet is because the country was until recently on the FATF’s grey list, which meant “money movement became quite challenging”, Farid told Business Recorder.

“Recently, we got the good news that they’re no longer on the grey list, which obviously reduces the risk from an anti-money laundering perspective.

“Another big challenge for us, as a foreign entity coming in, is the movement of money from in and out of the country. But if you are enabling dollars to flow into the country, then the risk of processing will make things a little bit easier. At least we hope so.”

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In terms of other challenges, Farid noted that a huge chunk of court cases in the country are real estate-related due to lack of proper documentation and ownership records.

This means “You really have to do your homework, especially if you’re looking to deploy third-party capital, meaning your clients’ money, and you want to ensure you’re doing them in the proper way so you don’t have these issues down the line.”

He says there have been a lot of government initiatives to further entrepreneurship and tech development.

“So I think we’re on the right track. The rewards are big enough to justify taking on the challenges and risk entering the market.”

In terms of regulations, SmartCrowd said it is in talks with the Securities and Exchange Commission of Pakistan (SECP) to work around their regulations around fractional ownership.

“We’ve also been working with local partners... We’re hoping in 2023 that SmartCrowd will be on the ground in Pakistan.

“It’s very important for us to do things right. Our approach has always been from day one, do it through a regulated platform. We’re regulated by choice,” he adds.

Finding success in Dubai

In the summer, SmartCrowd announced it had delivered its investors a 39.25% total net return (rental income + capital gains) over a 17-month period, and 27.92% return on an annualised basis, after recently exiting a Dubai Marina property investment.

The studio apartment in Marina Bay Central, Dubai Marina, was purchased by 53 investors through the SmartCrowd platform for AED 530,000 in February 2021, and sold for AED 780,000 in July 2022.

It announced around the same time that its investor base grew 100% on a quarterly basis as the company closed a bridge round in excess of $3 million.

The bridge funding will enable the rapidly growing company to scale its operations, products and establish a presence not just in Pakistan but Saudi Arabia as well.

SmartCrowd has funded some 70-plus properties and conducted transactions worth over AED50 million. The company has paid out close to AED3 million in rental income to investors so far.

“It’s amazing to say that the Middle East seems to be the most stable place in the world at the moment,” says Farid.

He says SmartCrowd focuses on high liquid, fast-moving assets like studios, one beds and two beds, with properties concentrated in about six or seven areas in Dubai.

Since the minimum amount needed to invest has dropped to AED500, the company has anywhere between 100 to 300 people invested in one property.

Reflecting on his experience of doing business in Dubai, Farid said: “I couldn’t have picked a better place to start my entrepreneurial journey just because this place is blessed with really good leadership. They think very long-term, generations ahead, and they’re building a society that caters to all.

“I think this place is very accessible for young entrepreneurs to try different things. What I really love is the accessibility. If you need to get a hold of key decision makers, you can do that. They listen.”

Copyright Business Recorder, 2022