SmartCrowd, a UAE WealthTech Pioneer with a Real Estate Focus

SmartCrowd, a UAE WealthTech Pioneer with a Real Estate Focus 

SmartCrowd’s Siddiq Farid explains how he leveraged the convergence of real estate and FinTech to build a groundbreaking product at a time when entrepreneurship was only budding in the UAE.

Siddiq Farid, co-founder and CEO of property crowdfunding platform SmartCrowd, launched in 2018, had spent most of his adult life in the Big Four advisories on the accounting side before venturing on his own. A veteran of the UAE startup scene, he takes a walk down memory lane to tell us how he developed a unique product in the UAE.

Why did you decide to start SmartCrowd?

I knew that my profession as a number cruncher would be commoditised at some point; becoming a job creator is the only way to future-proof yourself. And, as I was contemplating going back home to Canada, I wanted to try something else – sort of my last hooray. 

Since Brexit, I had a thesis that prices in the UK would come under pressure and it would be a good time to invest in real estate. However, I couldn’t afford it alone and nobody I knew wanted to invest there; where would I find the other people who probably shared my vision? That’s when the idea clicked: people with a small amount of capital investing in real estate jointly. Besides, while real estate is a big part of the economy in the UAE, a whole slew of middle class would love to put money over here but don’t have the ability. There was an opportunity to create a whole new segment. 

I roped in one of my friends, [co-founder] Musfique Ahmed, who has a tech consulting background, and our rides to our Monday football game became our brainstorming sessions. One weekend, I wrote a 40-page business plan and showed it to a friend of mine in the regulatory compliance field – as a financial product, my idea had to be regulated to give people comfort. That’s how the journey started.

How did you manage the first two years at a time when startups were just getting started in the UAE?

The Dubai Financial Services Authority (DFSA) had just set up the Innovation Testing (ITL) programme and we were among the first companies brought into this sandbox. 

The Dubai Internal Finance Centre (DIFC) had also just established FinTech Hive, but we thought our idea wasn’t advanced enough. However, we signed up for GITEX and, amazingly, we got shortlisted for GITEX’s Supernova Challenge and for the Accenture Innovation Award in the FinTech category. We had to pitch, which neither of us had ever done, and it went horribly. And 45 minutes later, we were supposed to pitch for Accenture! One of the GITEX judges had given us really constructive feedback, so I redid the entire deck, went on stage, and killed it. We won the FinTech category and got backdoored into FinTech Hive. We got office space for free and we got to go on Investor Day, getting the word out. Those were the key stepping stones for us after two tough years spent getting a licence and raising $600,000 – thinking we were on top of the world only to find out that, by the time we actually licensed, the startup scene had blown up and people were raising millions of dollars with a PowerPoint slide. $600,000 stretched out over two years in one of the most expensive jurisdictions is extremely challenging. In hindsight, I think we were too early and we’ve suffered. 

Today, do you consider SmartCrowd as a FinTech? A PropTech?

We consider ourselves in the WealthTech space because we’re an investment product. We take a chunky investment and we break it up to enable micro-investments. This fractionalising could be done for any income-generating assets – a private equity deal, a venture deal, an office building, an Amazon warehouse, an Emirates plane – which actually was part of our initial thinking.

But real estate is so big that we could spend the rest of our time just doing that. Right now, we focus on residential but there’s commercial, industrial, hospitality, development, refurbishment, flipping, etc. 

Residential is a critical sub-sector. Homeownership rates have been deteriorating at a pretty rapid pace across the world, mainly because of affordability, and there are a lot more renters in the world. This makes [residential] a very attractive investment asset class and that’s where the smart money is going. But the average person has been left out and we’re trying to change that. Having an easy way to invest in that asset class is a game-changer. 

Who is your average customer?

About 40% of our investors are non-residents and 60% are residents. Typically, they’re millennials and bread-and-butter white-collar professionals – people trying to save and invest for the future. We do have a small fraction of retirees looking for regular income. 

How does the solution work?

We source the right opportunities from our network and we evaluate them using our scoring model – supply and demand trends, developer, charge-to-rent ratio, location, etc. – purely from a return perspective – not an emotional one as many people tend to do because financial literacy is very poor. 

As a user, you create an account and access our marketplace. The platform has one to five properties at a time because we focus on quality versus quantity. You pick which properties you want to invest in and how much you want to invest, with a minimum of AED500. The average user has a portfolio of four AED8,000 investments, which is great for liquidity and risk diversification.  

You then become a co-owner along with a minimum of four other investors per property. Because the asset is securitised, meaning we create a special purpose vehicle (SPV) for it in DIFC, you become a shareholder in that company, which brings a lot of benefits: every asset is completely segregated so you have no exposure to whatever happens with SmartCrowd; two government entities, DIFC and the Dubai Land Department, have registered you as a shareholder so you have full legal ownership protection, whether you’re a resident or not.

We offer a variety of options for property management by our team, and all the strategic decisions, like selling the property, lie with the investors through a voting mechanism with governance built in. And every month, after expenses deduction, you get rental income in your wallet, which you can reinvest – that’s also the power of the business model; it’s a very sticky product. 

The average holding period is 33 months but what’s important is that, like any investment you make, the longer you hold the property, the more returns you get. And smart people reinvest their returns, so there’s a powerful compounding element.

We can’t guarantee results but we have a great track record, with over AED10 million in income to our investors, 130 transactions for close to AED170 million, 20 exits, and a total ROI of more in the high 40% annualised around 16%. 

SmartCrowd has a special offer for the ADSMEHub community!

Use the promo code ADSMEHUB to get an AED250 discount on your investment with SmartCrowd.

- The promo code is only allowed to be used once per user.
- The promo code is only allowed to be used on one investment.
- The discount is applied to the investment amount.
- The promo code is applicable by both new and returning investors on the SmartCrowd platform.

This offer is valid until January 31, 2024.

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