In 2021, the value of the global real estate market reached $ 6.8 Trillion and by 2027, it is expected to surpass $7.8 Trillion. In spite of its size, the real estate market supply chain suffers from heavy losses due to intermediaries, liquidity issues, supply chain management issues, and more. Historically, the real estate industry has been a slow mover in adopting new technologies to overcome its inherent challenges. However, this time things look different as real estate tokenization on the blockchain has really picked up the pace.
The first real estate tokenization happened in late 2018 when St. Regis Aspen Resort in Colorado tokenized its building by creating a single-asset REIT ( Real-Estate Investment Trust) on the Ethereum blockchain. Since then we have seen a lot of projects emerge to support asset tokenization services. Let’s first understand the need.
What value does real estate tokenization offer to the industry?
- Shared secure database
- Liquidity Booster
- Digital identifies to enhance due diligence and financial evaluation
- New Capital Channels
- Efficient cash flow management
For leasing, purchase, and sale transactions, the real estate industry has always relied on shared databases known as MLS or Multiple Listing Services. These databases are centralized and are susceptible to hacks. This is where tokenization of real estate will aid in the creation of a shared yet secure database on blockchain.
A blockchain-based MLS would make it possible for real estate data to be distributed across a peer-to-peer network. Thus, the brokers will have more control over their data in a trustless manner. This would also provide real estate seekers with clear details about property location, comparable sale or rental rates, capital values, ownership history, and title clarity.
Real estate is generally considered to be an illiquid market. That’s because the market will not always have buyers and sellers available. Tokenization of real estate acts as a liquidity booster as instead of selling the equity to the bank, the real estate owner can release the equity in the form of tokens. These tokens are then released onto a market where they are traded among a pool of investors. Overcoming liquidity challenges is a big plus as it increases the value of any real estate or asset.
At present, a significant amount of time is spent on due diligence and financial evaluation of real estate. This is because all the identity information and ownership details are often stored in physical documents which are difficult to procure every time with flexibility. The asset tokenization services can create digital identities for real estate. These digital identities consolidate real estate information like availability, financial and legal status, ownership, and performance metrics in digital form on the blockchain. All this data can be accessed anywhere for evaluation which expedites the lease or sales process.
Real estate tokenization enhances investor access, especially for small-scale investors. Large-scale properties have always been out of reach for small-scale investors because they are very expensive. However, tokenization of real estate enables fractionalization of a property where even smaller investors can own a fraction of the property by buying the tokens.
Using a smart contract real estate can address many challenges with cash flow management. A traditional lease contract can be morphed into a smart contract which enables transparency in lease terms and transactions. The smart contract automates payments to dealers, managers, owners, and stakeholders in real-time.
How are projects providing real estate tokenization services?
Let’s take a look at how different projects are tokenizing real estate:
It enables to have property ownership either partial or full anywhere in the world. Atlanta provides its users with a decentralized exchange on which tokenized properties can be traded. This kind of real estate tokenization allows users to buy a share in any property using ATL tokens. As the transactions on Atlant.io are peer-to-peer, no intermediary fees are required to be paid by property traders.
Imbrex is akin to a global Multiple Listing Service (MLS) and has been developed on the Ethereum blockchain where it functions as a single destination for global real estate. It brings its users free of third-party advertising where buyers can confidentially search real-estate listings and connect with agents at no cost. The only cost incurred is the network fees. At present Imbrex has over 2,200 project listings locally. Imbrex shares all the data on InterPlanetary File System (IPFS), a peer-to-peer distribution protocol.
The LABS is a very popular real estate tokenization platform that uses the G.A.I.N.S. paradigm to create utility tokens. With its asset tokenization services, it makes property possession available for as low as 100 USDT.
Wrapping it up
Moving forward, we will see more vendors and investors enter the space and drive further growth of asset tokenization services. Antier owns the legacy of providing cutting edge development support for real estate tokenization platforms and new liquid secondary markets. Got an idea? Connect with our experts. They are just a call away.