The real estate industry is one of the largest business sectors in the global market. It is growing at the rate of 5%, with China holding the largest share in the market’s capitalization.
The market slowed down during the 2019 pandemic, but it has since begun to regain traction due to the interest and participation of global investors.
The business sector is vast, with the involvement of international affiliates. But, it lacks in the processing or transferring of ownership from one member to another. The transaction process takes a lot of time, and it is complex.
The introduction of blockchain technology has been revolutionizing many business sectors across the globe, and real estate is one of them. It has simplified the transaction process and has eliminated the need for intermediaries through real estate tokenization.
Let’s get to know about tokenization before getting into real estate tokenization.
Table of Contents
Tokenization — Brief Introduction Of Assets To NFTs
Tokenization is the latest technique of converting real-world assets into digital forms, i.e., NFTs using blockchain technology. Tokenizing an asset increases its global visibility and makes it easier for purchasers to buy them.
Tokenization helps sellers list their assets on a digital marketplace, where interested buyers and investors can buy them directly using cryptocurrencies or other monetary forms.
It eliminates the need for a centralized party to oversee the transactions and reduces the fees associated with the transaction. It provides complete control over the assets to the buyers.
Real Estate Tokenization: NFTs and Real Estate Properties
The advent of NFTs has impacted the real estate business sector. NFTs have simplified and reliably improved how the real estate sector operates. By attracting investors and traders to the market, the combination of NFT with real estate has created new opportunities.
Transaction of property ownership is one of the biggest problems with real estate investment. Buying a real estate property through the traditional method requires a tonne of paperwork; real estate tokenization, on the other hand, is more streamlined and effective.
Due to the inclusion of NFTs in the real estate market, buyers can rapidly trace asset ownership. The benefits of using non-fungible tokens with credible, transparent, and immutable ownership proof are the key factors for the increase in the popularity of real estate tokenization.
Real estate purchasing has become digital and liquid due to blockchain technology. Real estate tokenization has allowed the selling of real-world assets into smaller pieces. A few years ago, the idea of owning portions of assets and frequently transferring them without incurring major transaction expenses seemed unfathomable. Real estate tokenization has been made possible by the adoption of blockchain technology in the real estate business sector.
Functioning of Real Estate Tokenization
Any real estate asset, including retail, residential, and exhibition properties, can be tokenized using blockchains. Real estate tokenization uses a smart contract, i.e., automated software integrated into a blockchain ecosystem to manage all the real estate tokens in the digital platform.
Anyone who purchases or possesses a real estate token has a claim in the underlying real estate property. Real estate token owners are in control of the underlying asset and any associated profits. Real estate owners can easily digitize their assets and raise money for projects on a global scale by tokenizing their real estate properties such as houses, plots, complexes, etc. It makes commerce easier and allows valuable commercial real estate, such as malls, and shopping centers, to be divided into smaller units for easier sales.
Real Estate Tokenization Categories
Real Estate Tokenization for Commercial properties
Commercial tokenization is the process of applying legal protocols to tokenize commercial real estate for enterprises. Commercial property owners, such as office buildings, retail stores, etc., can sell their assets worldwide utilizing blockchain technology.
Real Estate Tokenization of Household properties
For investors and asset buyers, household tokenization divides residential real estate holdings into fractional ownerships. Digitizing these assets in the blockchain space enables small-time sellers to profit from the global market with a large number of buyers and investors.
Benefits of Real Estate Tokenization
Blockchain transactions are best suited for the real estate sector since they are transparent, safe, and irrevocable. They have also eliminated third parties and complex procedures during transactions. Smart contracts automate the complete process, thus reducing the fees and time duration for ownership transfer.
By presenting the asset to a global audience through a digital platform, tokenization has made it possible to raise the value of assets and eliminate their lack of liquidity. When real estate is fractionalized and sold using tokens, its liquidity increases. By selling their tokens, owners of tokenized goods can instantaneously transfer divided ownership without selling the full asset.
Small-scale buyers and individual investors can now purchase real estate due to tokenization which has revolutionized the industry. Through tokenization, large assets are divided into tiny parts, making them accessible and affordable to all potential buyers.
The real estate sector establishes a reliable, open, and highly secure financial system using blockchain technology. Every stakeholder is in charge, and every network participant votes on any updates. The real estate market has been streamlined by removing time-consuming limitations, and everyone now has an equal opportunity to grow and earn.
The future of the real estate business is brighter with real estate tokenization. The popularity of tokenization has increased due to the global reach of assets with blockchain technology. Property owners can now sell their assets quickly without any hassles. The world is looking towards tokenization for its heap of benefits. The digital market is revolutionizing the world with innovations, and real estate tokenization has been an enormous boon for property owners worldwide.
Blog Credits: Medium