{"id":536477,"date":"2023-06-05T15:53:12","date_gmt":"2023-06-05T15:53:12","guid":{"rendered":"https:\/\/wncen.com\/?p=536477"},"modified":"2023-06-05T15:54:27","modified_gmt":"2023-06-05T15:54:27","slug":"the-coming-impact-of-tokenization-on-real-estate","status":"publish","type":"post","link":"https:\/\/wncen.com\/news\/company\/the-coming-impact-of-tokenization-on-real-estate\/","title":{"rendered":"The Coming Impact Of Tokenization On Real Estate"},"content":{"rendered":"
The global real estate market is one of the most valuable on the planet, with a 2021 study estimating it to be worth more than $280 trillion<\/a>. While that makes real estate one of the biggest financial asset markets on the planet, it is not without its problems. Real estate is notorious for being illiquid, nontransparent and inaccessible as a result of its high investment barrier, its inefficient processes, costly intermediaries and prevailing market conditions that mean most investments are long-term bets.<\/p>\n However, a new technology being developed by startups such as Metatime<\/a> and Propy<\/a> has emerged that promises to eliminate all of these problems in one fell swoop, by reducing the barrier to entry, boosting liquidity, streamlining transactions and making everything more transparent.<\/p>\n Blockchain has some unique features that make it an ideal platform for the real estate market. With blockchain, it\u2019s possible to \u201ctokenize\u201d real estate and represent properties as digital assets such as cryptocurrencies or non-fungible tokens (NFTs). Tokenization of real estate enables a concept known as \u201cfractionalized ownership\u201d where thousands or even millions of people could all own a share of a single property. Through fractionalized ownership, people can invest in real estate and receive a share of its rental income, without needing to buy an entire property or manage it themselves.<\/p>\n Real estate tokenization\u2019s advantages are so compelling that one recent study<\/a> by Moore Global found that if only 0.5% of the world\u2019s property market were to become tokenized, it would become a $1.4 trillion global market.<\/p>\n One of the most immediate benefits of tokenization is that it massively lowers the barrier to entry, making the real estate market more accessible to millions of new investors.<\/p>\n Traditionally, the only way to invest in real estate was to buy a property outright, something that is impossible for lower-income earners. Fractionalization reduces the upfront investment cost, with platforms like MetaRealEstate enabling people to invest as little as a few dollars into various hotels, apartments and luxury rental homes.<\/p>\n In 2019, a luxury villa in Paris<\/a> valued at 6.5 million euros was tokenized and split into one million tokens, hosted on the Ethereum blockchain, with a single token costing just 6.5 euros. As a result, the price of becoming a real estate investor was dramatically reduced, making it accessible to just about everyone in the world.<\/p>\n By making real estate more accessible, tokenization will almost certainly increase liquidity in the marketplace. Traditional real estate investments are seen as long term, and involve locking up capital for months or years before any profits can be realized. By tokenizing a property, it can be sold on open marketplaces freely, allowing investors to quickly realize a return on their investment if the price of that property (and therefore its token) were to increase.<\/p>\n Other benefits of tokenized real estate include diversification, with investors able to create more diversified portfolios. Even those who invest exclusively in the crypto markets will consider buying real estate tokens, as they have true utility by being linked to a physical, real-world asset. Tokenization also makes transactions more efficient through the use of smart contracts that cut out the middleman in property deals.<\/p>\n Real estate tokenization isn\u2019t without its challenges. One of the biggest hurdles that needs to be overcome is regulation. Most countries lack a clear and consistent legal framework for asset tokenization due to it being such a new technology. In some countries, real estate tokens are considered securities, while others categorize them as property investments. This inconsistency results in confusion that may deter many investors.<\/p>\n The crypto industry also has to increase awareness of real estate tokenization. While most people are familiar with cryptocurrencies, asset tokenization is still largely unknown, prohibiting widespread adoption. In addition, concerns around the volatility of crypto create further hesitancy for investors. Traditional cryptocurrencies are known for their wild fluctuations in value, and many people see them as highly speculative investments. Part of the reason for crypto\u2019s volatility is that traditional tokens are not backed by any physical asset. Instead, their value is based on simple supply and demand. While that\u2019s also true of real estate tokens, they are generally much more stable due to being backed by a physical property.<\/p>\n One of the best known crypto-focused real estate platforms is Propy<\/a>, which hit the headlines back in 2017 when it facilitated what was said to be the world\u2019s first ever blockchain-based real estate transaction. TechCrunch founder Michael Arrington used Propy\u2019s platform<\/a> to buy a 506 square foot apartment in Kiev, Ukraine for around $60,000 worth of ETH, the native token of the Ethereum blockchain, with transaction fees paid using Propy\u2019s PRO token.<\/p>\n Propy\u2019s automated real estate marketplace helps clients buy and sell real estate assets fast and simply, using Ethereum smart contracts to automate transactions. Its platform ensures that every transaction is legally documented, transferring the property\u2019s title and registering it with the relevant authorities.<\/p>\n A more compelling platform that promises to enable true fractionalized ownership of real estate is Metatime\u2019s MetaRealEstate<\/a>. Currently under development, MetaRealEstate will provide the tools for property owners to tokenize their real estate assets on the MetaChain. That\u2019s quite different to Propy, which only facilitates transactions.<\/p>\n One of MetaRealEstate\u2019s unique features is that it will create a special management team for each property that\u2019s tokenized. This team is tasked with managing the property itself, reviewing the rental income it generates and managing any expenses associated with it. When the regular rental payments are received, it will then make sure this is deposited into the wallets of whoever owns the associated tokens, ensuring users receive income that\u2019s proportional to their share of ownership. Another perk for investors, besides the regular rental income they collect, is that they\u2019ll be able to propose ideas and vote on important matters, such as repairs or upgrades to the property.<\/p>\n As the concept of real estate tokenization becomes more commonplace, it\u2019s likely that other asset tokenization marketplaces will begin supporting the concept. Platforms like CreditCoin<\/a>, and Centrifuge<\/a>, which enable real world assets to be tokenized and used as loan collateral, look like good fits for tokenized real estate.<\/p>\n Real estate tokenization may take several years to become mainstream, if it ever does. Investors will likely remain wary of the lack of regulation and volatility associated with crypto. As with all new crypto initiatives, there will likely be a number of scams that pop up along the way, so investors will need to do their homework before committing to anything.<\/p>\n Nonetheless, fractionalized real estate ownership has a promising future. If nothing else, the prospect of owning a share of a genuine, real-world asset may prove to be more enticing than traditional cryptocurrencies that aren\u2019t linked to anything tangible.<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The global real estate market is one of the most valuable on the planet, with a 2021 study estimating it to be worth more than $280 trillion. While that makes real estate one of the biggest financial asset markets on the planet, it is not without its problems. Real estate is notorious for being illiquid, nontransparent and inaccessible as a result of its high investment barrier, its inefficient processes, costly intermediaries and prevailing market conditions that mean most investments are long-term bets. However, a new technology being developed by startups such as Metatime and Propy has emerged that promises to eliminate all of these problems in one fell swoop, by reducing the barrier to entry, boosting liquidity, streamlining transactions and making everything more transparent. Blockchain has some unique features that make it an ideal platform for the real estate market. With blockchain, it\u2019s possible to \u201ctokenize\u201d real estate and represent properties as digital assets such as cryptocurrencies or non-fungible tokens (NFTs). Tokenization of real estate enables a concept known as \u201cfractionalized ownership\u201d where thousands or even millions of people could all own a share of a single property. Through fractionalized ownership, people can invest in real estate and receive a share of its rental income, without needing to buy an entire property or manage it themselves. Real estate tokenization\u2019s advantages are so compelling that one recent study by Moore Global found that if only 0.5% of the world\u2019s property market were to become tokenized, it would become a $1.4 trillion global market. The Advantage Of Tokenized Real Estate One of the most immediate benefits of tokenization is that it massively lowers the barrier to entry, making the real estate market more accessible to millions of new investors. Traditionally, the only way to invest in real estate was to buy a property outright, something that is impossible for lower-income earners. Fractionalization reduces the upfront investment cost, with platforms like MetaRealEstate enabling people to invest as little as a few dollars into various hotels, apartments and luxury rental homes. In 2019, a luxury villa in Paris valued at 6.5 million euros was tokenized and split into one million tokens, hosted on the Ethereum blockchain, with a single token costing just 6.5 euros. As a result, the price of becoming a real estate investor was dramatically reduced, making it accessible to just about everyone in the world. By making real estate more accessible, tokenization will almost certainly increase liquidity in the marketplace. Traditional real estate investments are seen as long term, and involve locking up capital for months or years before any profits can be realized. By tokenizing a property, it can be sold on open marketplaces freely, allowing investors to quickly realize a return on their investment if the price of that property (and therefore its token) were to increase. Other benefits of tokenized real estate include diversification, with investors able to create more diversified portfolios. Even those who invest exclusively in the crypto markets will consider buying real estate tokens, as they have true utility by being linked to a physical, real-world asset. Tokenization also makes transactions more efficient through the use of smart contracts that cut out the middleman in property deals. The Challenges Of Real Estate Tokenization Real estate tokenization isn\u2019t without its challenges. One of the biggest hurdles that needs to be overcome is regulation. Most countries lack a clear and consistent legal framework for asset tokenization due to it being such a new technology. In some countries, real estate tokens are considered securities, while others categorize them as property investments. This inconsistency results in confusion that may deter many investors. The crypto industry also has to increase awareness of real estate tokenization. While most people are familiar with cryptocurrencies, asset tokenization is still largely unknown, prohibiting widespread adoption. In addition, concerns around the volatility of crypto create further hesitancy for investors. Traditional cryptocurrencies are known for their wild fluctuations in value, and many people see them as highly speculative investments. Part of the reason for crypto\u2019s volatility is that traditional tokens are not backed by any physical asset. Instead, their value is based on simple supply and demand. While that\u2019s also true of real estate tokens, they are generally much more stable due to being backed by a physical property. Where To Buy Tokenized Real Estate? One of the best known crypto-focused real estate platforms is Propy, which hit the headlines back in 2017 when it facilitated what was said to be the world\u2019s first ever blockchain-based real estate transaction. TechCrunch founder Michael Arrington used Propy\u2019s platform to buy a 506 square foot apartment in Kiev, Ukraine for around $60,000 worth of ETH, the native token of the Ethereum blockchain, with transaction fees paid using Propy\u2019s PRO token. Propy\u2019s automated real estate marketplace helps clients buy and sell real estate assets fast and simply, using Ethereum smart contracts to automate transactions. Its platform ensures that every transaction is legally documented, transferring the property\u2019s title and registering it with the relevant authorities. A more compelling platform that promises to enable true fractionalized ownership of real estate is Metatime\u2019s MetaRealEstate. Currently under development, MetaRealEstate will provide the tools for property owners to tokenize their real estate assets on the MetaChain. That\u2019s quite different to Propy, which only facilitates transactions. One of MetaRealEstate\u2019s unique features is that it will create a special management team for each property that\u2019s tokenized. This team is tasked with managing the property itself, reviewing the rental income it generates and managing any expenses associated with it. When the regular rental payments are received, it will then make sure this is deposited into the wallets of whoever owns the associated tokens, ensuring users receive income that\u2019s proportional to their share of ownership. Another perk for investors, besides the regular rental income they collect, is that they\u2019ll be able to propose ideas and vote on important matters, such as repairs or upgrades to the property. As the concept of real estate tokenization becomes more commonplace, it\u2019s likely that other asset tokenization marketplaces will begin supporting the concept. Platforms like CreditCoin, and Centrifuge, which enable real world assets to be tokenized and used as loan collateral, look like good fits for tokenized real estate. More To Come Real estate tokenization may take several years to become mainstream, if it ever does. Investors will likely remain wary of the lack of regulation and volatility associated with crypto. As with all new crypto initiatives, there will likely be a number of scams that pop up along the way, so investors will need to do their homework before committing to anything. Nonetheless, fractionalized real estate ownership has a promising future. If nothing else, the prospect of owning a share of a genuine, real-world asset may prove to be more enticing than traditional cryptocurrencies that aren\u2019t linked to anything tangible. <\/p>\n","protected":false},"author":392,"featured_media":536479,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[79568],"tags":[],"class_list":["post-536477","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-company"],"acf":[],"yoast_head":"\nThe Advantage Of Tokenized Real Estate<\/h3>\n
The Challenges Of Real Estate Tokenization<\/h3>\n
Where To Buy Tokenized Real Estate?<\/h3>\n
More To Come<\/h3>\n