Tokenized Real Estate: What Does It Mean?
Introduction
A few years back, owning and trading fragments of physical real estate might have seemed too far-fetched for many. But with the advent of blockchain technology, real estate tokenization is providing new opportunities for fractional ownership and investment.
Blockchain technology’s long-overdue debut in real estate has made real-world asset tokenization a heavily-discussed topic in the industry. After all, tokenization ticks all those boxes that are often required to ruffle many a feather in a traditional industry — it’s digital, global, complex and future-oriented.
But how exactly does real estate tokenization work, and how can it help transform illiquid real estate ownership into a liquid one? Let’s take a look.
What is Real Estate Tokenization
Real estate tokenization is a contemporary extension of conventional fractional real estate ownership. It can be thought of as a crowd-funding tactic, which breaks up the value of a real estate investment into smaller chunks to overcome most of the investment barriers.
Every fraction of the asset is converted into a token. Each of these tokens is encrypted with all the pertinent details that grant the investor ownership based on their property share percentage.
For instance, real estate worth $100 million can be broken down into as many tokenizations, each worth a million.
The benefits of tokenization
Tokenization has the potential to revolutionize the way we invest and trade assets by making it easier and more accessible for everyone. For example, tokenization can help with the following:
1. Liquidity
The conversion of illiquid real estate assets into “tokens” implies that a direct investment in a property is treated as an indirect one. This allows issuers to secure higher liquidity, as the number of buyers is not limited to those who can afford the entire asset. In addition, tokenization allows for fractional ownership, opening up investment opportunities to a larger pool of potential investors.
2. Transparency
The use of blockchain technology brings a new level of transparency to the real estate industry. Since data is stored on a decentralized ledger, all transactions are visible to everyone on the network. Completed transactions can no longer be changed, manipulated or cancelled, creating a more secure and trustworthy system. This increased transparency helps to build trust and confidence in the market and reduce fraudulent activity.
3. Automation
The use of smart contracts can help to automate several processes involved in real estate transactions, such as title transfers, document verification, dividend payments and compliance. This can help make the process more efficient and streamlined, saving time and money for all parties involved.
4. Efficiency
Digitalization of the process, greater automation, smart contracts, and lack of third-party involvement reduce the strain on the investor. No paperwork is involved, and the transaction times aren’t more than three days. Crypto exchanges are functional around the clock, so there are no breaks during the process.
The potential risks associated with the tokenization of real estate investing
When it comes to the tokenization of real estate, there are a few key risks that investors should be aware of:
1. Regulation: Real estate tokenization is still relatively new, currently unregulated in most jurisdictions. This means there is a risk that laws and regulations could change, adversely affecting the tokenized real estate market.
2. Volatility: The prices of digital assets can be highly volatile, which means that investors could lose a substantial amount of money if they invest in a property that decreases in value.
3. Fraud: Fraud is always a risk for any investment. When investing in tokenized real estate, thorough research and due diligence are essential to ensure the project is legitimate.
Top Real Estate Projects in The World of Crypto
1. ATLANT
ATLANT is one of the latest tokenized real estate platforms powered by blockchain. They developed a secure and regulated digital securities exchange forum, Uvas.com, which may help the project understand risks and investment barriers better than most.
With the introduction of the digital asset exchange platform, RedDot, ATLANT is fulfilling the prerequisites for the envisioned future of the market.
2. Propy PRO
It is an automated real estate platform aiming to enhance convenience while maintaining their client’s peace of mind as they process tokenized land that best suits their customer’s needs.
Smart contracts form the basis for the efficient and transparent dealings of the project. The clientele catered to by the project includes both retail and institutional investors.
Propy uses PRO as its native token built on the Ethereum platform. The project believes in the inevitable tokenization of real estate and offers the Crypto Real Estate Agent certification to train new investors.
Specific courses pertinent to smart contracts and blockchain can be availed. At the end of each certification, an exam is conducted for knowledge assessment.
3. SYB Coin
SYB Coin (SYBC) is a new project in the digitized ecosystem. The platform strives to specialize in rejuvenating unwanted land into commercial and residential buildings. SYBC tokens can then be used to invest in tokenized projects to acquire complete ownership.
Bitcoin, USDT, and Ethereum can be swapped with native tokens on the SYB forum. Complete portfolios of the available projects are uploaded on the website, where potential investors can rent, lease or purchase assets. Middlemen are eliminated, and smart contracts enhance transparency and efficiency.
Conclusion
Despite these risks, the potential rewards of investing in tokenized real estate outweigh the risks for many investors. The key is to be aware of the risks and to conduct extensive research before investing.
