Why Tokenize Real Estate?

Historically, Property ownership has been the single, greatest store-of-value vehicle and wealth creator throughout human history. However, the expensive initial investment creates a significant barrier to entry for the average investor or property builder. Making the real estate market accessible to a wider investor base requires improving efficiency in the initial investment process and the ongoing management and administration of property holdings. Here comes the real estate tokenization.

So what is real estate tokenization?

One of the most clear definitions we have found describes it as a process in which real estate shares are created as digital tokens on a blockchain. Tokenizing a real estate project can help in raising capital more efficiently by giving investors unprecedented access to private real estate investments, transparency, and liquidity.

According to Moore Global, tokenized real estate could reach $1.4 trillion in five years.

“Tokenisation is an emerging trend with potential to become a mega trend – and it is absolutely going to be a disrupter in global property markets. It has potential to lower the cost of capital, increase the pool of potential investors and increase liquidity” – Dan Natale, Global Leader of Moore Global’s Real Estate group.

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Benefits

If one owns an entire property, it usually takes time to sell. So one of the advantages of a token is it should be capable of being sold in a short timeframe, subject of course to the price the seller is willing to accept. And buying and selling should be efficient and low friction.

Another benefit is greater liquidity. The idea is if people can invest smaller amounts and it’s open to investors around the world, in theory, the asset should become more liquid.

One great example of the opportunities that came with real estate tokanization is the deal with AnnA Villa, the first property deal in France done via a blockchain transaction. The propperty was valued at EUR 6.5 million. The transaction took place in three steps. Firstly, the ownership of the building was transferred to a joint-stock company called “SAPEB AnnA.” Secondly, the ownership of the company was divided into 10 Ethereum-powered tokens which were distributed among the new owners. In the last step, each of these tokens was then further broken down into 100,000 units, meaning each token has a face value of € 6.50. (source: Invao Group).

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We believe that Tokenization represent the next frontier of the technology, and grants the society with a unique opportunity to transform real estate investing from an antiquated, reserved-for-the-elite practice to a liquid, digital asset class that is accessible virtually to anyone with an internet connection.

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