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Upgrading Real Estate Tokenization to the Next Level

Blockchain technology is not a relatively new technology. It existed for many years, but only now has it gained mainstream appeal. The past few years saw blockchain technology getting integrated into various businesses and bringing significant benefits and change. Now, according to experts, real estate tokenization can bring beneficial changes throughout the economy, financial institutions and companies. Lets know it how!

One of the industries that blockchain will have a tremendous impact on is the real estate industry. Blockchain here makes it possible for users to tokenize houses, properties and apartments and represent them on the blockchain.

Presently, real estate remains the safest investment type and ensures better returns than any other investment opportunity. Ask anyone about the best investment to make, and they will tell you to buy an apartment or a commercial space. The only downside to real estate investment is the significant capital required. People with lots of money can invest in real estate, but that also means that regular people get left out.

That all changed with the introduction of blockchain technology and real estate asset tokenization

Real estate tokenization can forever change the rules of the market. Things like property rights, investment and raising capital are some areas blockchain will change. But before we get into the details of tokenized real estate assets, let’s first look at tokenization

Tokenization

Tokenization here means converting a real asset into several digital tokens and selling them on an online marketplace. The people who purchase these tokens own a portion of the asset. This asset exists as a blockchain-based digital token. Every token here represents direct ownership of an asset. These assets can be a piece of real estate, shares in a company owning real estate, participation in a real estate investment fund or anything else.

Many companies in real estate already see the potential benefits tokenization can bring to their verticals. Many are integrating the technology to change real estate transactions and change the established business models.

Overview of Real Estate Tokenization

The process of real estate tokenization involves converting a real estate asset into a token on the blockchain and putting it for sale. You can also create tokens for properties under construction. These tokens represent an interest in real estate or can work to raise capital for investment development. The latter process attracts a broader range of visitors and developers to participate or invest in real estate.

Real estate asset tokenization is a way for a business or an organization to raise capital from crowd sales. The process works similar to crowdfunding, but here it involves tokens available on the blockchain.

Real estate tokenization aims to fulfil the objective of making the funding accessible to a broader audience. The purpose of the tokens here is to act the role of stocks in a company. Users can purchase these costs and not rely on expensive intermediaries. This investment method may overtake and replace stock exchanges due to the latter’s expense and complexity.

A company can use a token as a loan, share, or owner of a specific property.

How to Tokenize Real Estate?

Typically, the real estate tokenization process follows these steps.

1. Identifying the Asset - Here, the company recognizes the commercial real estate asset. The process typically involves purchasing, financing and appraising

2. Generating Smart Contract - Now, the company follows the required securities laws and generates the smart contract.

3. Token Generation - Here, the company decides on the type and number of tokens to generate. The company then lists these tokens on a specified exchange platform.

4. Distribution and Marketing - Now, the company advertises the tokens and lists them on an exchange. The company utilizes a security token offering or STO to list the tokens

5. Post support - Here, the company provides additional support to the investors

The real estate tokenization process utilizes blockchain, removes the reliance on intermediaries and significantly reduces the investment requirements. This approach could unlock trillions in liquid global real estate assets. It also makes these assets accessible to a broader investor group on an open marketplace.

Benefits of Real Estate Tokenization


➤ Flexibility

Anyone can invest a specific amount and become a partial property owner and benefit from the profits generated. Additionally, the token holder can sell these tokens on secondary markets at higher rates. The property owner can sell parts of their assets through token issuance. Real estate tokenization provides a better option for crowdfunding as it gives the user instant digital ownership. Here, the user is free to sell the token when required

➤ No Location Limits

Property tokenization removes the limitations related to location. There is nothing to stop a user from buying a property on the other side of the world. Users can participate and profit from resort construction, housing estates or rentals anywhere in the world.

➤ Investment Speed and Ease

The primary objective of any optimized activity is to reduce the time required to complete a process. Blockchain technology enables this by removing obstacles such as notary fees and bank fees. This removal results in increasing investor returns and shortening the process for raising capital. It effectively streamlines the process and brings in more significant revenue.

Token investment minimizes costs and provides greater freedom as anyone can purchase a share in real estate and profit from it. The site automates the process and does not require pointless formalities. The user acquires the property rights by purchasing a token, which does not require any mortgage or real estate records.

➤ Diversification and Broader Audience       

Till now, the only form of real estate investment required significant sums of money.

Tokenization removes the need to purchase the whole property. Anyone can divide a property into several smaller tokens and sell them.

A user only has to purchase a single token. Here, the user can participate in a smaller shareholding structure like distributed investing. This process requires a small sum of money to buy a piece of real estate. The process lowers the entry barrier and makes investment accessible to people with less capital.

Distributed investing also enables users to diversify their investments. Users can consider investing in other properties and purchase them, thereby diversifying their investments.

➤ Better Security

Real estate tokenization makes transactions secure and makes the process transparent. Tokenization utilizes blockchain technology and provides the highest security standards available. Blockchain, by nature, is decentralized. It means there is no copying or code reversal, and nodes will identify any changes to the code.

Future Perspective

The concept of tokenization has a significant impact on the real estate industry. The trading of digital assets and tokenized real estate shares will bring substantial change. Blockchain technology could alter the way the real estate industry works and operates.

Also, tokenization lowers the high entry barriers and brings change to an industry. For a long time, the real estate industry dealt with high barriers to entry and illiquidity. Tokenization opens up this market and helps democratize this sector. It also enables large quantities of capital to enter.

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