The tokenization of real estate assets is a process in which a company issues digital tokens based on blockchain technology, these tokens act as a storage of value to the various assets that a company holds, including residential and commercial assets.
Unlike non-fungible tokens (NFTs), tokens tied to real estate assets represent a real value in the physical world.
Tokens issued by a real estate company are flexible by nature and offer investors several types of ownership in the company’s assets. Not only do investors receive ownership in particular assets in which they chose to invest in, but tokens can also represent an equity interest in a legal entity that controls the asset, a right to share in the revenue or profits generated by the asset, or any other variation as determined by the company that issued the tokens.
Unlike traditional real estate investments, tokenization offers many benefits to investors and token issuers alike. It increases liquidity, offers transparency, removes intermediaries and high processing fees, and provides the means of fractional ownership; through blockchain technologies, investors will be allowed to purchase a part of an asset instead of whole ownership.
The tokenization of real estate assets offers benefits beyond just profits because it is based on blockchain technologies. Through advanced cryptography and distributed ledgers, it offers investors safe and frictionless storage and transfer of assets. Once a transaction has been recorded and confirmed on the blockchain, it cannot be changed.
Investors can then stay updated on their rights and restrictions in regard to the tokenized digital assets as every transaction is publicly available on the distributed ledger and has been confirmed and verified by other users.
As real estate assets become tokenized, finding properties to buy or searching for prospective investors becomes easier as tokens can be traded on DEX (Decentralized Exchanges) like Binance and Coinbase or CEX (Centralized Exchanges) like Uniswap.
The advantage is that investors will be able to search for prospective investments from other regions, and sellers will be able to reach a larger community of prospective buyers.
Tokenization has the potential to transform the landscape of the real estate industry. However, considering the fact that it’s still a brand new concept, it is still complicated by various legal and practical issues. Dealing with these issues is essential to the success or failure of the technology.