Real estate tokenisation, the future of real estate? Tokenisation is emerging in real estate. Are we going to see a revolution in this area, and if so, why?
Real estate tokenisation is part of a more general process of tokenizing assets in the broadest sense of the term.
In general, this process enables us to offer property shares to as many people as possible. In effect, it makes it possible to divide a property or deed into several shares. This enables small investors to acquire shares in objects or shares they would never have been able to acquire otherwise.
Real estate tokenization therefore involves transforming real estate into a digital asset represented by tokens on a blockchain. But why opt for real estate tokenization?
Real estate tokenization, its advantages and its future:
Let’s remember in case it’s necessary that real estate tokenization is an application of blockchain technology that allows property rights in real estate to be represented in the form of tokens. As mentioned earlier, real estate tokenization is part of a more general trend towards economic tokenization.
Tokenization enables an innovative approach to dividing the ownership of real estate into multiple shares, each represented by a unique, transferable token. In this way, the ownership of a property can be split up and exchanged transparently and securely on the blockchain.
Financing, speed and price of transactions:
Tokenization offers many advantages over traditional financing and investment methods. Firstly, it reduces transaction costs and eliminates intermediaries such as banks and brokers. It also offers greater flexibility in investment management, enabling investors to diversify and exit their positions more easily.
Security and transparency:
In addition, real estate tokenization can offer advantages in terms of liquidity and transparency. Real estate tokens can be traded more easily than shares in a real estate company, for example. In addition, ownership and transaction information can be transparently recorded on the blockchain, offering greater confidence to investors.
Democratizing real estate:
Finally, real estate tokenization can also enable a wider range of investors to participate in real estate projects that were previously reserved for a small number of institutional or wealthy investors. Investors can purchase fractions of real estate at affordable prices, and benefit from the returns associated with these investments.
The positive impact of tokenization in real estate is already being felt, and we’re only at the very beginning of the process.
As a result, we can easily anticipate the enormous impact this process will have in this field in the future.
I mentioned financing above, and this is a crucial point, as tokenization offers property owners broader access to financing.
Indeed, tokenization makes it possible to raise funds from a larger number of investors, which can reduce transaction costs and make it possible to dispense with intermediaries such as banks and brokers.
When it comes to tokenizing a property, owners can choose between two types of token: those based on coins and those based on NFTs. Each type of token has its own characteristics and advantages, and it’s important to understand these differences before deciding which type of token is best suited to your property.
Coin or NFT?
Coin-based real estate tokens are tokens based on a blockchain, such as the Ethereum blockchain. They represent part of the ownership of a property. Coin-based real estate tokens are often used to represent part of the ownership of real estate, rather than the property as a whole. For example, if a building is divided into ten units, an owner can create ten wedge-based tokens, each representing one unit of the property.
NFT-based real estate tokens, on the other hand, are non-fungible tokens that represent the complete ownership of a property. Unlike tokens based on coins, which can be divided into smaller units, real estate tokens based on NFTs cannot be divided. Each NFT is unique and represents the complete ownership of a property.
One of the main advantages of wedge-based real estate tokens is that they can be more liquid than NFTs. Since they can be divided into smaller units, it’s easier for investors to buy or sell part of a property’s ownership. On the other hand, NFTs can be more difficult to exchange due to their unique, indivisible nature.
However, real estate tokens based on NFTs also offer significant advantages. Since they represent the complete ownership of a property, NFTs offer greater transparency and security for owners. What’s more, NFTs can be used to represent unique real estate assets, such as works of art, historic buildings or high-end properties.
Time will tell what choice the real estate sector will make, but one thing is certain: tokenization offers so many advantages that its future is more than promising. Once again, there will be those who jump on the bandwagon at the right time, and take advantage of the benefits on offer very early on. We have a few examples, such as RealT, or concrete initiatives, such as Finjuris in Dubai. I’d like to make it clear that I have no connection whatsoever with these companies, and only cite them as examples to illustrate my point.