The Transformation Of An Industry: Blockchain-Based Real Estate Assets.
March 30, 2020
Blockchain technology has transformed several industries in the past few years. Banking, finance, and even the healthcare sector have witnessed a change in business operations when subjected to the world of blockchain. So, what big industry is next in line to benefit from this revolutionary technology? This question turns our attention towards an obvious response in the name of Real estate. It was only a matter of time before the exploits of blockchain were to be introduced to the real estate sector and the inclusion is bringing changes in a way that was never explored before. This technology is changing the landscape of how business in the real estate world is done in the form of investment, development, and sale.
This new transition is the ‘Tokenization’ of real estate assets. To simply put, it is the representation of fractional ownership of an asset through a blockchain security token. It will transform the way we perceive real estate assets from the most illiquid to easily tradable ownership just like shares of company stock from the easy access of one’s smartphone. This idea is taking the real estate transaction to a market larger than ever before, as it enables virtually anyone to buy stakes in a property on offer in the form of digitized blockchain tokens and later sell it in the marketplace when the prices seem fit.
All these are not just speculations, real estate tokenization has kicked off in cities like Texas, New York, California amongst others through a Texas-based real estate marketplace which has successfully tokenized nearly $2billion dollars worth of assets. This digitized secure contract leads to the transformation which is beneficial to the market in various aspects, some of them being
Liquidity is synonymous with how easily an asset can be exchanged for cash. Assets like stocks and bonds are more easily converted to cash as compared to real estate. Real estate assets are one of the most illiquid classes as it takes a lot of time to book a sale and turn into cash. But, tokenization is transforming the whole idea as it makes fractions of asset ownership available for transactions to a massive global pool of investors at prices and accessibility which was unknown to the market earlier.
Transparency is an extremely essential factor for a transaction to be successful in the long view. Proper record-keeping is key for real estate deals and hence comes the USP of blockchain. Transactions led by blockchain ensure that a proper record is maintained about payments, ownerships, and other factors with timestamps at each step of the deal.
Real estate transactions involve a lot of third party interference in the form of extra monetary obligations and extensive paperwork. Tokenization through blockchain will make the costs of registration, legal, brokerage, and other such processes come down to a simple fee and much lower fees for the marketplace registration as all the other necessary steps and processes will be carried out through the virtual marketplace. This will also automate the complete transaction that needs compliance, verification, escrow, etc just through verified click by the owner of the asset token and will make the complete process an extremely efficient one in terms of cost and time.
Blockchain tokenization is shifting the whole real estate sector into a new world that works on a new age paradigm based upon the technology, ease, and efficiency. Real estate investments will no longer be just limited to elite investors but will be available to a much larger market which will liberate the industry in a completely different manner.