The real estate market is complicated by several parties involved, significant sums of money, specialists from various fields, contracts, laws, etc. That is why many real estate companies, start-ups, investors, and government institutions are on the hunt for new solutions, one of which is the blockchain technology.
What is Asset Tokenization?
Tokenization of real estate allows property owners to distribute tokens through a blockchain platform. Tokens represent a certain number of shares for a particular real estate property. Interested parties can buy these tokens, and by doing so, they become partial owners of the property, which additionally enables them to take part in cash flows and increase the value of assets.
Besides, investors enjoy the freedom to sell their shares whenever they want. Tokens can be traded on various cryptocurrency exchanges, like the Tokenizer Exchange.
There are numerous benefits of tokenizing real estate. However, we will stick to the three common benefits in this article.
Blockchain immutability proves ownership
It is common knowledge that blockchain is an immutable ledger of records that cannot be altered. Having a digital transaction record helps all interested parties to prove their ownership. Additionally, an immutable ledger helps minimize the likelihood of fraud. In a blockchain network, a token issuer cannot sell tokens twice.
Programmability allows automation, improves transactions, and share management
The ability of smart contracts to hold several business logics is linked to programming and helps set automatic events when certain conditions are met.
Investors can track secondary transactions easily using third-party exchanges. Besides, they can also effectively use any other processes, like voting. The automation aspect of blockchain is essential for accelerating calculations since tokens have built-in compatibility.
Real estate tokenization extends the possibility of partial ownership of a property. A decree, like the US dollar, can only be fractionalized to $0.01, but tokens contain up to 18 decimal places, meaning that they can go much lower if some restrictions are not introduced.
High liquidity implies that the investor’s contribution is much lower and that there is more room for partial ownership. For instance, instead of investing 2,000,000 USD in a particular property, an investor can pay 7,000 USD for fractional ownership of tokens.
The process of tokenizing real estate and current issues
For a property to be tokenized, these three requirements must be met:
i) A platform that has the rights to store assets on the blockchain
To tokenize an apartment, you must look for a property issuing blockchain platform that is fully regulated to store ownership in tokens. Examples of regulated tokenization platforms include Polymath, Securitize, and Tokenizer.
ii) Ability to transfer the rights to assets through a blockchain network
Besides being able to store rights to properties onto tokens in a proper way, the tokenization company should also allow the owner of the property to transfer those rights to any interested person and also transfer the complete ownership to someone else through a legal process.
iii) Tokens should be exchangeable for value
Just like other common securities, a property owner should be able to exchange the tokens for a certain value so that each asset can obtain its true value represented in tokens.
The role of Tokenizer’s in Real Estate Tokenization
Tokenizer provides the technology that makes it possible to create, distribute, and manage tokens on an ongoing basis. At Tokenizer, we project that the need for asset-backed tokens will continue to increase, where various companies solve problems facing them using tokenization while depending on tokenization technology experts to explain that piece of the puzzle.
Real estate companies do not have to hire blockchain developers. Tokenizer offers the blockchain technology expertise so businesses can use their time, energy, and resources on their fields of specialization.
Are you looking to leverage Tokenizer tokenization technology? Contact us through our website.