What is Tokenized Real Estate?
Blockchain technology holds a lot of possibilities for real estate, particularly through tokenized real estate investment. Tokenized real estate refers to the shifting of real-world, tangible assets onto the blockchain. Upon this shift, these assets are allocated a token. Ownership of this ‘token’ is indicative of ownership in an asset, and they are much like owning the shares of a company.
Real estate is a segment that has traditionally suffered from reduced liquidity. This lack of liquidity of investments has kept investors at bay from taking the plunge into investing. Tokenization resolves this problem by making real estate properties easily convertible into cash.
Tokenization opens up investment opportunities for a brand new class of investors. Investing in real estate assets has been seen as the domain of the affluent. Tokenization, through fractional ownership, enables smaller-scale investors to make investments in properties that they would like to own.
Additionally, tokenization serves as a low-risk diversification option for existing large scale investors who want to broaden their portfolio. Tokenization is predicted by industry analysts to become the norm within the realm of investing, and this is not without precedent. Tokenization introduces undeniable benefits and conveniences that alter the experience of investing from ‘cumbersome’ to ‘enlightening.’
Tokenization of Commercial Real Estate Asset
Tokenization can be defined as the shifting of asset and account management (constructions, premises, and related cash flows) into an electronic format, specifically onto the blockchain. These tokens are indicative of ownership in those real estate assets.
A commercial real estate asset is typically a large scale investment that not all investors have the option of considering. This often rules out a very large set of prospective investors who might’ve liked to own the property, but don’t have the means necessary to do so. This is where tokenization sets in.
In tokenization, fractional ownership of property becomes possible, much like owning the shares of a company. Each individual token is representative of partial ownership in a commercial real estate property. Tokenization imparts a host of benefits to owners and sellers, and a few of these include increased liquidity, the introduction of a new class of investors into the real estate domain, and fractional ownership of real estate property.
Tokens are often given out through asset tokenization offerings (ATOs), or tokenized asset offerings (TAOs). Tokens are categorized as securities under US securities law. Tokenization of commercial real estate assets is set to redefine the way in which we view investing by redefining investing itself.
Advantages STO in Real Estate
The preliminary sale of a security token is referred to as a Security Token Offering. (STO). This is alternatively referred to as a tokenized security offering (TSO), or as a tokenized asset offering (TAO). While STOs can be considered to be similar to ICOs (Initial coin offerings), the point of divergence is that tokens issued through ICOs are not necessarily indicative of ownership of the underlying asset or real estate property. However, the token issued through an STO is indicative of ownership in a tangible, real-world asset.
Security token offering real estate provides a host of benefits to prospective investors. Tokenization of real estate property enables fractional ownership, increases the liquidity of a traditionally illiquid asset class, and introduces a new class of investors into the domain of investing. Additionally, tokenization serves as a low-risk diversification avenue for existing investors who want to spread out their portfolio through multiple low-risk investments, instead of a single large investment.
Tokenization has been receiving all of the hype within blockchain technologies, and this is not without merit. Tokenization has the potential to revolutionize the asset investment industry by redefining the way investing happens. Blockchain’s revolutionary presence can be compared to the advent of the internet, and in no other avenue is its undeniable utility demonstrated than in tokenization.
How Blockchain App Factory’s solutions benefit using Blockchain in Real Estate :
Real estate tokenization projects are rapidly gaining momentum and this has witnessed a corresponding increase in the number of real estates tokenization companies. Analysts are predicting that it will not be long before all major asset classes are being purchased on the blockchain. Blockchain-based real-estate is gaining steam as a medium of interaction for buyers, sellers, and investors, where they can learn about real estate tokenization properties.
Tokenization leverages the potential and power of Distributed Ledger Technology (DLT). It improves trust through enhanced transparency. Within the real estate industry, trust is an extremely important factor. Blockchain improves contract processing speeds and minimizes time/cost expenditure.
Due to the ever-increasing number of real estate transactions, a public database of leases and purchases is more important than ever before. Transparency in the ledger system provides visibility in the transaction history of properties. Transparency is important in establishing trust.
Blockchain App Factory, with its extensive industry exposure in the domains of blockchain development and cryptocurrency, is your go-to solutions provider for real estate tokenization. Develop your own STO, STO exchange, and tokenization platform with BAF’s team of subject matter experts and thought leaders. Make your mark in the domain of real estate tokenization with BlockChainAppFactory!