Real Estate Tokenization
Real estate is one of the far-reaching, boundless industries, the concept of tokenization of real estate assets, alongside blockchain technology, is transforming real estate to another level. Blockchain-based tokenization is thriving among potential investors because it helps them with a more efficient business consisting of increased liquidity, globalization, and several other factors.
Tokenization of real estate assets is the process of converting the value of a real estate property into digital tokens that you can sell to investors to raise funds. In simple terms, to ” tokenize” means is to divide the asset into shares, or tokens that represent an individual underlying asset or shares of different underlying assets.
We, at Blockchain App Factory, have an experienced team of developers who will offer tokenization services that include due diligence, auditing, and legal services to reduce illiquidity discounts by at least 25%. Our cutting-edge blockchain tokenization platform removes the hindrance of a long, tedious process and enables a hassle-free business at reduced costs.
Real Estate Tokenization Strategy
Tokenization will change the way people invest in properties globally. The potential for strategizing by blockchain developers, legal and financial advisors is enormous. At Blockchain App Factory, we simplify the legal and practical issues with a team of Legal, Financial and Blockchain Consultants who ensure the tokens are legally compliant.
Our developers consistently consult with our subject matter experts on crowdfunding/securities, tax/accounting and real estate during the tokenization of the assets. SMEs guide our team in the development allowing you to raise funds within the regulatory framework.
Real Estate Tokenization Checklist
Type of Interest
Location of the Asset
Ratio of Tokenization
Mortgages on the Asset
Accredited Investor Verification
Legal & Regulatory Frameworks
Process Involved in Tokenizing an Real Estate Asset
Finalizing The DealThe factors that influence the final deal are the type of assets, jurisdiction, types of shareholders, and the relevant regulations to be followed.
Formation Of The Legal StructureVarious options are available for the property owner and he/ she can opt to form a Special Purpose Vehicle (SPV), become a member of a real estate fund, involve in project finance, or take part in a Real Estate Investment Trust (REIT).
Selection Of The Appropriate TechnologyThe right blockchain network needs to be chosen to create the token. Investors will require a custody solution to store their tokens safely. The securitized tokens can be offered to the investors either through primary issuance or by trading them on the leading secondary exchanges.
Token Creation And DistributionOnce the token has been created, a distribution plan must be prepared according to the total supply available. Multiple payment methods need to be accepted when potential investors purchase the token. You can see the amount of funds that you have raised totally by viewing the cap table updated on a real-time basis.
Security Token Offering for Real Estate Asset
Since a securitized token is being offered to the prospective investors, the process is referred to as a security token offering (STO) or a tokenized asset offering (TAO).
By buying a token, an investor gets a stake of ownership in the property. They will earn greater returns from future appreciation in the price of the asset. Asset owners have complete freedom in deciding how to market their STO in multiple ways. Transactions will also be streamlined and illiquidity discounts will be significantly reduced through tokenization.
An end-to-end asset-backed token for the Real Estate Industry. We help the industry in technology, legal, and auditing processes to raise capital via property-backed tokens. Our tokens are compliant with numerous jurisdictions with the regulations embedded in a smart contract.
At Blockchain App Factory, we provide services which include due diligence, auditing, and legal services to reduce illiquidity discounts by at least 25%, based on the technology that disrupted the decentralized industries.
Benefits of Tokenizing Real Estate
Both property owners and prospective investors will benefit immensely from Digitizing an Asset.
Tokenizing your real estate assets will bring in high-volume liquidity that will help you with efficient buying and selling of properties and also with a quick conversion of property values into cash.
Tokenization allows fractional ownership where you can split the value of shares and also their ownership. This helps reduce your distress of being a sole owner and bear all challenges by yourself.
Tokenization removes geographical barriers, and you can trade with anyone around the globe, which widely expands your business opportunities, spinning profits in huge numbers.
By tokenizing real estate assets, users are enabled direct peer-peer transactions with no involvement from intermediaries. This helps with a risk-free business, and also reduces extra costs.
The integration of blockchain into the tokenization platform provides immutability where the transactions, once recorded, cannot be interchanged. Also, blockchain completely protects the user and their asset information.
Instant, Efficient transactions
Tokenization eliminates the long, tedious real estate process and helps with quick, efficient peer-peer transactions, from/to anywhere around the world.
Reduced entry cost
The tokens can easily be subdivided into many parts and this enables its sale at lower prices due to the presence of fractionalization. Hence, small investors can participate greatly in the process while the wealthier investors can efficiently diversify their portfolio.
No individual or organization controls the entire system, and the power is equally distributed between the different users. Advanced cryptographic techniques like private keys are utilized by users to get access to their digital assets.
Investors’ rights can be managed easily. Secondary transactions executed can be tracked on a real-time basis by partnering with the leading third-party exchanges. Investors get their returns promptly and also participate in the governance of the platform through voting rights and decision making.
Factors to Consider While Digitizing an Asset
A host of issues need to be dealt with while offering a token in the market. They are classified into the following aspects mentioned below.
- The type of interest which an investor gets by buying the tokens will have to be precise.
- The various security laws need to be complied with properly which varies according to the geographical location.
- A Corporate code needs to be set up regarding the formation of an entity.
- Mortgage issues concerning different properties will have to be taken care of.
- The guidelines will be different for domestic and international sales of tokens.
Practical and Legal Issues That Need to Be Tackled Before Starting Tokenization
The law must be followed diligently in Tokenization. If not, it will lead to various operational obstacles affecting the token sale process.
- Government regulations will have to be followed seriously especially regarding KYC/AML verification of the investors.
- There is a complete lack of uniform regulations regarding cryptocurrencies and tokens in all the countries. Hence, investors will find it tough to prove their ownership legally.
- The tokens should either be recognized as shares in the SPV or a right to get cash flows from the property.
- Self-regulation is not possible in Real estate tokenization as it brings back some form of centralization. They have to align with a set of well-defined laws.
The scope of Real Estate Investment Tokens
The biggest asset we have for you is the legally compliant token structure which can be built on numerous blockchain. Our team of 200+ members are highly driven to help you raise funds within the legal framework.
- Ethereum, Hyperledger or Stellar Token Structure
- Blockchain & Smart Contract Development Experts
- Understand the requirements of the Market
- End to End Securitized Real Estate Token Solution
- Experienced Team of Technology, Legal & Financial Advisors