The concept of Fractional ownership isn't something new. However, fractional ownership via blockchain technologies, also known as real estate tokenization, is increasingly becoming a topic of consistent discussion in the industry, with few startups across the globe already functional in the space.
Real estate investments, blockchain technologies, and fractional ownership are all there. When the three are combined, a new type of ownership emerges that is ‘tokenization’. Real estate tokenization provides you access to a portion of a real estate asset that has been transformed into a blockchain token that can be sold. It allows you to purchase small or large pieces of handpicked homes, receive weekly rent, and, most importantly, sell whenever you want. The best is yet to come. Apart from yield and appreciation from the asset, the investor has opportunity to make incremental return from the appreciation of tokens price, which is based on demand and supply dynamics like any other crypto currency trading in the world.
Isn't that interesting?
Consider purchasing a Rs 1 core property and then needing Rs 20 lacs urgently.
You can't just sell a Rs 20 lacs worth component of your house, like the living room or the bathroom + hall, in traditional investing. Who would buy something like that? How long do you think it would take you to find a buyer?
With fractional ownership and blockchain technology, however, you can sell the equivalent of Rs 20 lacs from your assets and keep the remaining asset unsold for future consideration. With this, you get access to liquidity by selling a fraction of your asset and also earn yield you expected when you first invested, this time on Rs 80 lacs and not Rs 100 lacs.
Early adopters of tokenized real estate are well aware of the kind of returns cryptocurrencies like bitcoin and ether have given. They are well within their rights to expect tokens to give similar returns in the real estate sector over and above the stability that the token will offer because it is backed by a tangible asset unlike popular cryptocurrencies being traded in the market.
This is surely an upgrade. Isn't it? But,
What is the relationship between tokens and blockchain?
Tokenization is a relatively new trend in the blockchain world, but it's already gaining popularity in real estate, stocks, collectibles, artwork, digital media platforms, and other more or less traditional businesses. It clearly allows a far larger group of people to become "landlords."
People who would never have considered investing in real estate before now have the opportunity to do so. Ironically, even for structures that aren't yet made of brick and mortar, this is a reality.
Purchasing real estate for investment purposes has traditionally been a privilege reserved for the wealthy. Only those who already had the money could do it. With tokenization, real estate investing will eventually become broad based and available at multiple ticket sizes making it more affordable. Token is nothing but like a share. Share is available in demat and token is available on blockchain platform, both accomplishing the same purpose.
With as little as a $50 per token investment, one can now own a piece of real estate which will have the ability to offer rental yield as well as capital appreciation and yet remain liquid.
Tokenized fractional ownership is a good approach to diversify a portfolio by adding real estate as an asset class. The icing on the cake is the opportunity clients get in case tokens appreciate over a period. Latter is the main driving force behind making this concept popular not just with customers but also with private equities and VCs in the startup ecosystems.
Benefits of real estate tokenization:
For investors:
- Affordable
- Fast settlement
- 24/7 market
- Automatic diversification of revenue streams
For developers and brokers:
- Broadens the market and target segment
- High security due to blockchain technology
- High liquidity
- 100% digital process, no site visits
.png)
