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Future Perfect: Virtual Real Estate Tokenization

By Vishakha Thakur

Technology, especially that in the realm of the web3 space, is changing like never before altering the contours of various businesses in the decentralised virtual world. The real estate industry is one such sector where myriad digital innovations are taking place in the virtual world or metaverse. The real estate industry has gone through a lot of changes but due to the advancements in technology, it is becoming a very promising aspect for the present and the future as well.

Since, it is very important to keep all real estate transactions secure and private, tokenization, which refers to splitting up a real asset into various digital tokens, has played a major role in making real estate happen in the virtual world. With the emergence of digitalisation and metaverse, the purchasing and selling of real estate assets has become interesting and a lot easier.

What is real estate tokenization?

The process of converting expensive assets of real estate into small tokens is often termed as the tokenization of real estate. The separate blocks, which are then regarded as a proof of ownership, guarantee users the security, immutability and the much-required transparency. All such tokens contain well encrypted data which is an important aspect of transferring an ownership to the buyer. All such information remains secure enabling efficiency and transparency. The process of tokenization provides all investors a convenient way to invest in real estate but currently there is no framework of rules that regulates the tokenization process in the real estate industry.

What are the benefits of real estate tokenization?

There are various benefits of real estate tokenization which include enhanced efficiency, improved transparency etc.

• Enhanced efficiency: Tokenization lowers counterparty risks and enhances efficiency by making property searches easier and facilitating proof of ownership.
• Reduced transaction costs: Tokenization and blockchain technology helps in reducing transactional costs and provides several other benefits.
• Lower barriers: Even small scale investors can participate as tokenization facilitates investments in fraction portions.
• Creating liquidity: All the tokens involved in real estate can be easily transferred by using blockchain technology which creates liquidity in the market. 

Types of real estate tokenization

There are four types of real estate tokenization which includes trophy, commercial, residential and single real estate tokenization.

Trophy Tokenization

Trophy tokenization is when you buy real estate with the purpose of marketing. This type of tokenization can be used for fundraising too and if you use an immutable ledger, all your assets can all be liquidated in a legal, well controlled and safe manner.

Commercial Tokenization

All commercial real estate properties come under his category but there should not be any criminal activity related to this business or commercial property. 

Residential Tokenization

All the investors can acquire any desirable residential property or a parcel of land in this particular real estate tokenization. This makes it easier for all the owners to get their hands on the capital gains of the property.

Single Tokenization

Single real estate tokenization allows all the companies and individuals to lower their liquidity premium by some percentage. In the future, this type of tokenization helps the buyers in enhancing their investment portfolio and raise funds for some other projects.

People can start buying or selling virtual real estate in the metaverse due to real estate tokenization. Tokenized real estate can transform the entire virtual real estate industry by offering myriad possibilities. The combined usage of smart contracts and blockchain technology helps in increased efficiency and seamless transactions. That is how and why real estate tokenization can become the future of real estate investment. 

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