Tokenized real estate assets have introduced liquidity and access to investments previously available only to high-net-worth individuals, according to Marius Grigoras, CEO of crypto launchpad for startups BHero. The rising prices of real estate have made it increasingly unaffordable for most people, and tokenization of real estate is seen as a solution to this problem.
Tokenized real estate allows buyers to purchase a share of a property for as little as a dollar and sell it when the property value rises or falls.
Fractional ownership gives investors exposure to high-value assets at lower costs. Bob Ras, co-founder of Sologenic, said tokenized real estate is gaining attention because smart contracts reduce the need for paperwork and cut down the cost, time and effort involved in buying property.
Various tokenized real estate models have emerged, including tokenized REITs, rental properties, and mortgage-backed securities.
Accountancy firm Moore Global predicted that tokenization will become a $1.4tn industry if a small fraction of global property markets are tokenized in the next five years. While some companies are already using blockchain-powered tokenized models, the industry still has a long way to go before it reaches the predicted target.
Real estate startups such as Roofstock and Propy have already sold homes through NFT-based marketplaces, facilitating fractional real estate investment in tokenized assets.
Fintech and single family-focused rental platform Roofstock recently sold a Georgia home to ReaIT, a platform that offers fractional real estate investment in tokenized assets, via an Ethereum-based NFT on OpenSea.
Propy sold its first NFT-backed four-bedroom property in Florida in February last year. Tokenization company BinaryX has listed a villa in Bali on its testnet, with each fractionalized token becoming the villa’s co-owner in the real world and offered $6.25 rent per token.
While tokenized real estate is gaining traction, it is not always successful. For example, a real estate broker in the US offered to sell a house along with an NFT video of the house, with a minimum bid of 48 ETH, but it has still not been sold.