Real estate is a very diverse and boundless industry. Real-estate tokenization is a way of expanding the traditional real-estate sector into the digital world. Integrating blockchain technology into this industry can transform its illiquid market into a liquid and digital real-estate investment market.
Let us first understand tokenization and how it works. Tokenization is the process of representing a physical asset digitally on the blockchain. In simple terms, tokenization represents all traditional assets such as collateral, tangible assets, or financial instruments on the DLT. Asset tokenization is the process of representing pre-existing assets on blockchain by transferring their evaluation value and ownership rights into a digital token.
Tokenization of real estate converts its value into tokens that are used to raise funds from investors. It allows the conversion of real estate into fragmented assets and represents them with digital tokens. Each token can represent a property with reserved rights and obligations. All this is made possible because of “smart contracts,” which carry out all the contractual details of the deal. These tokens can then be traded on an online marketplace. The token purchaser will earn the ownership rights to that particular asset portion.
Tokenization can play a significant role in future real-estate transactions. This is because it increases the efficiency of real estate investments through faster transactions and more security.
It allows fractionation of real estate, thus making it a viable investment option for small investors.
Suppose you want to tokenize a property of 100,000 sq ft worth $30 million.
Tokenizing this property will let you divide each square foot into separate shares. Thus, the property can be divided into 100,000 shares, each valued at $1,500. Tokenization allows fractional ownership. Therefore, these 100,000 shares can be individually sold at a multiplied profit.
Real-estate asset tokenization will change the way people invest in real estate all over the world. Tokenization offers enormous advantages to the real estate industry, from providing fractional ownership to enhancing liquidity to automation. Tokenization will bring out the best market potential for the real estate industry in the coming years. Future tokenization projects in this industry will consist of groundbreaking results.
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