Tokenization in Real Estate
Commercial real estate constitutes a significant portion of world economic asset and transaction activity and tokenization is here to take it to the next level. Today’s global ecosystem consists of many siloed and independent real estate networks with little to no interoperability between them or their existing systems.
Asset management investors are constantly looking for ways to increase or preserve liquidity options thereby allowing them to improve positions and manage risk. Liquidity idefinition is how quickly an asset or investment is converted into cash.
The explanations why Real Estate isn’t as liquid as crypto is because:
- Public exchanges can list cyrptocurencies on their exchange where it is quickly sold during open hours.
- The number of buyers for crypto is a lot more than for real estate.
Liquidity of an asset is directly proportional to the supply of the buyers. The problem with real estate buyers are:
- Firstly, the barrier for entry is very high when it comes to real estate.
- They aren’t looking to buy any property which is far away from where they live (except in the case of international real estate.)
- Real estate dealings have loads of third parties involved so the transactions are bogged down by fees and regulations. This discourages potential buyers.
- Even if you do find some buyers, a lengthy transaction process can take a lot of time and the chances are high that it will end in failure.
Token securitization of properties via blockchain, along with token-enabled marketplaces and exchanges, however, can make these types of investments possible. Tokens logic is programmable according the issuers choice, including logic ensuring that distributions and transfers are compliant to meet specific rules. Simple examples include controls to ensure that transfer of token is only to certain counterparties, or not at all during a lock-up period. However, the real promise of this programmability is a future with fundamentally new instruments and markets.
Benefits of Tokenization in Real Estate
Tokenization reduces the cost and increases the speed of creating, issuing, and exchanging assets, innovating new features, administering dividends and other corporate actions, holding, reporting, and creating secondary market trading and settlement arrangements with no counterparty risk. This, in turn, increases access to investors and has the potential to improve liquidity and distribute risk. Major organizations around the world recognize the potential of the blockchain to create real estate platforms, enhance property sales, provided greater access to real estate funds, and record important information in real-time.
In the real estate market, the advice, knowledge, and know-how of real estate professionals will remain crucial to commercial buyers. However, the processing of securities, liability management, document processing, and accounting will inevitably change
We at BeyondBlockLabs through its Real World Asset Tokenization platform help in enhancing the underlying operations of the retail and commercial Real Estate industry through automation, tokenization.