Real Estate Tokenization; Who Wins?
With the continuing adoption of blockchain and its use cases, many traditional stakeholders in the real estate industry are getting worried. The technology is already disrupting the once vibrant sector with many functions being rendered obsolete through process automation.
However, the tokenization of the industry should be seen to benefit all the market players. It seeks to make the processes work efficiently and deliver accurate results. By transitioning from an analogue way of transacting business to a blockchain backed system that is fully automated, the end result will be the satisfaction of all stakeholders.
Real Estate Tokenization and Automation
New technologies are usually met with resistance and blockchain is not an isolated case. Many digitalization of asset critics are looking at the job lose aspect but do not consider the benefits the investor is set to get from a tokenized economy. The truth of the matter is everyone is set to gain from the multi-billion real estate industry.
By breaking down the imagines complexity of the industry, it will open up the flood gates for more investors. Tokenization makes property ownership accessible to all since anyone can purchase shares or token in the secondary marketplace and own a fraction of the asset.
Global Market Access
Traditional real estate is restricted to select geographical location but once the market is put on the blockchain, all the cross border barriers will be broken. Investors will be able to purchase certain percentages of property anywhere across the globe.
With all transactions on the blockchain, everything will be done online and records stores in an immutable ledger. Unlike the traditional real estate transaction records, blockchain makes it difficult to alter any entries unless certain set parameters are met buy the network participants.
When records are out in an immutable system, it is very easy for the investor to prove their asset ownership. What’s more; chances of fraud and record altering are reduced to nil. The system cannot allow anyone to sell their share or tokens twice.
How Secure is a Tokenized Asset?
The tokenized infrastructure is fueled by security tokens and the deployment of smart contracts makes the digitalized assets secure. Transactions are done through third party crypto exchanges. These third parties make transactions seamless and traceable.
Security token have their inbuilt compliance and once real estate is tokenized, it will make the asset management easy and stress free. This will also cut down on the number of players who have been slowing the transaction processes in the traditional real estate.
Challenges of Real Estate Tokenization
One of the major challenge real estate tokenization if facing is lack of universal AML and KYC requirements. Each country has its own requirements making it hard for tokenization to gain global acceptance. If these are standardized, real estate tokenization would become an instant hit.
Blockchain and real estate tokenization are new concepts and have their teething problems. However, investors are looking at the benefits that come with a tokenized economy. Once the modern investors realize these benefits, adopting the transition from illiquid to liquid assets will be the next big thing.