Tokenizing Real Estate

Tokenization will change how commercial real estate is done for the better in 2022 and beyond. Tokenization essentially democratizes ownership of assets by using cryptocurrency to split assets into tokens that are stored on the blockchain. This makes it possible for ordinary people to invest in this unique real estate asset class. Someone who wants to invest in a trophy real estate project now has the luxury of being able to resell their share on the open market through secondary trading. Platforms will be created where an investor will be able to buy and sell — no different than how we buy and sell stock today. People in different geographies and tax brackets will now have access to attractive investment opportunities that they previously would not.

For real estate investors, tokenization will be a new way to raise equity or debt on deals. We have been following this trend closely and have seen deals in the U.S. and abroad oversubscribed for investors (when investors pour more cash than what is needed for the investment). I believe we will begin seeing tokenization as a new method of financing, which could serve as a better alternative for a project and investors. With blockchain tokenization, we can remove the unruly pressure of traditional bank financing, which is much healthier for the project and all of the stakeholders. With crypto assets emerging as a new asset class, their underlying technology - blockchain networks - have evolved to not only serve transactional systems but also confer, hold and transfer value in general.

As the industry and technology continue to develop, there is considerable room in merging the old with the new, and few areas hold potential equal to the tokenization of real estate Tokenization, as the name suggests, is the representation of an asset or equity, in token equivalents, which can be fractionally divided and owned. A tokenized property would be akin to a real estate investment trust (REIT), but much more flexible and with very little middlemen fees. Tokenized equities and real estate will witness unparalleled liquidity, given how the ease and secure settlement of cross-border transfers in tokens can take investment pools global. The fractional ownership aspect of real estate tokenization opens up the market to a much wider investing public. The result could potentially lead to greater access for ordinary investors to take a stake in assets that they ordinarily wouldn’t be able to purchase through existing means.

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Ray Martin

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