Last year (2019), my Team did some research on real estate and blockchain, trying to answer this question: “Is Now the Right Time to Move Real Estate Development Business on Blockchain?”
We have researched real estate and the security tokens market, and the conclusion is as outlined below.
The outcome is that while the real estate sector has experienced marked growth in terms of investing, earnings and impact on residential and commercial development, there are some challenges, which include the difficulty in financing the real estate development projects, complicated government regulatory setups, and lack of contingency structures for balancing ‘up and down’ times.
The world’s real estate assets exceeded $280 trillion in 2017 (1) and they represent seeds for security tokens. In addition, in few years, the mass adoption of security tokens will replace much of the current paper work used in trading of securities and real estate.
Thus, we believe that the security tokens are financial instruments of the future, which allow the reduction of the level of fees, accelerates the process of transactions, contributes to the development of the free liquid market, reduces manipulation and accelerates the growth of the investor base.
I think that the way forward in undertaking these challenges is to innovate and adopt new evolving technologies, such as blockchain and artificial intelligence. The adoption of the Blockchain technology is possible now for companies in industries of all kind, including finance, construction, real estate and technology development, etc.
As for the beginning of 2020, few companies worldwide have started the tokenization of their actual construction and real estate development business by designing unique products (and tools) in order to offer Fractional Property Ownership (FPO) and Passive Income Class of Investment (PICI) to mass investors.
These Companies will contribute to the change of the real estate development ecosystem by providing investment platforms that pay token holders direct dividends and/or interest from every real estate acquired, constructed and developed project.
A permanent dividend or interest could be paid via Proof of Stake (PoS) smart (staking) wallets, and the security tokens – attached to a real estate development project – can be traded on the Security Token Exchanges (for those interested in the subject, I will publish later a list of STO Exchanges, that came out in our research).
The Blockchain make the market very transparent and Security Token ecosystem is designed in such way that the secondary markets (STO Exchanges) make the real estate assets become liquid and available to all investors, accredited or non-accredited, in many jurisdictions around the world (some jurisdictions are banned or restricted). Of course, there are legal issues to resolve for being fully functional from the legal point of view, and in some jurisdictions like Estonia or Switzerland, crypto and blockchain formation is well regulated.
This new type of investment model is created for forward thinkers, entrepreneurs, professionals, business owners and all investors who want to own a fractional property, in square meters of a specific asset that is entitling investors to all the advantages of real estate ownership.
Through these platforms and their in-house tools, in the next years, we will see offers for easy access to real estate investment opportunities, with exceptional attributes, such as: very low investment and trading fees; very low minimum amounts to invest (€/$100 or even less); pertinent annual rate of return, and much more.
The Real Estate and Blockchain subject is new and endless now! If there will be an interest in learning about this particular subject, I am going to post here more topics, such as:
- Tokenomics (Token Economics)
- Utility or Security Token
- The Real Estate Blockchain Ecosystem
- The Security Token Investment Model
- The Security of Security Tokens
- The Real Estate Tokenization
- The Real Estate Problems and Possible Solutions
- Introduction to the European Real Estate Market
- Crowdfunding vs. Traditional Real Estate Investment Overview
- Risk of Investing in Real Estate Markets
- User Experience (UX) in Real Estate on Blockchain Platforms
- The Regulations of Security Tokens
- Friendly STO Jurisdictions
- Corporate Structure for an STO Business, etc.
Security Token: the digital equivalent of a stock certificate, updated and secured for the 21st century. It performs equally in functionality as a traditional security; the difference is that it confirms ownership through blockchain transactions. Security tokens offer a number of financial rights to investors such as equity, profit dividends, income shares, vote casting, and access to many others investment mechanisms.
Crowdinvesting: a special form of crowdfunding, which means investing together via the Internet, on platforms which offer shares/interest/dividend in startups, where mass investors follow a specific target and startups raise funds for developing their projects.
Crowdinvestor: a crowdinvestor investor uses crowdfunding platforms and spends for gaining a stake (dividend, share, interest) in startups.
- Savills, The Value of Global Real Estate: https://www.savills.com/impacts/market-trends/8-things-you-need-to-know-about-the-value-of-global-real-estate.html