In the present situation, the real estate tokenization market is very complex since multiple stakeholders are involved, large amounts of money are involved, different people specialized in various fields, and following jurisdiction rules. These complex situations won’t create significant issues but affect the market’s growth while the company keeps growing. From minor to medium-sized companies facing this issue, everyone looked for a new solution to overcome the situation, and blockchain tokenization was one of them.
What is Tokenization of real estate?
The Tokenization of real estate is a process that consists of virtual tokens to represent ownership of real estate interest. Dealing with common real estate interests in an outdated manner with paper documents, customers are comfortable with digital transactions using tokens.
Advantages of Real estate tokenization platform :
- Liquidity Asset :
Liquidity is the process of buying or selling an asset with ease. Investing in real estate tokenization platforms may bring fractional improvement in a sales price that could generate trillions of dollars for issuers and resellers.
- Worldwide investment pool :
The tokenization pool has potential investors that are truly global. Any investors with minimum capital and a good internet connection can easily purchase, hold, and sell real estate located anywhere in the world.
- Cost-effective entry :
The minimal capital will also change when real estate is tokenized. There is no necessity for a virtual token to be sold as a whole unit. Instead, the code present in the real estate token may allow it to be divided for giving access to an issuer or subsequent holders for selling their fractional asset-tokens at less cost due to fractionalization.
- Standard Transactions :
Blockchain technology has benefited from the Tokenization of real estate assets built. The purchase and sale of these real estate tokens are developed using standardized smart contracts, which need not be negotiated at any means and reduces transaction price substantially.
- Transparent Process :
Since the blockchain is a public ledger, it is traceable to record every transaction involving virtual tokens and cryptocurrencies running on it. Therefore, this structure makes a token holder “sell-twice” a real estate token that refuses to transfer the same asset token to two various sources.
- Security Process :
The blockchain is a distributed ledger that holds no person, group of members, or organization controlling them. These blockchains rely on advanced cryptography to provide safe and secure processes to users. Each user consists of their private key for granting access to blockchain assets. The security key comes with a long string of random characters that is difficult for a computer to let a user guess.
- Immutable Process :
It is not possible to change a recorded and confirmed transaction in the blockchain. This process gives the investors the belief that none can hack or do fraudulent transactions, but it is complicated to reverse if any transaction goes wrong.
- Simple Management Process :
Real estate tokenization can lead to an easy management process for investors and their rights. The secondary transaction can trace out by collaborating with other third-party exchanges. Hence, investors can receive their distributions back and practice other essential rights like voting through blockchain technology.
Essential steps to tokenize real estate :
- Separate platform holding rights to store assets on blockchain :
To tokenize a property, you need to figure out which blockchain platform holds the rights to store ownership of validly authorized asset tokens.
- Able to own rights for transferring assets legally through the blockchain :
Instead of storing rights to real estate into tokens in a traditional way, the platform should enable the token holder to transfer those rights to anyone and transfer the entire ownership to someone else in a legal manner.
- Tokens should be of exchangeable values
The owner needs to exchange the real estate token for the proper market value associated with each asset.
Issues viewed from a real estate angle :
- Mortgage Issue :
The issuer should pay it off entirely or get permission to do that if the mortgage is associated with a tokenized property.
- Token holder tracing issue :
Token issuers should be aware of tracing the holder owning that asset token and how many users have had the chance to own it. This method clearly shows that security-token can track ownership and secondary trading.
- International Investment Issue :
All countries have different rules for KYC and AML with unique security laws.
The token issuer should be aware of regular regimes that keep changing. For example, if UAE security offers are legal for them, it might be illegal in NZ. Everyone across the globe hopes for the usage of Smart Contract comes easy to overcome the hurdles.
What are the efficient steps to overcome this problem?
Even if tokenization has lots of potential, it lacks in improving real estate investment since it is a complex structure with many practical and legal issues that need to be solved. If any of those is ignored, the whole thing will slide away to the marketplace’s bottom line. Every token issuer needs to be aware of their customer and Anti Money Laundering regulations and laws no matter what their asset tokens are being offered during trading.
Checklist for real estate tokenization :
- Decentralization process
- Smart Contract System
- Interest types
- Legal entities
- Security Regulations
- Official corporate code
- Type of Asset
- Asset’s Location
- Tokenization ratio
- Recording investor
- Automated KYC/AML process
- Accredited verification for Investor
- International Fundraising process
- Regulatory and Legal Frameworks
- Enormous Jurisdiction
In tokenization development for real estate, customers can experience the best trading platform to generate legal asset tokens. The future of real estate investment is rapidly growing, and the Smart Contract system’s use helped develop a world-class real estate tokenization platform. The tokenization platform comes with high-security properties associated when trading or transaction takes place. The real estate token values are well structured and given access for every investor to start trading in the real estate crypto market. The development of ethereum, hyperledger, and stellar token structure is trending in recent years for its value in the marketplace. If you would like to start a business related to real estate tokenization to raise your business standard get in touch with a professional blockchain development company. They will take the initiative in generating real estate tokens to make them sell effectively among customers. Complete guidance comes from their end to strategize your blockchain business with care.