Partial ownership of buildings and developments will be one of the areas of application of blockchain technology in the real estate industry. From democratizing access to real estate investing to increasing market liquidity, there are arguments that tokenization is a net positive for the real estate industry.
Private equity coding is also another example of the growing “sharing economy” that appears to be encouraging crowdfunding ownership, a trend that could help decentralize the global real estate market across multiple sectors.
As the millennium, the first generation of digital natives, enters its heyday, the digitization of the real estate market could lead to more market participation from this demographic.
However, as with fractional ownership in general, tokenized real estate investing has its share of drawbacks. Due to the innovative nature of the business, funding opportunities can often be limited, resulting in low market liquidity and a general lack of flexibility.
First placement of fractures
As previously reported by Cointelegraph, Fraction, a subsidiary of Hong Kong-based fintech Group, has received regulatory approval from the Thai Securities and Exchange Commission for token trading, which is a small part of its physical and digital asset ownership.
While the approval extends to tokenized investments in physical and digital goods, Fraction will focus primarily on fractional real estate investments and will use the Initial Equity Offer (IFO) mechanism.
According to the company’s announcement in September, the IFO will provide an easier entry into the luxury goods market for potential investors. IFO tokens will represent a fraction of luxury real estate ownership for less than $150, presumably lowering the barrier to broader market participation.
Back in January, Fraction listed its first properties on its exchange platform – a housing association located in On Nut, Bangkok, Thailand. According to details on the company’s website, this process involved the complete digitization of the title deed, followed by the division of the property’s holdings before offering a token ownership of these shares through the IFO.
Josh Stick, co-founder and CEO of Sundae, a digital housing market platform, spoke with Cointelegraph about important aspects of the token and its market share. “Investing in housing is one of the biggest opportunities to create value, and unfortunately it is available primarily to the wealthy,” Steke said, adding:
“Coding residential real estate on the blockchain promises to provide efficient and open access to the largest asset class in the United States, not just for young people, but for anyone who wants to invest in real estate with no cash for the entire property business process.”
Using cryptocurrency and blockchain technologies, Stech said the token will help lower the barrier to entry for private equity investors. “Although mutual funds and real estate platforms offer partial investment opportunities, they are hard to find, hard to evaluate, illiquid and only available to accredited investors,” the CEO added.
Real estate is still in its infancy and is still a niche aspect of the market. However, industry insiders say there is potential for explosive growth with UK accounting network Moore Global, which estimates that the tokenized real estate market could reach $1.4 trillion by 2026, representing just 0.5% of the current global market. . Feature.
Although the real estate space looks promising, there are many important issues that need to be addressed. Among these major obstacles are lack of liquidity, especially in the secondary market, institutional indecision, and lack of clarity in regulation.
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According to Tal Eliashev, founder and CEO of blockchain-focused venture capital firm SPiCE VC, ownership through tokens still has a long way to go. Eliashev told Cointelegraph:
“I believe that in order to drive the real estate market forward, we need to see a higher level of institutional comfort as token assets approach. The market has already seen an influx of projects at the institutional level. The market should also experience innovation in niche real estate platforms that allow for token investments.