The Growth of Real Estate Tokenization in the Metaverse
Posted By : Priyansha Singh | 05-May-2022
Real Estate Tokenization in the Metaverse
As blockchain innovations and adoption across a myriad of industries within the metaverse have begun to soar, numerous businesses, startups, and financial institutions have started to pour massive interest in the decentralized virtual realm. One such sector where monumental digital innovations and metaverse development solutions are spreading their wings is real estate.
Real estate, without a doubt, is the most liquid asset that requires long transaction processes and more entailing with significant capital commitments. If it continues to occur digitally, it is pivotal to keep the real estate transactions private and secure. Moreover, with the digitalization of real estate assets, purchasing and selling off blocks of land and buildings have become a lot easier to manage. And the term that has gained prominence in relation to streamlining the virtual asset management in the metaverse is reckoned as ‘real estate tokenization’.
Tokenization is a progressively developing area in the financial industry that enables secure and managed investments in digital tokens backed by real-world assets as well as securities. In this blog, we will shed some light on what real estate tokenization means and how it is revolutionizing the real estate sector in the metaverse.
What is Real Estate Tokenization?
Real estate tokenization is a process in which real estate assets are broken down into discrete blocks that represent proof of ownership in that asset. These discrete blocks are reckoned as asset tokens that ensure immutability, transparency, and top-notch security. The entire process of breaking high-value real estate assets into smaller tokens is termed as tokenization of real estate.
Furthermore, it is a contemporary extension of fractional real estate ownership. Real estate tokenization can also be thought of as a crowdfunding tactic that fragments the value of a real estate investment into smaller chunks in order to overcome most of the high entry barriers. In this process, each fraction of the real estate asset is converted into a token. Each of these tokens is securely encrypted with the crucial and pertinent data that are pivotal for granting ownership to the buyer on the basis of their shared percentage in the property.
How To Tokenize Real Estate in the Metaverse?
Typically, the real estate tokenization process within the metaverse follows these crucial steps:
- Identifying the asset: In this process, the company or business recognizes the commercial real estate asset. This step usually entails purchasing, financing, as well as appraising the property in the metaverse.
- Building smart contracts: The next step is to build robust smart contracts. The businesses have to follow the necessary securities and laws before generating the smart contract.
- Token generation: Here, businesses have to decide on the type as well as the number of tokens to be generated. These tokens are then listed on specified metaverse NFT marketplaces or related metaverse platforms.
- Distribution and marketing: Now, businesses have to advertise and promote their tokens after the marketplace listing. Security token offering or STO can be leveraged to list the tokens.
- Post-launch support: The final process inculcates offering security and support to the real estate buyers and investors in the metaverse.
Also Read: Pros of Building NFT Marketplaces for Artists
Benefits of Real Estate Tokenization
One of the most significant merits that real estate tokenization brings to the table is liquidity. Since commercial properties and high-value homes often face difficulties in being sold as an individual entities, it ultimately contributes to the highly illiquid nature of the asset. However, with real estate tokenization, asset owners will be able to sell desired portions of their assets in the form of virtual tokens.
Real estate tokenization also opens new doors for small-level investors and individuals to strategically invest in high-value properties. This aids them in expanding their portfolio and destroying the monopoly held by a handful of mega and full-fledged real estate investors when it comes to purchasing highly-valued real estate. Some of the prominent advantages of real estate tokenization are:
- Tokenization improves transparency
- Tokenization increases liquidity
- Tokenization decreases counterparty risks
- Tokenization enhances efficiency
- Tokenization opens floodgates for new capital channels
- Tokenization helps in making property search easier
- Tokenization facilitates proof of ownership
- Tokenization breaks the entry barrier for small investors
Types of Real Estate Tokenization
It is essential to note that any type of real estate can be tokenized. These tokenized assets can be distributed to a set of investors via any secure and trusted real estate tokenization platform. Blockchain development services altogether play a pivotal role in the entire process. There are several types of real estate tokenizations available:
- Residential real estate tokenization
This type of virtual asset tokenization enables investors to own a parcel of land or any piece of residential property that is prime and in demand across the entire planet. This facilitates the owners in retrieving dividends and capital gains from the property.
- Commercial real estate tokenization
The ownership of commercialized real estate is tokenized with the usage of the audited fractionalization method without breaking the regulatory compliance, legal requirements, and standards.
- Single Real Estate Tokenization
Businesses and individuals can tokenize their single real estate and lower their liquidity premium by over 20%. This helps them in raising funds for other projects and diversifying their investment portfolio in the long run.
- Trophy Real Estate Tokenization
This process is applicable for instances where you have purchased real estate just to flaunt your market position. Trophy assets can also be liquidated in a secure, regulated, and compliant manner by using an immutable ledger and can also be used for fundraising purposes.
As an investment, the real estate industry has been a bit elusive when it comes to matching the speed of technology and digital innovations. Earlier, there was a cornering fear that real estate assets might lose their value in terms of monetary investment if technologies take over.
However, with the proliferation of metaverse development services in amalgamation with blockchain technology and tokenization, the unimaginable task of making global real estate both lucrative and liquid has been achieved.
For a long time, the real estate industry dealt with high barriers to entry along with illiquidity. Tokenization, altogether, has opened up this market in the metaverse, lowered the market entry barrier, and has immensely contributed to the democratization of this sector.
As a trusted metaverse development company, we offer all the requisite services that are needed to tokenize your assets. If you are looking for NFT fractionalization, asset tokenization, or metaverse real estate development solutions, feel free to drop us a line. Our experts will get back to you within 24 hours.
Priyansha is a talented Content Writer with a strong command of her craft. She has honed her skills in SEO content writing, technical writing, and research, making her a versatile writer. She excels in creating high-quality content that is optimized for search engines, ensuring maximum visibility. She is also adept at producing clear and concise technical documentation tailored to various audiences. Her extensive experience across different industries has given her a deep understanding of technical concepts, allowing her to convey complex information in a reader-friendly manner. Her meticulous attention to detail ensures that her content is accurate and free of errors. She has successfully contributed to a wide range of projects, including NitroEX, Precise Lighting, Alneli, Extra Property, Flink, Blue Ribbon Technologies, CJCPA, Script TV, Poly 186, and Do It All Steel. Priyansha's collaborative nature shines through as she works seamlessly with digital marketers and designers, creating engaging and informative content that meets project goals and deadlines.