Correlation between blockchain and real estate has led to creation of digital real estate ownership to open up space to individuals who lacked funds, as stated by Cointelegraph. Buyers are expected to execute transactions immutably through tokenised real estate.
According to the publication, real estate tokenisation refers to the way an asset is fragmented into digital tokens to represent the underlying property with all its rights and obligations. Process of real estate tokenisation is considered similar to crowdfunding, which refers an asset being partitioned into small fractions with the use of a smart contract. Those individuals who buy or own a token gain right to a part of real estate. Real estate can be tokenised irrespective of being residential, commercial or trophy. Liquidation of trophy assets is possible through tokenisation to raise funds or projects.
Based on data from the publication, benefits of real estate tokenisation are:
More transparent and efficient transactions
Through decentralisation of blockchain, transactions are made ideal for real estate through a string of holders and procedures. With automated smart contracts providing the ensurance to eliminate any human role in transactions, blockchain ensures there is no paperwork for completion of transactions. The system aims to ensure transparency.
Before the emergence of digital real estate ownership, liquidity caused problems to investors. When a real estate piece is fractionalised due to tokenisation, its liquidty increases. Token owners can sell their tokens quickly.
Opportunity for small-scale investors
Real estate tokenisation has made investing in that area possible for small-scale and retail investors. Through tokenisation, large assets are turned into small fractions to increase their accessibility.
A free-flowing market
Blockchain based tokenisation aims to introduce the real estate sector to a decentralised financial system free of biases, with the intention to provide fair chance to all investors.
Decrease in counterparty risk
Smart contracts have been created with the desire to ensure better running of things from a regulatory perspective. As human interventions are reduced to a minimum, chain of transactions are short and remove the risk associated with weak links. Moreover, counterparty involvement gets reduced to an extent.
(With insights from Cointelegraph)