Can Cryptos Help Real Estate Break Free?

Larry Fink, the CEO of BlackRock, at the New York Times’ 2022 Dealbook Summit, said that the future of securities will be tokenization. Real estate is the world’s largest industry. Real Estate, the world’s most significant store of wealth, is more valuable than all the global equities and debt securities combined. The value of all gold ever mined pales by comparison at $12.1 trillion, at just 4% of the value of the global property. The value of the world’s real estate is estimated to be more than $327 trillion, which is more than twice the size of the world stock market. ( Savills ). But Real Estate also happens to be the most backward. There are so many ways technology can be used in real estate. One of them is tokenization which will accelerate equity growth and liquidity. Maybe cryptos could be the needed catalyst for change.

Cryptocurrency – The Rule of Three in Action ( Jagdish Sheth )

The cryptocurrency revolution is wildly successful because of three interlinked factors powering it instead of just one innovative idea. The three factors coming together are Bitcoin, Blockchain technology, and Economic uncertainty (Post-2008 recession). The world is largely divided into believers and sceptics of cryptocurrencies. The three cherished values of millennials and GenZ are:

#value 1: Financial Freedom

In today’s VUCA world, where job uncertainty is the norm, creating multiple sources of wealth is mandatory. Getting unstuck from chains like 20-year mortgages opens possibilities such as being a digital nomad, developing one’s passion off the beaten path, or venturing down the entrepreneurial route. Financial freedom opens the doors to opportunities and possibilities. Freedom brings happiness and joy.

#value 2: Democratization of Real Estate

Real estate investing has often been restricted to the rich and affluent middle class. The lower and middle class often just hope to have one home to stay in. They rarely aspire for other real estate options due to the high entry barriers. Accessibility creates options.

 #value 3: Creating a Legacy

Long-term appreciation of both real estate and crypto assets will create generational wealth and relieve some of the pain of living an ordinary life. Passive income will help customers live aspirational lives. Purpose drives people to buy or deal with purpose-driven companies.

#tokenization when combined with real estate is an emerging trend that enables a property to be traded fractionally rather than in traditional lumpy chunks. These #tokens are liquid-like stocks and help investors tap their liquidity at the click of a button. This also helps asset owners to raise capital effectively. Transparency of transactions, the immutability of records and liquidity through smart contracts are accomplished through Blockchain technology. A real tradable asset like real estate is represented on a blockchain network and then issued as a digital security token. The tokenization of assets can be thought of as the splitting of whole assets into shares known as tokens. Asset tokenization makes trading a much more flexible process. In traditional real estate, the whole asset needs to be transferred between seller and buyer. With the use of tokens, real estate is more affordable, thereby increasing the pool of potential investors across a wider geographic range. Through smart contracts, tokens can be traded in real-time.

Challenge: #fractionalownership

Fractional ownership has been on the cards for a while. The challenge has been to create the right marketplace. Some asset-based crypto projects have developed their firm's tokens and launched through ICOs (Initial Coin Offerings). There has been a barrage of ICOs and the launch of, yet another ICO may not be exciting. Certain firms such as SolidBlock have taken up select properties and tokenized these properties. Trading is restricted to their clientele on their website.

Platform solutions would act as the ideal focal point for trading tokenized properties. These would be on the lines of opensea.io/ to trade NFTs. Such a marketplace would offer a transparent and easy trading platform.

#freedomlifestyle #realestate #realestateinvesting #cryptocurrency #tokenomics

Dr Munish Batra Anand John BlackRock Blackstone Real Estate Income Trust BlackRock Brookfield Asset Management - Asia Pacific Embassy REIT Brookfield Asset Management - Asia Pacific Mindspace Business Parks Savills India