Take real estate tokenization to the next level

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BUTWhile many people and organizations see real estate as an attractive investment alternative, the high-value initial investment creates a significant barrier to market entry for the average investor or developer. Combined with inefficient paperwork and labor intensive processes, and lack of oversight, limited participation, liquidity and productivity. To make the real estate market accessible to a wider investor base, it is necessary to improve the efficiency of the initial investment process, as well as the ongoing management and administration of real estate holdings. Issuance real estate tokens on a platform based on distributed ledger technology (DLT) and creating a market for issuers (property owners), investors and other stakeholders can be a solution to take the real estate market to the next level.

Think of tokens as representations of shares of ownership, encoded with ownership and rights information. A distributed ledger is the only source of reliable information for all parties, as well as a clear, transparent, immutable record in real time about who owns what. The use of a private DLT-based platform, as opposed to a public blockchain, allows the market operator to verify participants and allows information related to a transaction to be available only to the participants involved in the transaction. Automation of processes, including signatures and exchange of funds, ensures the confidentiality of market participants by centrally linking through tokens all documentation related to the issuance of land rights.

Using the DLT platform eliminates the need for negotiation between parties through channels such as email and agreements. Getting a new asset to market and completing a transaction is much faster and with less hassle. Dividing ownership into available shares allows the real estate market to become more inclusive and accessible to a wider investor base, removing high barriers to entry and giving issuers access to capital.

Collecting information about counterparties, sources of prices and other data in such a way that it is easy for holders of tokens to consume and use them to make investment decisions, allows you to standardize and automate the workflow for the entire life cycle of an asset in a complex ecosystem.

In theory, tokens can be based on a legal structure whereby the trustee takes care of the interests of the token holders. Many processes, including confirmations of payments, withholding of management fees, escrow for repairs and distribution of dividends, can be done automatically using smart contracts, and token holders can have a digital record of activity. Smart contracts can also handle default scenarios, such as when tenants don’t pay on time or managers don’t fulfill their responsibilities.

The development of DLT and the ability to tokenize and trade any asset digitally has opened up new opportunities for exchanges and startups. To get started, you’ll need a robust DLT-based enterprise platform that offers a seamless workflow throughout the lifecycle of traded assets and value-added services, including market surveillance, reporting, and risk management.

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