Real Estate Tokenization

Analyzing Ethereum’s Role in Real Estate Tokenization

Real Estate Tokenization is one of the game-changing trends currently in the industry. It involves the conversion of properties into digital assets known as tokens and selling them to potential investors in the market. Since Real estate is one of the largest asset classes in the world, Tokenization can be implemented on a huge scale in this sector. 

Let Us See How Ethereum Can Influence the Tokenization of Real Estate Asset

  • Assume that an ERC20 contract exists representing a set of properties that are going to be tokenized.
  • The ERC20 contract will be responsible for processing all the income associated with tokenizing real estate asset
  • the specific property. 
  • Investors will get the share that is due to be paid to them.
  • Each digital token offered for sale represents a certain share of the property. 
  • The tokens will be offered in ETH (Ether) to the prospective investors.
  • The Ethereum blockchain takes care of processing transactions, issuance of the tokens, trading of the tokens, and asset lifecycle management. 
  • The tokens contain information about ownership rights and transaction history. It will be pre-programmed.
  • The total value of all the tokens issued to the investors will be equal to the total worth of the asset that has been securitized. 
  • The Ethereum Virtual Machine (EVM) can be utilized to create a digital token and also for establishing smart contracts. 
  • Download the MetaMask wallet that will use your smart contracts to connect to the Ethereum blockchain network. 
  • Send a transaction in MetaMask. 
  • Install Web3.js that enables you to interact smoothly with the Ethereum blockchain. 
  • Get some Ether for deploying the smart contract on the blockchain network. 
  • Truffle will test your smart contracts thoroughly before deploying them.
  • Set up a digital wallet that supports all your Ethereum tokens.
  • Choose any tokenized property that suits your financial situation and interests.
  • Once the digital tokens have been purchased by the investor, they will get to know all the details of the sale along with a transaction reference link on the Ethereum network. 
  • The investors will receive dividends and equity from the property. 
  • The advantages of Ethereum are the fast processing of transactions on the network and accuracy in the transmission of information. 

Tokenizing Real Estate Asset That Has Already Happened on Ethereum So Far

  • Inveniam Capital Markets tokenized a building in Florida for $66 million in the form of ERC-20 tokens on the Ethereum blockchain. It is available in the form of a private placement according to the rules of the Securities and Exchange Commission (SEC).
  • A luxury condominium in Manhattan was tokenized for $30 million on Ethereum. 
  • Fundament Group, a German company opened a tokenized real estate bond worth 250 million Euros after getting approval from the German Financial Market Supervisory Authority. It also launched a Real estate token using the ERC-20 standard on Ethereum. The token is financially backed by 5 different construction projects. 
  • Harbor, a digital platform that manages investments, has already tokenized a $100 million fund on Ethereum for iCap Equity, which is a Real estate investment firm located in Bellevue, Washington. 
  • RealT turns properties located in the USA into security tokens on the Ethereum network. The holders of the token will get regular rent. They have already sold $1 million property on Ethereum. Investors get dividends paid on a fractional basis. Tenants pay rent in US Dollars that is converted into DAI, a stablecoin, and sent to the Ethereum wallet under the control of the investor. 
  • Elevated Returns, a financial company that does asset management and offers real estate advice, tokenized the St.Regis Resort in Aspen for $18 million on Ethereum. It followed a dual approach where the digital token will be minted on a primary asset issuance platform and the token will be traded in a leading secondary exchange in the market. 
  • Breezecoin, a utility token was launched on the Ethereum blockchain for the Real estate industry. It follows ERC20 token standards. Users can process transactions automatically and are safeguarded by Ethereum smart contracts. Investors get periodic returns in dividends.

Related: How to Tokenize Commercial Real Estate Asset

The Future of Tokenize Real Estate Property on Ethereum 

Tokenized real estate asset on Ethereum have emerged in the form of asset-backed tokens or synthetic assets. Many dubious utility tokens arrived in the Ethereum network in 2017 and some investors were cheated as they could not get the returns promised. The tokens were issued personally by some developers and the risk was very high. The upcoming upgrade of Ethereum  (Ethereum 2.0) will make the network stronger and digital securities laws will be applicable for all the ETH tokens sold to investors. 

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