Fractional And Frictionless Real Rstate Investing

For the first time, investors around the globe can buy into Dubai real estate market through fully-compliant, fractional, tokenized ownership. Powered by blockchain.

Tokenization of Real Estate

Tokenization revolutionizes real estate investing by enabling smallscale investors to engage in fractional ownership.

The real estate market is undergoing a significant transformation with the emergence of tokenization, a process in which real estate assets are converted into digital tokens stored on a blockchain, allowing for digital ownership and the transfer of fractional shares.

An investor may not buy the whole property but only a certain part of it. For example, tokenization allows to divide an object worth $1,000,000 into shares (tokens). The price of each will be $10,000. Each investor can purchase a certain piece of real estate and receive the corresponding profit.

What is Blockchain Real Estate

Tokenized real estate investing is a relatively new way to invest in property, allowing investors to own fractions of a piece of real estate anywhere in the world. The “tokenized” part refers to the way the value of the property is divided into digital tokens that represent the owner’s stake in that property. All of the tokens for that property are stored on the blockchain, the same technology that underlies cryptocurrencies like Bitcoin.

How does real estate tokenization work

Tokenization is used across many industries and simply refers to producing digital securities (tokens) that represent fractional ownership of an asset, in this case, real estate. This tokenization is done on a blockchain, which is a public, distributed ledger system. This means that when a real estate asset is tokenized, all ownership records are stored securely and permanently on the blockchain.

The tokenization process involves three key steps:

  1. The creation of digital tokens representing fractional ownership in the property
  2. Issuance of the tokens on a digital ledger
  3. Trading digital tokens on an exchange or platform developed for tokenized assets

Smart Contracts

A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement.

A smart contract is a self-executing program that automates the actions required in an agreement or contract. Once completed, the transactions are trackable and irreversible.

Users who own blockchain-based tokens can take advantage of programmable smart contracts, which execute predetermined actions encoded in the code once certain conditions are met. Smart contracts eliminate the requirement for human involvement that currently burdens many real estate transactions.

Special-Purpose Vehicles (SPVs)

A smart contract is a computer program or a transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement.

A smart contract is a self-executing program that automates the actions required in an agreement or contract. Once completed, the transactions are trackable and irreversible.

Users who own blockchain-based tokens can take advantage of programmable smart contracts, which execute predetermined actions encoded in the code once certain conditions are met. Smart contracts eliminate the requirement for human involvement that currently burdens many real estate transactions.

Security token offerings (STOs)

STOs is a digital token supported by blockchain technology that represents a stake in an asset.
An innovative class of security tokens that represents traditional legal ownership of real-world assets. Security token offerings are a unique blend of digital tokens, security tokens, and conventional equity.

Decentralized autonomous organizations (DAOs)

Decentralized Autonomous Organizations (DAOs) provide an innovative alternative to traditional centralized LLCs for blockchain-based tokens. DAOs is an organization managed in whole or in part by decentralized computer programs, with voting and finances handled through a blockchain. In general terms, DAOs are member-owned communities without centralized leadership.

What types of real estate assets can be tokenized

  • Single-family housing
  • Multi-family housing
  • Office buildings
  • Industrial buildings
  • Self-storage units
  • Commercial development projects
  • Undeveloped land

What are the benefits of real estate tokenization

As a result, investment transactions are often completed faster and at reduced cost to the parties involved, allowing investors to earn larger returns. Tokenization also has a lot of other benefits, such as tracking the capitalization table in real time, making it easier to access, and making buyers more accountable.

Increased Access
Tokenization makes investing in real estate accessible to a much wider group of people, including those who may not have the means or qualifications to invest through more traditional routes.

Low Entry Cost
It is possible to purchase shares of a given property for a fraction of the cost required to purchase an entire property. This opens up investment opportunities that previously weren’t available to many people.

Fractional Ownership
The ability to divide properties into smaller units and tokenize them makes it possible to own a portion of a real estate asset, rather than needing to pay for the whole asset. This makes it easier to diversify investments and spread risk.

Liquidity
One of the major advantages of tokenization is that it allows for near-instant liquidity, meaning holders can quickly and easily convert their tokens into cash or another asset type with minimal fees.

What are the risks and challenges of real estate tokenization

  • Absence of established procedures for tokenizing real-world assets
  • Insufficient personnel or support infrastructure for executing
    tokenization processes
  • Confusion in the market and knowledge gaps concerning blockchain technology
  • Concerns related to the vulnerability of technology and the recovery of assets
  • Unclear market regulation
  • Need for centralized reporting of transactions
  • Reconciliation with land registries and other legal requirements
  • Fees

Benefits of real estate tokenization platforms for investors.

These platforms enable:

  • Issuance and management of initial token sales
  • Management of sales on secondary token exchanges
  • Facilitating investor communications
  • Executing distributions
  • Providing marketplace environments for investors to discover real estate opportunities
  • Connecting owners with fundraising avenues
  • Verification of a clean property title
  • Confirmation of no outstanding taxes
  • Successful completion of inspections
  • Accurate appraisal calculations
  • Identification of existing tenants and managers

Benefits of real estate tokenization platforms for issuers

These platforms enable:

  • Issuance and management of initial token sales
  • Management of sales on secondary token exchanges
  • Facilitating investor communications
  • Executing distributions
  • Providing marketplace environments for investors to discover real estate opportunities
  • Connecting owners with fundraising avenues