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Benefits of Tokenization of Real Estate

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Jayashree Ingle Follow


Jan, 20 2020

Jan, 20 2020

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The current Scenario of the Real Estate markets
Real Estate has been extolled as one of the prospective spheres for tokenization. The real estate sector covers 60% of global assets and endorses a $217 trillion worthwhile global market cap. The real estate sector primarily covets huge capital investments and tokenization seems to assuage this issue. Tokenization of real-world assets offers several benefits along with few challenges which include mainly the legal and jurisdictional issues apart from the massive capital requirement.
But for sure, tokenization through the blockchain technology has laid new avant-garde in the momentary stagnated markets after the 2008 economic crisis. The concept of real estate tokenization is rapidly becoming hot-cake and some emerging startups in this bracket are keen to enter the booming market of digital assets.

CCAP Platform for Tokenization
 CCAP technology platform of Crypto Asset Rating Inc. is one of the most promising platforms led by Pramod Attarde. Recently Pramod has been vocal about upcoming digital projects of this firm. One of their most ambitious projects is the CCAP technology platform where the tokenization of real estate will take place. Dwelling on the benefits of real estate tokenization, he enthusiastically put forth his perspectives. Pramod excitedly asks, isn’t it a great opportunity that the small and medium investors will be part of the exclusive global projects and the gap between the small and the big investors will be narrowed further?
The mass appeal for the blockchain technology behind the tokenization is growing enormously and it’s interesting to understand and assimilate it. But starting with what is the tokenization of real estate. It provides an easy answer.

What is Tokenization?
Tokenizing the real estate is the process of creation of a digital asset deploying the blockchain technology that signifies a single or multiple properties. Tokenization of real estate enables a wide-range of assets to trade on a secondary market. It reduces the gap between the publicly traded investment and illiquid real estate investments bringing the closer executable price of the property to the true value.

Benefits of Tokenization

Beneficial in Real Estate Liquidity
The illiquid nature of the real estate especially the commercial properties is a challenge for small and medium institutional investors as well as for retail investors. It promises to create a wider scope to sell the property in secondary markets during any emergency. Though it’s at the nascent phase right now but has the potential to grow tremendously.

Ease in Cross Border Transactions
While performing cross border transactions, some of the most rampant challenges could be listed as tracking right property for investment, high costs of the properties, difficulty in cross border payments, visa and immigration laws, finance management, varying and varying jurisdiction and tax laws, various exchange rates and multiple challenges that can be simplifies by tokenization of the real estate properties. Investors can explore broader opportunities by combating cross border barriers.

Accessibility and Accreditation to the Diverse Investors
Tokenization will certainly allow small and retail investors to be the fractional owner of exquisite properties that are owned and manipulated by the large players in this sector. Reg D regulation provision allows only accredited investors whereas Reg A+ allows non-accredited investors with certain norms.

Capital Raising via Fractional Ownership for Small Investors
Property owners and developers can offer fractional ownership of the assets through the blockchain-based tokenization process. A diverse group of investors can be thus involved to raise capital through tokenization by the distribution of the denominations.  

Improved Price Discovery
As the traditional real-time pricing information for secondary markets is paper-based and randomly stored, it will be managed systematically with more automation.

Multiple Benefits of Integrated Blockchain Technology
Tokenization is based on blockchain technology. Blockchain Technology has certain features that are disruptive. One of the features of blockchain is immutability that is irreversible nature which doesn't allow to change the data once entered in the system. Once the transactions of the investors and the stakeholders are entered into the system they are irreversible and remain forever. This further reduces the chances of any fraud. If the token owner tries to sell the single token to multiple investors, he will be prevented to do so as the blockchain data will have all the data saved which will make it impossible to further deceive investors or other buyers.

Other benefits of blockchain technology are:
- Regulatory compliance for tokens by verifying KYC/AML regulations.
- Access based on investor’s type and accreditation
- Improves cap table management

Programmability allows automation of wills and rights process. It improves transaction and shares management. The programmability and smart contracts in blockchains have predefined rules which make the tokenization easier for investor management. The automated process further improves settlement speed and overall governance of the property. Tokenization appears to be a lucrative business opportunity for the issuers and for the investors as well but it is a complex process that requires comprehensive consultation and technological assistance from the professionals in this domain. CCAP is all set to assist the investors and issuers in this spectrum. 

#Tokenization #blockchainTechnology #Programmability #CCAPTechnologyPlatform #RegD #RegA+ #RealEstate #Liquidity

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Jayashree Ingle

CBW - External Analyst


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