Real Estate Tokenization (RET)

RET will tokenize the Capital Investment on a lending platform to build on Aurigraph  DLT platform using ActiveContracts. RET can be programmed to fractionalize and automatically transfer to a borrower. Investment Tokenization enhances liquidity by converting underlying assets into digital tokens, representing a portion of a unit, which makes it easier for investors to buy, sell, and trade these assets on a global scale, while reducing costs associated with transactions by eliminating intermediaries and reducing paperwork. Tokenization uses ActiveContracts to define token attributes and the responsibilities and rights of token holders, making the process transparent and reducing the risk of fraud. ActiveContracts in RET enable automation of the process, which reduces the need for intermediaries and paperwork. Aurigraph Finverse implements ActiveContracts in REIT with shared and complete ownership of units. 

Real Estate Tokenization for Receivables (RET-AR)

Accounts Receivables tokenization creates a derivative token of RET, the RET-AR, which represents a Rental Receivable on Aurigraph Finverse using ActiveContracts. The invoice could be programmed to automatically transfer ownership when the Rental is paid towards RET-AR. RET-AR enhances liquidity by converting assets into digital tokens, which makes it easier for investors to buy, sell, and trade these assets on a global scale, while reducing costs associated with transactions by eliminating intermediaries and reducing paperwork. RET and RET-AR use Aurigraph ActiveContracts to define token attributes linked to the underlying asset and the responsibilities and rights of token holders making the process transparent and reducing the risk of fraud. ActiveContracts in Real-World Asset Tokenization enable automation of the process, which reduces the need for intermediaries and paperwork. Using Aurigraph Finverse, businesses can sell RET-AR tokens to investors, receiving immediate payment instead of waiting for customers to settle their Receivables, thereby benefitting from greater liquidity. The entire process can be automated using ActiveContracts on Aurigraph Finverse, streamlining invoice management and reducing administrative costs. . Aurigraph Finverse implements ActiveContracts in Accounts Receivables Tokenization with Invoices and Account Receivables

Real Estate Collateral Tokenization

Collateral tokenization is a process that leverages DLT to represent ownership of assets used as security for loans or other financial agreements. These tokens function as Digital Twins for the underlying real-world asset, enabling a more efficient and transparent collateral management system. Collateral tokenization offers Traditional assets like real estate, invoices, or even securities can be tokenized, creating a digital representation on a DLT. This allows for easier divisibility and tracking of ownership. The Assets need to be linked to their only source of truth. For example, in case of properties, the data should be current and bound to local government’s data electronically, to maintain the integrity of  the data. Collateral transfer and management are faster and automated through smart contracts on the Aurigraph Finverse, eliminating manual paperwork and intermediaries. Tokenization can unlock the potential of previously illiquid assets like real estate to be used as collateral. Fractional ownership through tokens makes them more accessible to a wider range of lenders. Aurigraph DLT provides a secure and transparent record of ownership and transaction history for Collateral tokens, reducing risk of fraud and errors. Tokenized Collateral helps in reducing costs to both lenders and borrowers. Borrowers with illiquid assets can gain access to credit by using tokenized collateral. Tokenization opens doors for innovative financial products like decentralized lending platforms. However, Clear regulatory frameworks are needed to ensure the legitimacy and enforceability of tokenized collateral. Integrating tokenized collateral with traditional financial systems requires API integration with the single source of the truth about the credentials of the underlying asset. By increasing efficiency, transparency, and accessibility, it has the potential to unlock new opportunities for lenders and borrowers alike.

Regulatory Landscape 

The US regulatory landscape for tokenized real estate is still evolving. Despite the lack of definitive regulations, there are a growing number of companies in the USA actively involved in real estate tokenization. These companies offer platforms for fractional ownership, tokenized offerings, and related services. For the USA, the potential benefits of real estate tokenization are like those seen globally. Increased accessibility for investors, improved liquidity, and streamlined processes could be significant advantages.

Valuation Challenges

Traditionally, real estate valuation is a complex process. Tokenization adds an additional layer, as the value of the tokens themselves may not directly reflect the underlying asset's value. New methods for valuing tokenized real estate will need to be established. Aurigraph Finverse recommends using incumbent valuation and assessor systems directly integrated with Aurigraph Finverse 

Liquidity Risks

While increased liquidity is a potential benefit, it is not guaranteed. There needs to be a sufficient investor base and interest to ensure a healthy secondary market for the tokens.

Legal and Compliance Issues 

Tokenization raises new legal questions around ownership rights, taxation, and regulatory compliance. Clear legal frameworks need to be developed to address these issues. The regulatory uncertainty and the need for technological advancements remain challenges in the USA as well. Additionally, gaining acceptance from traditional real estate players and establishing clear valuation methods are crucial for wider adoption. The Securities and Exchange Commission (SEC) plays a significant role. How they classify tokens representing real estate ownership will significantly impact regulations.