Real Estate Tokenization
for REITs
Current Market Size
2022: $2.7 billion
2024: $3.8 billion
Prophecy Market Insights: $3.8 billion in 2024
Projected Growth
CAGR of 2.90%: This would lead to a market size of $26 billion by 2034
Surge to $18.2 billion by 2032 (Russian)
Useful links
Tokenized Real Estate: Statistics And Examples 2024
The Reawakening Of Real Estate Tokenization: Why Businesses Should Take Note
Aurigraph DLT offers the secure, safe, quick, and trusted tokenization of Real Estate at a low cost and with a fixed transactions fee. Assigning monetizable value and automating business value thorough ActiveContracts™ disrupts the status quo by opening several new avenues of value creation. A Real Estate asset may be monetized in a few minutes through Open Data integration from the single sources of truth. Aurigraph RET is the only platform that generates a Digital Twin from Open Data sourced from the Single Sources of Truth for the underlying asset. The owner of the underlying asset needs to be verified through KYC. Third party verification by an assessor/valuer lends credibility to the tokenized asset while ascertaining value for the token. The monetary value of the Asset may be managed by ActiveContracts™ for value creation and transfer using tokens for fractionalization, Account Receivables, cross-border payments and other use cases with programmable currency. A Real Estate Token on Aurigraph will need an Assessor to certify the Digital Twin is the true copy of the underlying asset and the corresponding Real Estate Token. Aurigraph Finverse provides the white labeled RET marketplace and Token custody with independent supervision, optionally.
Real Estate Tokenization (RET)
Real estate tokenization is a promising innovation with the potential to shake up the traditional industry. Real estate tokenization offers an innovative approach to investing in and managing property by leveraging DLT technology. Here are some of its key use cases and benefits
Fractional Ownership
Traditionally, real estate investment requires significant capital, often limiting participation to high-net-worth individuals. Tokenization allows for fractional ownership, where a property is divided into digital tokens. This enables investors to buy smaller portions, making real estate investment more accessible to a wider audience.
Increased Liquidity
Real estate is typically considered an illiquid asset due to the complexities involved in buying and selling properties. Tokenization creates a more fluid marketplace. Tokens representing ownership can be easily traded on secondary markets, like stocks, increasing liquidity for investors.
Enhanced Transparency and Efficiency
DLT technology provides a secure and transparent record of ownership and transaction history. This can streamline processes like due diligence and property management, reducing costs and administrative burdens.
Democratizing Private Equity
Real estate investment trusts (REITs) and private equity funds traditionally have high minimum investment requirements. Tokenization can unlock these opportunities for smaller investors by allowing them to buy tokens representing a portion of the underlying asset.
Aurigraph Finverse Solution for RET
Aurigraph RET offers Real Estate financing through Tokenization and could potentially facilitate new models for real estate financing, such as tokenized mortgages or debt instruments. Aurigraph ActiveContracts™ automated processes like transfer of ownership, rent collection and distribution of rental income, reducing administrative costs, and streamlining property management. It is important to note that real estate tokenization is still an emerging field, and regulations are evolving. However, the potential benefits it offers for democratizing investment, increasing liquidity, and streamlining processes are significant and could reshape the real estate landscape in the future.
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 Asset Tokenization
Asset tokenization 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 ActiveContracts on Aurigraph Finverse, eliminating manual paperwork and intermediaries, improving liquidity. 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.
Real Estate Tokenization is in its early days with regulatory compliance trailing.
Regulators are moving rapidly to bridge the gap to capitalize on the opportunity to increase liquidity in Real Estate markets
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.