Tokenization: One solution for all real estate problems of millennials

The real estate sector is a massive market. Along with the residential and commercial demands, an ever-growing demand has resulted in an enormous demand for office space.

There is no doubt that real estate is one of the safest investment options. The ever increasing demand and the eventual rise in the price is almost guaranteed in most countries. However, we still do not see a lot of active participation from the millennials.

Why are millennials not investing in real estate?

Technology has enabled the world to evolve in every sphere. The meaning of investment is gaining substantial traction. We see a shift from buying land to investing more on financial assets among the new generation. 

Millennials are open to seeking promising employment opportunities. So, It’s difficult and time-consuming, to maintain immovable assets like real estate. Furthermore, unlike mutual funds or other financial assets, real estate requires a larger fund for investment. This makes the millennials investing in real estate at the initial stage a bit difficult. High prices deter those millennials who aspire to buy a house of their own.

How to make real estate accessible for all 

Real estate is an illiquid asset and expensive. Every time you walk pass by a big fancy building ever wonder who owns it? Also think that: they must be super-duper rich to own that piece of land!

All this might seems a bit far-fetched but not impossible! You don’t have to be a multi-millionaire to invest in real estate anymore. 

Tokenization

Tokenization is a blockchain mechanism that allows real estate property to be converted into digital tokens on the blockchain. This process eliminates the need for intermediaries, making the process of investing in assets faster and cheaper.

For instance, imagine a 10mn square meter of land (say worth US$10mn is tokenized), you will have 10 million tokens each representing 1 square millimetre of that property. Now, all you need to buy your dream property is an internet connection and required fund. This enables you to own a portion of the property.

Why Tokenization?

Tokenization isn’t something specific to real estate but all illiquid assets. We are already witnessing blockchain’s intervention in supply chain management and various other operations, helping digitize every financial transaction. Now, tokenizing real estate has multiple benefits and here are listed a few:

1.    Liquidity & No investment barrier

One has to consider a lot of things in investing a land. When it is fractional spending, things become more natural. Anyone with a minimal capital (like millennials) can invest in the real estate. Furthermore, unlike land, it is a lot easier to sell your tokens.

2.    Security

Even though we have come a long way along the digital path. It is normal for people to get a bit skeptical about any online investment because of e-scams. In case of these tokens, it is always protected with cryptographic encryption

3.    No middlemen

Middlemen have invaded the real estate market for long now. With tokenization, intermediaries are eliminated, and the process becomes faster and cheaper. Also, any manual work becomes minimal as smart contracts are used to allocate and manage tokens. 

Virtual currency is not a legal tender in many states. But, we cannot ignore the fact that blockchain is already making its presence felt in various sectors, including the real estate sector.  The recent efforts by firms around the world from the US to Switzerland to tokenize real estate with the help of blockchain is a step in the right direction. With the support of favorable regulations, it would facilitate speedy adoption of tokenized securities in the realm of the property sector, bringing much-needed liquidity and convenience for millennials looking to own real estate.

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