Due to highly illiquid nature, investing in real estate can be tricky and requires a lot of wealth, that drastically cut-shorts the number of investors in this particular business. For investors, to liquidate a house, a building or a piece of land often becomes a grave concern and can take several years. To solve this problem, Blockimmo, a Switzerland based real estate investment platform is aiming to put this industry on blockchain, where fractional ownership of a property is possible through tokenization.
Talking to BlockPublisher, Bastiaan Don, the co-founder of Blockimmo addressed the same concern of high investment rates in real estate industry and how fractional ownership of assets will drastically increase the investor poll in the business. He said;
“I would say when you look at the real estate market it’s rather difficult to get into. If anyone wants to invest, there is high entry barriers from the financial point of view. In many cases one need to have a certain wealth in order to invest in a property and even then it is tricky to find good opportunities like, what is a solid real estate property to invest in?”
Tokenization is forming a local network that can belong to any particular asset and a representative of value (token) lies on the network also provides utility to users. Through the process of tokenization, fractional ownership of an asset can be made possible that bring more potential investors and increases the market liquidity. For example, if 1 Million of tokens are created of a building that has a value of $5 million, then one token would be of $5, which can enable people with a smaller budget to invest in real estate, that is impossible in the current situation.
After high financial barrier, the second problem of investing in real estate is the ownership. Any particular property can only belong to one party, an individual or a corporation. Legal issues associated with the ownership of a real estate piece makes it highly unlikely to be owned by multiple parties. Bastiaan added;
“Real estate deals are done behind closed doors for a selected group of individuals and companies. Then there is obviously a reason for that because real estate is highly illiquid, it’s not very common to invest in real estate with a lot of people. It is almost impossible in a way that the land research is limited to a number of people who can be listed as an owner and also from a legal and regulatory point of view, it is really tricky to have multiple owners of the same property”.
Another grave concern that most investors have to deal with, is to liquidate their real estate asset. At times it takes several years to find a suitable buyer for the property. Bastiaan is in the real estate business for several years now, as an investor and agent as well. He knows how difficult and at times, frustrating it is to find the buyer who is willing to match the asking price of the property. He further added;
“Secondary market for the real estate is non-existent because there aren’t much buyers that have enough liquidity. Anyone invested in real estate, is stuck for, let’s say at least 5 or 10 years depending on the investment range of their agreement with the facilitator of the investment and if you bring blockchain into game, then only a lot of these things are not there anymore or are soft”.
Another positive effect of blockchain is on the real estate secondary market. As soon as tokens of a building become available to be traded on the secondary market, there is no need to wait or to go through wealth managers or banks. One can just go to a regulated exchange or even on the platform and if anyone’s financial situation changes and there is need of liquidity, people can sell either all of their tokens or a part of it and get direct liquidity.
Blockimmo is leveraging blockchain technology, where fractional ownership of real estate is made possible by tokenizing the asset, through smart contracts. The idea which also blockchain advocates, is to make things more democratic and that is exactly what Blockimmo is doing.