Tokenization of Real Estate: the Future Trend in Investments

Abstract

Real estate is considered one of the most attractive investment assets. At the same time, real estate transactions remain a complex process, despite the many implemented solutions that facilitate this process. Although there are the numerous advantages, one of the key drawbacks of real estate investments is the lack of liquidity. Thus, even though global real estate investments amount is about twice as large as investments in stock markets, the number of investors in the real estate market is significantly lower. When manipulations with securities have long become available in a couple of clicks in a mobile application, real estate transactions continue to be associated only with a headache. A new method of making transactions — tokenization — will simplify the purchase and sale of real estate. After the advent of blockchain technology, real estate tokenization is one of the latest trends in this industry, in which physical assets are converted into digital tokens, which makes them more accessible and easier to buy/sell. Instead of registering ownership in the traditional way, investors will be able to become co-owners of a tower in Shanghai in a couple of clicks. Thanks to tokenization, real estate will not only become liquid and transparent, but will be able to open the market even for retail investors. However, there are a number of stop factors such as the lack of clear legislative, technological and environmental regulation in many countries of the world. The purpose of this thesis is to analyze in detail the general framework in tokenization of real estate investments, potential benefits of blockchain technology and future perspective and obstacles of legislation in the world of investment.