Elizabeth Siew, property lawyer turned tech advocate explains about property tokenization in Part l of a 2-part series.
Real estate tokenization
In 2018, the first property-backed token was launched! It is called BIG Tokens.
The BIG Tokens are backed by 7 pieces of prime beachfront and riverfront sites. Token proceeds will be loaned to the land owners of these 7 sites for development. The sponsors will pay an annual interest and loan repayment back to the ecosystem driving up the value of our BIG Tokens, thus benefiting token contributors.
BIG Token holders can utilise their tokens at the full range of hotels, co-working spaces and health medical facilities to be developed. BIG Tokens can also be used at partner developments, airlines, golf courses, and hospitals to ensure utility is as similar to traditional currencies as possible.
Today, Property Tokenization can come in 2forms:
1.to convert one’s property into digital asset in the of non-fungible token (NFT) and sell the property NFT. One NFT represents one property;
OR
2.breaking the property into many small fragments, what we generally called ‘fractionaliza tion’. Each fraction represents a partial interest or ownership of the property.
In the past, a property investor could participate in real estate investment by:
1.directly buying and owning a property,
or
2.investing in real estate investment trust (REITs),
or
3.investing in the stock of real estate company or property development companies.
In recent years, due to the rise of property technologypla tforms and Mobile Apps, real estate investment can be done in small bite sizes. This is referred to as property fractional ownership. Examples of fractional property platforms are Domacom and BrickX in Australia; Lofty, Tessera, Arrived Homes , Dibbs in the United States; and TAB, August in Europe/ United Kingdom.
The fractional real estate investment is done through the respective mobile App, where an investor could buy a small fraction of a selected property for as low as $50 and hence own interest in the real estate and be entitled to receive return on investment. The return can come in the form of dividend or rental sharing on the real estate. The return is usually transferred to the investor’s e-wallet.
Property tokenization essentially adopts the same principle of fractionalizing property, using blockchain as an underlying technology. Every fraction of the property is in crypto token form. The crypto token minted on the blockchain will be a representation of the ownership, rights and interest to a fraction of the property. You can regard that as a digital certificate of your ownership of property.
