NFTs, or Non-Fungible Tokens, have had a rapid surge in popularity over the past few years, which has highlighted their potential for use in a variety of sectors. What were formerly extremely tactile and non-technological businesses, like fashion and real estate, are now steadily integrating the technology that powers NFTs. Dolce & Gabbana and Jimmy Choo debuted their first NFT collections at New York Fashion Week in 2021, while Nike revealed its acquisition of RTFKT in the fourth quarter of the same year, marking its first foray into virtual footwear.
An NFT in real estate may be connected to a title, a property deed, or an authenticity certificate for a particular property. Each token created would be exclusive to its owner, but all associated tokens would be linked to a specific ledger on the blockchain that provides shared access to many users.
How do NFTs benefit real estate?
The conventional business of real estate has always been conducted on paper. However, there are a number of drawbacks to this process, including the time-consuming paperwork and the multiple middlemen required. Instead, an NFT can be used as the legal title for a real estate asset, which would make the process a lot simpler and secure. The flat owned by TechCrunch founder Michael Arrington in Kiev, Ukraine, for example, was sold on the Propy platform in 2017 for $93,000 in Ethereum, a great example of a real estate NFT sale.
Benefits for the industry
Turning real estate assets into NFTs could offer several benefits:
- Efficiency
In order to completely execute a transaction including the paperwork through NFTs, legal compliance will need to catch up with technology. However, once done, it can put a system in place that makes aggregating listings, browsing, applying local filters, and making trades right away almost effortless. Without having to go through too many hoops, NFTs can aid with property ownership and transfer verification. - Liquidity
When you possess property, you are bound to the location or asset for some time until it is sold, since it is illiquid. Real estate sales also take time to complete, and the process isn’t always easy. If a property were to be purchased or sold as an NFT, it would be done so in its tokenized form, making the trade or sale considerably faster and more convenient. NFTs can assist lower transaction costs and are easily tradeable on the market. - Transparency
Every transaction would be permanently recorded and stored on the blockchain, thanks to NFT technology. Since it is open-source and does not permit additions or revisions, potential buyers will be able to easily check and verify valuable details including the previous owner of the property, the price at which it was sold, and even high-quality market statistics. Thanks to this real-time information access, they will be able to make informed decisions before they go ahead with their purchase. - Fractional ownership
To reduce the initial expenses of acquiring the property, one can share ownership of a portion of the asset with other owners. This makes it possible for additional investors and users to benefit from it without needing to pay the whole cost. A sole proprietor may not be able to afford the expenditures of property upkeep or tenant management. Fractional ownership may be advantageous in this situation.
How to sell real estate using NFTs
While real estate plays a role in everyone’s life, acquiring quality real estate for a reasonable cost can be challenging. Additionally, many properties are offered on commission, forcing buyers and investors to spend more than necessary for property that isn’t even theirs. Fortunately, blockchain technology may simplify all of that by enabling direct communication between those looking to buy real estate and those looking to sell it.
First, an NFT is created by tokenizing a piece of real estate, wherein its relevant details, including its value, previous owner, and the documentation establishing ownership, are registered on the blockchain. Then comes minting the NFT, which involves uploading its JPEG image and smart contract to an NFT marketplace. This will allow buyers to examine the real estate NFT and submit their offers.
It practically involves the same steps as purchasing any cryptocurrency. Once you’ve chosen an asset, you may pay for it using your smartphone and receive the NFT (i.e., ownership in the tangible item) right away in your wallet. Real estate shares of a property in Wiesbaden, Germany, worth approximately €2 million were tokenized by a business named Brickblock. This made the entire process faster and simpler, from completing the paperwork to ensuring the necessary legal compliance.
The way ahead
The real estate industry is significant and important to an economy. In fact, real estate happens to be one of the most traded assets globally. However, owning property is not without its difficulties, from regulations to cash problems. The size of the market size and the preparedness of the industry are the two most significant factors impacting the real estate sector in employing NFTs. Despite the fact that the sector accounts for a sizeable portion of overall financial assets of an economy, it is still modest in comparison to other financial sectors like foreign exchange, fixed income, or stocks.
In order for its successful adoption, every new technology needs to resolve a challenge faced by either the users, providers, or investors, providing a solution that is superior to what is already available. In order to attract further players, there must be early adopters who are knowledgeable about the technology as well as how to leverage it in their business strategy.
Many emerging real estate developers have already begun changing the landscape of real estate forever by leveraging the many benefits offered by NFTs. In the future, the value of real estate NFTs is expected to rise significantly, especially as the technology develops further, and the transition from physical assets to tokenized assets becomes completely frictionless.
