NFT for real estate tokenization
The hype around non-fungible tokens is still often associated in the mass consciousness with digital art. NFT technology can be applied to a very wide range of industries. One of the promising areas of NFT application is real estate tokenization. Today we will talk in detail about how the technology of non-fungible tokens can be used in the real estate market. We note right away that we are now talking about real estate, and not about virtual land in the metaverses.
Legal nuances
The tokenization of real estate via NFT has not yet been properly understood from a legal point of view; this can be perceived as both an advantage and a disadvantage. The advantage is that the new technology bypasses many bureaucratic restrictions. The disadvantages are also clear — users need a clear and safe legal environment, so real estate is a lot of money. One way or another, the tokenization of real estate is primarily the digitization of rights — whether it be the right of ownership or the right to use.
One of the biggest challenges with real estate right now is the transfer of ownership. In the current legal realities, a huge number of documents are required for the purchase and sale of real estate, these are very slow and bureaucratically overloaded procedures. Digital document management could speed up and optimize all the necessary procedures. However, before the advent of non-fungible token technology, such a solution would simply be too dangerous, due to the vulnerability of conventional centralized digital transactions to hacking or fraud. Blockchain technology allows you to store information about the transfer of ownership in a distributed ledger, which makes digital transactions much more secure.
Fractional ownership
One of the most promising uses for NFTs in real estate is fractional ownership. When it comes to such expensive assets as real estate, fractional ownership often looks like a very attractive solution. But in traditional legal realities, the separation of assets is a bureaucratically very cumbersome and inconvenient process that can be greatly simplified with the help of NFTs.
Fractional ownership of real estate using non-fungible tokens makes it possible to collectively purchase real estate in the manner of a crowdfunding platform where investors buy shares. So, NFTs here will represent the share of investors in the asset. For example, if the owners decide to rent out the property, then the percentage of rental income will depend on the share.
Real Estate NFT rentals
Suppose you are going to rent out your apartment. A lease agreement can be combined with an NFT listing and a payment can be made to receive the NFT.
In the near future, the technical implementation of renting tokenized housing may look like this: NFT is embedded in a smart contract related to managing a smart home. One can imagine locks that work with NFTs instead of keys.
More unusual approaches are also possible — for example, you sell NFT as a tokenized intellectual property right (patent), which can also be resold later, and you will receive a percentage of each resale, similar to how royalties are realized in the NFT digital art market.
Summarizing
On the one hand, one should not hope that NFT technology will be able to completely abolish paper document management in real estate in the near future — this is too sensitive an area. However, fractional ownership and rental housing can be greatly simplified.
In the future, NFT technology will make it possible to securely digitize ownership and use rights, as well as information about previous owners and users of property will be reflected in the blockchain. The real estate market has long needed more transparency and less bureaucracy.
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