Equity participation as an ancestor of the tokenization of square meters

Equity construction is a child of new age. Being a loan translation, in Spanish it sounds like “construcción de la equidad” It was born in 80s, in countries of Latin America in times of severe hyperinflation.

The history of equity participation began in Argentina. In 1983–89, Argentine President Raul Ricardo Alfonsin was defeated by the British in the Falklands war. The country’s financial system was at an extremely low level — in the face of strong inflation, the currency of the new austral passed through 12 denominations, and the last time, in November 1990, was denominated 500 times.

In such circumstances, the banking system could not fully function — granting loans would mean a loss for the Bank. Argentine developers had experienced a special crisis. Banks did not issue mortgages, so saving for the purchase of housing was meaningless. And, in 1985 Raul Alfonsin began the movement “building for justice”.

According to this slogan, everyone who wanted to buy a house had to participate in the construction of future houses. Receiving a salary, Argentines invested money in special joint-stock companies “sociedad anónima”. The contribution was confirmed by the purchase of a special paper, the cost of which was expressed not in money, but in square meters. Having accumulated a sufficient number of square meters, buyers could exchange them for real estate.

As a result, construction companies received a significant amount of money and were able to complete the construction of long-term projects. During the reign of Alfonso the number of homeowners among Argentines was increased from 2 to 21%.

Chili has adapted Argentina’s experience. According to Jose Ibañez, the owner of the Chilean agency Inmobiliario — Valparaíso, in Chile, the “construcción de la equidad” appeared only after the departure of Pinochet, after 1990. Unlike the Argentines, interest holders joined together mainly in order to have an income in proportion to the invested capital.

If the Argentine equity construction was strictly supervised by the government, then in Chile it became a matter of private initiative. As a result, some companies failed to fulfill their obligations to equity holders and were declared bankrupt. However, despite all these vicissitudes, Chilean co-investors have not been deceived.

The present form of “equity construction” has appeared in Great Britain and British developers sometimes claim to be the creator of this scheme. English construction companies turned to “construction in justice”, in order to guarantee the sale of the constructed facilities, especially in in the burgeoning Arab Emirates, Kuwait, Egypt, Qatar. They did not create joint-stock companies, but simply began selling “air locks”, i.e. unbuilt facilities. At first, it has aroused some distrust, but the long-standing reputation of respectable developers made the business.

By the way, the most famous object, where the apartments are sold well before the actual sale might be the tallest building in the world — Burj Dubai, which was built by the British company Sherwoods. Despite the fact that the completion of construction had not been planned to start until 2009, square meter was sold for the price of 28,870 dollars in 2008.

The system is fair-building in the interests of customers, encouraging customers to the accumulation of funds through the acquisition of stable securities equivalent to square meters, has historically proven its effectiveness. “Building for justice” formed the basis of a vision of SQUAREX ecosystem and evolved in the tokenization and initial placement of square meters during the Initial Square Offering (ISO) with the subsequent control of construction financing with smart contracts in the SQUAREX final vision.