Real estate is the largest asset class in the world. Commercial enterprises and real estate professionals are recognizing the transformative impact of blockchain technology to optimize retail and commercial property sales, streamline payments, and access to real estate funds and investment opportunities.

What are the Benefits of Blockchain in Real Estate?

Commercial real estate constitutes a significant portion of world economic asset and transaction activity. According to an MSCI report, the size of the professionally managed global real estate investment market increased from $7.4 trillion in 2016 to $8.5 trillion in 2017. Today’s real estate market however, consists of many siloed and independent networks with transactional friction and opacity between existing systems. The Ethereum blockchain presents a practical solution to realize the following industry benefits:

Tokenization of real estate assets

Process efficiency for underlying industry operations

Reduced costs from process automation

Access to global asset distribution

Access to broader investor pools due to ownership fractionalization

Access to secondary market opportunities

Data accessibility to increase transparency and inform better investment decisions and portfolio management

One of the most exciting ways Ethereum benefits the industry is through the digital securitization of real estate properties, also known as tokenization. Digital assets can represent real-world assets such as real estate, real estate funds, revenue streams, governance rights, and more. Once these assets are tokenized, they can be divided into more granular pieces, made accessible to a wider pool of investors, and leveraged to raise capital. Once tokenized, the programmable Ethereum blockchain enables the secure and compliant digitization of the transactions and processes around these assets, including issuance, trading, and lifecycle management.

In the real estate market, the advice, knowledge, and know-how of real estate professionals will remain crucial to commercial buyers. However, the processing of securities, liability management, document processing, and accounting will inevitably change.

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What are the Blockchain Use Cases in Real Estate?

Enterprise blockchain technology transforms the real estate industry with ten use cases:

Asset Management and Real Estate Funds

Project Financing

Loan and Mortgage Securitization

Property Management

Land and Property Registries, Sales, and Reassignment

Urban Planning

Property Development and Construction

Investor and Tenant Identity

Payments and Leasing

Real-Time Accounting

How does tokenization impact real estate funds and asset management?

In real estate, tokenization refers to the digitization of securities, alternative assets, and financial instruments. With Ethereum blockchain technology, digital assets can be programmed to include ownership rights, transaction history, and rules to ensure asset issuance, distribution and transfers are regulation compliant. Simple examples include controls to ensure that tokens can only be transferred to certain counterparties, or not at all during a lock-up period. Digital assets can be customized to meet all kinds of issuer requirements.

In addition, tokenization reduces the costs and increases the speed of creating, issuing, and exchanging assets, innovating new features, administering dividends and managing other corporate actions. In-depth customization and rapid issuance allows issuers to tailor digital assets directly according to investor demands, significantly reducing counterparty risk.

Reduced costs allow issuers to decrease minimum investment amounts and expand access to a wider pool of investors. Increased connectivity between digital assets and associated networks expands secondary market opportunities and improves liquidity. These benefits to both issuers and investors demonstrate the real promise of blockchain is a future with fundamentally new instruments and markets.

How does blockchain impact alternative financing for real estate?

Raising finance for new real estate projects is difficult. Property development firms face interest rates as high as 29% when working with banking institutions as single source loan providers. They also face challenges with multiple loan sources as crowd financing can be difficult to administer.

Blockchain simplifies access to alternative financing models by facilitating investor management for developers and ensuring investment transparency and continuous ROI tracking for investors. Blockchain based financial products can also be programmed for global distribution. These solutions simplify investor experience, increase investor confidence, and unlock