Latest guest post by Ian Scarffe, who is a serial entrepreneur, investor, key opinion leader and Blockchain consultant with business experience from around the world.
Non-fungible tokens or NFTs have gained a lot of popularity with the Web3 community over the past few years, rapidly transcending into several traditional sectors for a complete digital transformation. One of the prime examples of this is the use of NFTs in real estate.
Image Source: Pixabay
Why Real Estate Investments Have a New Face: NFTs
NFTs make a strong case for use in the digital ownership and trading of real estate since they are unique, immutable, and cannot be duplicated. Tokenizing a property using NFTs brings strong benefits to the table, including clear-cut digital ownership that is undeniably and permanently recorded on a blockchain for everyone to see.
Paired with other advanced technologies such as AR/VR, IoT, AI/ML, etc. further increases the potential of NFTs in the real estate sector. For instance, virtual reality-based property tours, virtual ownership, tokenization of physical assets, etc. are disrupting the traditional real estate sector, thanks to NFTs and blockchain. Such applications are creating new options for property owners and investors alike.
NFTs and Real Estate: What’s the Buzz About?
It is widely known how drawn-out and expensive traditional real estate procedures are. Offline real estate transactions can take weeks or months, from when a home is first listed to when they are finally closed. Besides, it takes a lot of time and money to solicit and evaluate offers, verify ownership, and title, and finish the necessary paperwork and contracts.
These and other shortcomings in the real estate sector are being addressed successfully by NFTs and blockchain technology today. NFTs are pushing for “phygitalization” (physical + digital), which will expand the possibilities for real estate transactions using new technologies.
Using NFTs makes prior owners, tax records, pricing histories, and any pending legal challenges regarding the property swiftly and easily accessible to interested parties. At the same time, NFTs can be more readily and broadly sold to real estate agencies and property management firms when denoting real-world assets.
Let’s take a few exciting examples into consideration. In Tampa, Florida, a property owner received $650,000 for the sale of her five-bedroom house as an NFT deed. Michael Arrington, the founder of TechCrunch, received $113,176 for his apartment in Kyiv, Ukraine, through a similar NFT deed. ONE Sotheby followed suit with the auction of the “MetaReal” mansion, offering both the actual house in Miami and its virtual, tokenized equivalent in The Sandbox.
How NFTs are Changing the Real Estate Scene?
Thus far, NFTs have been largely associated with either art or gaming or the purchase of cryptocurrencies. However, as we learn more about their unique attributes, capabilities, and advantages, NFTs have started to influence other sectors as well, with real estate as a prime example. An NFT’s programmability is what sets it apart, with its associated Smart Contracts simplifying and automating complex procedures.
Here are a few applications of NFTs in real estate that are completely transforming the latter:
Immutable Ownership Records
Real estate NFTs help store the history of every activity, update, and transaction for the associated asset on the blockchain ledger. This ensures that you have all the comprehensive details you need for a certain asset in a single place.
At the same time, you have complete access to information such as prior buyers, investments, actions, legal conflicts, payments, and more. Since NFTs function on an underlying blockchain, these records are immutable and irrefutable.
High-Speed, Secure Transactions
With traditional mechanisms, the entire procedure could take weeks or even months. Even with a contract in place, it may take a few weeks to sign and exchange them, and there is little guarantee of a safe transaction. Using real estate NFTs, on the other hand, ensures the safe and instantaneous transfer of assets. You can transfer assets and payments using cryptocurrencies or fiscal currencies without using the conventional middleman.
Automated Smart Contracts
When you purchase real estate NFTs, you automatically benefit from the underlying smart contract functionality of the associated blockchain. Smart contracts set into motion multiple automatic processes for dividends, payments, rentals, and more, meaning you can rest assured of safe and timely transactions.
At the same time, NFT property sales automatically cover digital funds and identity authentication. Real estate NFTs also guarantee enhanced security and data integrity in addition to transparency, quick delivery, and unquestionable proof of ownership.
Fractional Ownership Made Easy
Through fractional ownership tokenization enabled by real estate NFTs, each property is divided into multiple tokens that function like shares. Such division of a single deed into multiple tokens is beneficial for cases of joint investors and shared ownerships. Separate rules and automation mechanisms for each fraction can be included in the smart contracts, ensuring seamless operations, transactions, and authentications.
Advanced Metaverse Solutions
The number of virtual lands in the metaverse is rapidly growing. According to Gartner research, by 2026, about 25% of people will spend at least an hour each day in the metaverse. Users will therefore require their own digital houses more and more. Real estate NFTs will enable users to buy virtual land in the metaverse and create their own immersive environments leveraging Web3.
Image Source: Pixabay
Users of the metaverse will be able to rent out their virtual spaces as online meeting rooms and conference rooms using real estate NFTs. For online retailers, owners can also create digital storefronts and shopping areas the same way. They can also build and rent out galleries, museums, and stadiums for sporting events and concerts.
Digital property NFTs will also offer chances for promoting goods and services to increase brand presence in the metaverse. Virtual property owners will be able to mortgage their assets to obtain loans in fiat or cryptocurrencies. NFT-based digital real estate will thus usher in a new age in the real estate industry.
Conclusion: Future of Real Estate Tech and the Role of NFTs
Predictions for real estate NFTs are difficult at this early stage because the world has just started to explore this potential combination. In principle, NFTs can make it simple to transfer stock ownership in real estate investments or virtual properties. However, using NFTs for transactions of whole properties has still not been experimented with yet.
This is an even bigger challenge considering the current real estate regulation landscape. It is clear, however, that real estate NFT regulations will evolve as blockchain technology and tools further prove their potential to disrupt the real estate sector. The next practical step would be to determine how properties are issued on each blockchain after legal conditions have been addressed. With a positively charged regulatory landscape and with more investments, interest, and awareness about real estate NFTs globally, there is no stopping their growth.
About the Author:
Ian Scarffe is a serial entrepreneur, investor, key opinion leader and Blockchain consultant with business experience from around the world.
An expert in Startup, Investment, Fintech, Web3 and Blockchain industries. Ian currently consults and advises for a range of multi-million dollar companies.
Ian’s overall mission is to foster a society of economically independent individuals who are engaged citizens, contributing to the improvement of their communities across the world.
Follow Ian Scarffe:
See more stories here.