Building On The Blockchain – How Blockchain Infrastructure Will Work For Real Estate Investments

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We all knew that true diversification was coming, we just didn’t know when. Blockchain technology, best known for bitcoin, is disrupting scores of other industries, including the real estate market. Above all, blockchain infrastructure allows users to invest seamlessly into a broad asset-backed portfolio. Soon enough, we will be relying on blockchain technology for investments across real estate asset classes. As a result, the real estate industry will become diverse and vibrant; unlocking a wave of cross-investment potential and opportunities worldwide.

Blockchain technology’s destruction of the centralized economy disrupts the housing market

The Global Real Estate Investment Trust (REIT) sector has grown drastically in the last decade. This growth is in terms of REITs new entities. In addition, there has been an increase in the size of the sector in existing jurisdictions. According to REIT data provided by NAREIT, the US REIT market capitalization is worth $1trn. To illustrate, the number of REITs has grown to 224 from 152, in the US alone. On the other hand, the REIT market in Europe is attempting to keep up with their US counterparts. We can argue that the growth in Europe is slow. However, data from EPRA reveals that the market cap of the European real estate sector has grown from €150bn to €200bn. Similarly, the REIT sector in Asia has grown from $135bn to $213bn, according to data from Consilia Capital.

Emirates REIT launch in the UAE in 2010 was the first REIT. The second public REIT, ENBD REIT launch in 2017. At the moment, these investment instruments represent a notable share of the UAE’s listed real estate market.  However, the REIT market, not just in the UAE, but rather globally, could benefit from increased public education. There is inadequate information regarding the function of REITs. Also, the REIT market has heightened barriers of entry that prevent the market from gaining traction amongst individual investors. In other words, globally, non-REIT investment vehicles remain the preferred investment of choice.

Blockchain technology for real estate investments

To enable blockchain use cases in real estate, a world-class robust platform for real estate investment must be implemented. This platform should include smart contracts and a native token. The token would be fully tradable on exchange platforms, to unlock rapid, simpler, cheaper, and more secure exchange of value. Thus, investors can hedge their risks in real assets. In addition, the tradable token can allow investors to participate in fund management, and receive dividends. Together, both real estate and blockchain provide a turnkey solution to drastically increase cryptocurrency adoption.

Moreover, in the blockchain infrastructure asset owners can register as users. Thus, they can register their assets on the real estate blockchain platform through the fund manager module. Consequently, bringing more assets from across the globe under decentralized management, in turn introducing broad-scale investment opportunities. Furthermore, a transaction module embedded on the network would handle API and interface calls. As a result, all transactions with the external world will be validated with KYC Compliance. In the same way, the transaction module will be responsible for executing transactions. Instructions can come from all participants in the ecosystem, using the platform’s native coin.

Last modified: August 30, 2019

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