Around last year, Micheal Arrington successfully auctioned his apartment in Ukraine as an NFT for 36 ETH which is around $100k. This historic transaction shows that the horizon of the NFT real estate industry is widening beyond the physical landed property.
The real estate industry is now entering a new phase with the beginning of real estate NFT.
Ever since Micheal has thrown the dice, other people have shown interest in NFT real estate and a lot of companies are now offering solutions in this emerging domain.
Perhaps you wonder how exactly a real estate NFT works or the intriguing benefits behind why more people are getting into it, do read this article to the end.
As the name implies, NFT real estate refers to a system of selling physical real estate property as non-fungible tokens. That is, the NFT becomes a representation of the actual property.
It's important to note that since each real estate property is unique in real-time, it can also be treated as a unique digital asset when it is minted on the blockchain as an NFT.
Therefore, when you buy a digital real estate NFT, you become the owner of both the NFT and its underlying physical real estate property.
We discussed earlier that tokenization is an important step in creating an NFT real estate. As a result, the way a real estate NFT is tokenized is the way it can be owned.
Entire ownership is different from fractional ownership because it doesn't confer joint ownership on individuals. Instead, one entity becomes the sole owner of both the NFT and its underlying real estate property.
From a legal standpoint, the deed of the real estate must be minted as an NFT for it to confer ownership in the eye of the law. However, this is a roadblock as most countries haven't recognized NFTs as a class of asset.
While real estates cannot be tokenized, a legal entity can be tokenized. Therefore, most NFT real estate firms first "convert" or "weave" their real estate into a legal entity, then they proceed to make NFTs out of them.
Fractional ownership happens when the value of a real estate property is fragmented into several NFTs for individuals to buy. This is similar to how fractional shares work in traditional finance.
NFT Real Estate is always fractionalized for two reasons.
First, it gives an investor the ability to own some parts of a property without the burden of owning and managing it entirely.
Secondly, it breaks down the barrier of investment as each investor can purchase fractions of NFTs according to their capacity.
As a result, each person with these NFTs can claim real-life ownership of some portion of the particular real estate property in question.
Some Decentralized Autonomous Organizations always utilize this method of ownership to ensure joint ownership of items. For example, Indaod.io is a popular DAO that sells fractions of real estate NFTs to its members.
Indeed, the use cases and advantages of real estate NFT are the reasons the new generation of brands and investors are utilizing NFT. Let's examine a couple of those reasons:
For those familiar with the traditional real estate industry, it is littered with a lot of paperwork. This rigid structure makes real estate transactions to be unnecessarily lengthy. Thus, hindering prospective home buyers from purchasing their dream homes early enough.
Real estate NFT is disrupting this old-fashioned and rigid process in the traditional real estate industry. Natalia Karayaneva, the CEO of Propy, pointed out that NFT real estate transactions can be closed within 30 minutes or even less.
In a real estate NFT transaction, the ownership of the property is swapped from the individual owner to a legal entity - which can be transferred through an NFT.
In addition, all the key documents of the property—like Certificate of Ownership and construction plans—can be transferred via a smart contract.
NFT real estate investment is expensive and this has been a major barrier keeping people with lower capital away from participating in the industry. Now, NFT real estate is driving an inclusive framework for people to invest in real estate even with a not-too-large capital. This is possible with real estate fractional investment.
The members of City DAO are pioneering this as they collectively bought land in Wyoming - a place of tourist attraction in the United States. Each member of the DAO has fractional ownership of the city with their NFTs.
Similarly, Black Manta Capital Partners spent $12 million to acquire blue-chip real estate assets around Berlin so it can later sell them to investors and home buyers as fractional NFTs.
Frauds often forge documents, impersonate the identity of the original owners of landed property, and swindle innocent third parties. According to a report from the Federal Bureau of Investigation, almost 14 thousand people have been victims of real estate-related frauds in 2020 alone.
One of the ways real estate NFTs can introduce change to this industry is by securing the identity of the owner. The owner of a real estate NFT can be confirmed on-chain with blockchain explorers like Etherscan and BSCscan.
This will make it impossible for anyone to impersonate the owner. In addition, NFT smart contracts also ensure that both parties fulfill their obligations of the contract - thereby eliminating foul play.
People often use real estate property as securities to get a loan. But now, collaterals are no longer limited to only physical assets. Some DeFi Protocols, like Nexo and NFTfi, give out loans with NFTs as collateral.
Last month, one Chris Ciobanica used an NFT as collateral to get a loan of over $1 Million from Arcade - an NFT lending protocol.
While there is not yet a specific example of where a real estate NFT was used as collateral, there are chances that this would likely be embraced in the nearer future
Having known what real estate is about coupled with its solid use cases, you might want to ask, "Where can I buy real estate NFTs?"
Here are the top seven platforms where you can purchase real estate NFTs:
Propy is a Silicon Valley company that is leveraging NFT smart contracts to facilitate real estate transactions. You can list your real estate property on Propy as an NFT.
When you sign up on the platform as a homeowner, you'd be able to manage bids and accept the offer that suits you. The platform also shows homebuyers some available real estate NFTs.
Natalia Karayaneva, a real estate magnate, founded it a couple of years back. For the records, this company helped in carrying out the first real estate NFT transaction, thus, being a trailblazer.
RealT is a real estate firm that is focused on the United States market. It has real estate property in popular places like Chicago, East Cleveland, Detroit, and Birmingham.
Using the Ethereum blockchain network, the company is helping more people to partake in fractional real estate investment. The firm is on track to ensure that investors earn weekly, no matter the number of their investments.
As the investors have bought the NFT, RealT ensures that the tenants pay rent so the investors receive their rent payments into their wallets every week.
Fraction is a real estate NFT firm on the Ethereum blockchain and it has been duly licensed to operate by the Securities and Exchange Commission of Thailand.
Shaun Sales and Eka Nirapathpongporn founded it in 2018 to make real estate investment available to more people through NFT fractional ownership. On Fraction, you can become a real estate NFT investor with a minimum of $150.
When the real estate NFTs have been listed on the Fraction Exchange through an Initial Fraction Offering, they can be traded among the investors.
In an interview with TechinAsia, the firm claims to be in talks to work hand-in-hand with more Thailand-based development firms and also acquire more high-end real estate property in the country.
Omni Estate Group and Passive Income is a Spain-based platform with more than 22,000 properties. Thus, being a big wig in the industry. It allows anyone with a minimum of €100, which is around $111, to invest in its tokenized property.
In terms of compliance, Omni claims to have been duly audited by CertiK and to be under the supervision of ESI as prescribed by the Securities Market Law.
Apart from their usual return on investments, Omni real estate investors can as well stake their ROI and earn more income.
Founded in 2021 by Berwin Tanco, Ekta is an Indonesia-based blockchain infrastructure that aims to ensure a merger of both the physical estate and the on-chain world. It is carrying this out with its real estate NFT marketplace.
Ekta's NFT marketplace brings together homeowners and purchases to transact under a decentralized system. Primarily, Ekta is starting its work by purchasing land and landed property in South-East Asia, then fractionalizing it to people as NFTs.
As reported by CNBC, the company hopes to have the first sale of a real estate property that is worth $100 million. Just like Omni, Ekta also has a staking program for its users.
NFTify is a marketplace builder platform that enables homeowners and realtors to build their NFT storefronts where they can display and sell their real estate NFTs.
At the moment, real estate firms like OVR Real Estate are leveraging NFTify to market their top-tier property in Malaysia. It has different categories of property like Factories and Residential Areas.
It is selling each fraction of NFTs for $100 (USDT). Thus, investors can buy fractions as much as they have the capacity.
Launched last month, Vesta Equity is an NFT real estate project on Algorand that wants to help homeowners and investors to transact without any barrier or a third party.
Homeowners who want to sell some portions of their homes can sell it as an NFT. This also presents the investors with an opportunity to expand their real estate investments without the burden of full ownership.
Vesta Equity has a marketplace where it lists its available property like residences and tennis courts. It will show both the entire price and the fraction. For example, it is currently listing a home that is worth $1,194,741, but the fraction is $382 per square foot.
Indeed, the traditional real estate industry is due for innovations. NFTs are solving a lot of problems that the traditional real estate industry is facing. This will help the real estate industry to be more scalable in this century and attract more players - including homeowners and investors.
With the way a lot of people all around the world are gradually embracing NFT real estate, the rate of adoption will keep expanding exponentially. But for the emerging real estate NFT industry to fly, more countries need to accept it legally.
Do you perhaps have any real estate you want to tokenize and sell? Start your real estate NFT business and launch it on your own marketplace quickly using NFTify.
1. How can real estate be tokenized?
It can be tokenized by auditing to know its worth and putting a representation of this worth into NFTs.
2. Where can I buy real estate NFT?
You can buy real estate NFT on platforms like Vesta Equity, Propy, and NFTify
3. How much do I need to start fractional real estate NFT investment?
It depends on how much the owner places on each fraction of the NFT. Generally, you can start with $50.
4. If I buy a home with real estate NFT, how will I get the legal documents?
You should receive the legal documents as NFTs once the terms of the smart contract have been fulfilled.
5. Are Metaverse homes and lands also part of real estate NFTs?
Real estate NFTs can be addressed from both physical and virtual standpoints. Virtual real estate NFT such as land and homes in the Metaverse is also real estate NFT in another context.
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