The real estate market nowadays faces a number of challenges being at the same time a niche for great investment opportunities. Due to the relatively new BIM (Building Information Modeling) technology, any authorized person might become a part of real estate investment business.
What do we do to tokenize real estate?
The real estate tokenization means converting rights to the property into digital tokens. Remember, in the real world this is still real assets. The main advantage and the most important feature of asset-backed tokens (ABT) for investors is an unbreakable connection of tokens and real estate.
It means low risk, liquidity, security and transparency. The low risk is explainable by nature of real estate and ever-growing market demand. Liquidity means “easy to trade” and “low cost of trade”, and it is by far easier and cheaper to trade tokens, than underlying assets – real estate properties. Security is connected with reliability and indestructibility of blockchain technologies, which literally serve by fundament every tokenization project.
How can we apply blockchain to the real estate?
Blockchain networks support transparency, but only partially. Blockchain itself is context-free. Literally saying, it is mean, that pure blockchain and even smart contract do not guarantee connection with real word. In the old traditional world, there are special authorities to do this: brokers, notaries, lawyers etc. In IT world these “middlemen” were changed by blockchain networks, smart contracts and our trust in their infallibility. But at the same time, someone or something has to supply information from real word to virtual universe. Someone or something in which we trust. If it will be “somebody”, we fall in recursion without a chance to avoid obsolete, manual and fully human-based technology. If imagine something, human-free, or something mimic human: what would it be?
The answer is a framework, including business processes, software, autonomous machines or sensors, which collect data from real word and transfer to blockchain and smart contracts without a breach of continuity.
Which technology is going to applied?
These days BIM is very much talked about because of its evident benefits such as cost saving, transparency and high efficiency. Smartlands platform will provide access for its clients to this innovative technology in blockchain network. BIM is a framework for integrating technologies, processes and engineers to drive end-to-end efficiency in Engineering and Construction (E&C) operations.
BIM can provide information about the project to the smart contract – collects data from real word and transfers to blockchain without a breach of continuity. Now investors can stay in touch with a project all the way down. That allows investors to be fully informed about the project, thus to lower risks and to tokenize the property efficiently.
BIM allows simulating building process, giving professionals (architects, designers and engineers) the idea of the future project. The distinctive feature of this software is centralized data storage, which means that any modification to the building design will automatically replicate in each views such as floor plans, sections and elevation. This not only helps in creating the documentation faster, but also provides stringent quality assurance by automatic coordination of the different views.
How can you use Smartlands Platform?
Smartlands will link ABT (asset-backed tokens) with real estate property in the best and the most comprehensive way possible. That includes every important aspect: legal framework that bounds ownership of property to tokenholders, in-depth initial information and updates about any major changes or developments, occupancy monitoring etc.
To provide better understanding how it works here is a use case of a commercial real estate tokenization project in UK. Each token will be backed by 0.001 square meters of commercial property under the Smartlands’ legal framework, while ownership of a token will be secured by blockchain-based trustless registrar. Token holders will benefit from rental payments and will be able to make the strategic decision about the property through voting that is also secured by the Stellar network.
It is much easier and cheaper to issue tokens than securities, transact them globally and get all the accurate, updated information about tokens through block explorers. It will bring down the costs of offerings, consequent operations, as well as make it inclusive for investors all over the world. Audit results and monitoring information from BIM system, will be hashed to the blockchain (checksums), making it immutable (given distributed nature of the database).
What is the source of cash flow to token holders?
It is commercial property rental payments. Smartlands’ framework propose legally binding asset backing of tokens, in-time cash flows to token holders. The main source of cash flows for token holders is rent payments from property renters with the expected annual return of 8-10%.
The token will be listed on the Stellar-based Smartlands decentralized exchange. Stellar is an open-source protocol for exchanging money and tokenized assets. Also, we propose Stellar-based wallet for our framework. A creditable trustee will be used as an escrow with an obligation to act in response to token holders voting as outlined in the legal framework.
What are the advantages of the real estate tokenization?
With proposed framework, you can invest in real estate development through peer-to-peer financing with blockchain networks as trustless registrar of liquid stakes. It will wear off risks, fees, excessive layers. As an investor, you will get higher return at lower risk while the real estate developer will be able lend at lower rates, faster and with lower initial costs.
Bringing real estate properties to Smartlands Platform provides a bigger scope of tokenization that will be affected by SLT tokenholders voting. Additionally, it will increase demand and liquidity of SLT due to mechanism (implemented in Steller-based Smartlands wallet) of trading (and holding) of SLT with asset-backed tokens issued on the Platform.
How can we do it? Let’s issue the token for your real estate business or let’s invest together with Smartlands’ framework!