A Complete Guide on Real Estate Tokenization

With the demand for Real Estate skyrocketing in Pakistan, there will soon be problems with the supply, especially in a country with such a high population. This leads to the rise of the need to adapt, improvise, and overcome. With the concept of the tokenization of Real Estate reigning supreme elsewhere, bringing it to Pakistan will benefit the industry in numerous ways.

What is Tokenization? 

Tokenization of Real Estate refers to the breaking down of a Real Estate Asset into smaller parts, converting them into virtual tokens, and encrypting them with the relevant information that would lead to ownership. This phenomenon is the result of the amalgamation of Real Estate and Blockchain Technology, which has emerged as an efficient way for investors to increase their profits by quite a margin while increasing transparency and liquidity and opening more doors of opportunities in the Real Estate Industry. A way to securitize Real Estate assets, tokenization can help the Pakistani industry to grow exponentially. 

Enhancing Flexibility and Usability

The virtual tokens offer great flexibility to the issuers, representing equity interest in a legal entity controlling the asset, as well as the right to share in the profit or revenue that the asset generates. Furthermore, the usability of the tokens is very convenient for issuers, as they can tokenize commercial, residential, and industrial property. Similar to traditional real estate properties that are physical in nature, the value of the tokens will vary depending upon the performance of the properties, but safety in storage and ease of transfer, due to the extremely dependent blockchain technology, is the distinguishing factor between traditional and tokenized investments. 

A Unified Solution for Industry Challenges

Pakistani Real Estate industry has been overrun with an influx of problems, mainly concerning lack of liquidity, lack of transparency, middlemen, high processing fees, and an absence of fractional ownership. A solution to all these problems, introducing tokenization to the country’s real estate industry will be a genius masterstroke. Operating in an extremely secure way, tracking of ownership is verified without the threat of any contradictory records due to the safety a blockchain provides. 

Centralization and Transparency

People might argue that there is no centralized system controlling the Tokenization of Real Estate, but that is completely wrong. Initial interaction with the local land authorities is necessary for the properties to be recorded in the blockchain, which is a public registry itself, but once it is recorded, there is no need for registration every time a transaction is made. Also, the transactions taking place will all be transparent since users in the market will approve those transactions. 

Convenient Investment Search

Of all the issues faced due to traditional investment methods, searching for a credible and viable property is the biggest one of them all. Especially due to the middlemen present in the country, who have inherited the profession rather than learning it through an educational system. These frauds are always present to misguide investors, inflating market rates, and earn ridiculous commissions on each deal. With a centralized marketplace in the form of a blockchain, investors will find it relatively easier to find potential assets in the industry, while also linking up with investors from other regions where investments are also in prospect. 

Asset Fractionalization

Tokenization enables the fractionalization of assets, a feat that was previously impossible through traditional methods. Instead of considering Real Estate assets as indivisible, tokenization allows them to be divided into smaller parts, increasing liquidity.

In this digital age, tokenization is a revolutionary concept that has transformed the Real Estate industry. To compete globally, Pakistan must embrace tokenization as a necessary step in its Real Estate evolution.

Additionally, xstate plays a crucial role in this transformation, adhering to Shariah compliance standards while championing the adoption of tokenization in the Pakistani Real Estate market.