How can the blockchain be applied to real estate?

Global property market worth has an estimated value of $228 trillion, yet a huge amount of this wealth is locked and unreachable. In most countries home ownership is deteriorating and only institutional lenders such as banks control access to, and therefore benefit from, the majority of real estate financing and value creation. At its core, investing in real estate requires considerable funds from the start, and as prices rise, it forcibly locks younger investors into financing arrangements with high percentage lenders.

Looking at the most popular routes of investing in property such as buy-to-rent, which is relatively a lower risk investment, is ideal for younger groups such as millennials to get on the property market. Purchasing fractionalized property through a blockchain platform can simplify generating additional third-party investment. 

Generating additional third party investment involved in the purchase of a fractionalized property is simplified through the HiP ecosystem, with the help of the blockchain.  This provides a broader range of financing options previously restricted to younger investors. Getting on the property ladder is made easier by avoiding the bank route, as it allows for smaller deposits and lower monthly payments. This enables them to save money, giving them the ability to acquire and build equity in their property over time, as and when they can afford it. Additionally, they will be getting their return through renting out the property, generating a bigger profit which can then be re-invested in more properties. 

Investors who come across opportunities that demand quick decision making can also access funds through blockchain. Catching opportunities early on can make a huge difference to an investment, compared to following known trends that have already been tested such investing only established high value areas that are relatively risk free but also way more expensive.

Property markets tend to repeat previous patterns, and identifying price changes and the rate early on can lead to very profitable investments. Closely related are opportunities created by changes such as new or improved infrastructure. This is a major driver for price growth, as it often increases the draw and comforts of an area. Fractionalization will therefore allow buyers and property owners to work with investors rather than rely on banks. Funds are easier to acquire and are also more accessible, and thanks to blockchain technology, approval periods are quicker and streamlined, which benefits both parties and allows them to act faster to grasp opportunities. 

Tokenization also means that investors can realize higher returns compared to a real estate investment fund, as most costs related to real estate purchases and transactions are eliminated or significantly reduced, such as stamp duty, legal fees, valuations and annual fund management fees that are incurred and deducted from the fund’s gross proceeds.

The fractionalization of property and tokenising said assets will most definitely boost the property market by allowing fewer barriers to those entering it, granting existing home owners access to equity and debt that they didn’t have before, and giving investors the chance to diversify their property portfolio by investing in new areas and emerging markets. 

HiP aims to be the first to make real estate wealth more accessible at scale, by turning equity and debt underlying a property into tradable, interactive assets. HiP is developing a system whereby equity becomes a currency and debt levels become a choice. With HiP, equity release means selling a percentage of your assets – without losing ownership – to raise money, free of debt.