By Amrita Singh
Traditionally, buying real estate means purchasing an entire property, needing huge amounts of capital, dealing with paperwork, registration and investment periods that stretch into years. But what if you could buy just 1 square foot of a prime property and that too from the comfort of your home?
Thanks to Real Estate Tokenisation, it is now possible. It sounds complicated, but it is just basically dividing physical real estate assets into smaller digital units called tokens that can be bought and sold by investors. Here's how it works:
§ Acquisition of Real Estate: An entity (A) identifies a real-world property which can be a commercial building, office or residential space. This property is then evaluated for rental potential, market demand and long-term growth prospects. A pools investment from a private group of investors to purchase this property after all due diligence is done. To facilitate this, a Special Purpose Vehicle (SPV) may be created to hold the investments.
§ SPV Holding the Real Estate: The acquired property is held by the SPV, which fractionalizes its ownership into digital tokens. Each token captures a pre-determined financial value, that is proportionate to 1 square foot of real estate. A 50,000 sq. ft building, for instance, becomes 50,000 separate units, and if this property is worth ₹50 crores, each token is worth ₹10,000.
§ Issuance of Tokens: The SPV issues these tokens to investors on a blockchain, meaning that the transactions are recorded on blockchain based custodial ledgers ensuring security, transparency, and immutability of ownership records.
§ Rights Assigned through Tokens: Smart contracts embedded within the tokens automatically assign rights to investors, which may include profit-sharing, future redemption options, etc.
§ Marketplace: Investors may buy and sell their tokens through the designated marketplace, providing a platform for investors to participate in the buying and selling of available tokens.
For example, on Alt DRX, you can buy and sell portions of prime properties across India on their own digital marketplace, called TradeX. These transactions are recorded in a secure, transparent custodial ledger and matched in real-time, like a stock trade, with the ledger automatically updating to reflect the new owner.
For a first-time investor, the advantages of tokenisation are numerous. You can access the real estate market easily, with capital as low as ₹10,000. These tokens can be bought and sold quickly and easily, offering high liquidity and short investment periods. Blockchain based ownership records facilitate transparency and security. With just one intermediary i.e. the platform, these transactions are cost-effective, bringing down the total cost of buying real estate assets. You can choose from a wide range of professionally curated real estate assets across India. Owning real estate is no longer a dream to be realised in the future, with digital real estate, you can own your first sqft now!
