Tokenization holds the promise of bringing profound change in the real estate market. By converting physical properties into digital tokens stored on a blockchain, tokenization enables digital ownership of real estate and the transfer of fractional shares.
The financial benefits are obvious, as tokenization opens up access to the real estate market to millions of new investors, enabling them to become co-owners of properties. This leads to improved liquidity, while the underlying blockchain reduces the cost of transactions by eliminating the middleman.
However, the advantages of tokenization aren’t just related to financial gains, for the concept can also have a profound societal impact that transforms communities and the well-being of numerous disadvantaged people.
Tokenizing Real Estate To Support Local Communities
Many people want to support their local communities, and tokenization can help to incentivize those individuals to participate in solving societal challenges where they live, through social housing projects and other initiatives that intend to create opportunities to boost their region’s economic growth.
As an example, tokenization can be used to fund the construction or purchase and renovation of existing properties for affordable housing projects owned by their local communities. Similarly, tokenization can be applied to real estate developments intended to support sustainable development and community revitalization efforts, and other social causes. People can acquire tokens to support those projects and also have a say in how they are implemented, contributing to the overall impact they have.
In this way, tokenization becomes a useful tool for raising funds for affordable housing, accelerating the positive impact of these projects. At the same time, it can facilitate long-term value creation. Because tokenized real estate assets generate passive income and appreciate in value, those returns provide a consistent source of funding that can be used to further access to affordable housing for more families.
Participation is enhanced through tokenized governance, where the token holders have the rights to submit proposals and vote on them, enabling an inclusive, democratic decision-making process for social impact projects. Moreover, the very knowledge that participants can take on a leading role in the ongoing direction of such projects will encourage more active involvement from community members.
Finally, the transparent nature of tokenized real estate means more transparent reporting on the economic, environmental and societal impact of affordable housing projects. All data relating to a tokenized property is recorded on a public, decentralized ledger that everyone controls, meaning a clear and auditable record that can be used to gauge the positive impacts.
This transparency can be further enhanced using a complaint tokenization platform such as Nexera, which provides enhanced verification in compliance with government regulations while allowing users to retain full anonymity if they desire.
A Real World Impact
The social impact of real estate tokenization is already being felt through projects such as Blocksquare’s Regional Hub Program, which encourages individuals to become ambassadors for the project and raise awareness of the technology’s societal benefits.
Although Blocksquare does reward its ambassadors, the initiative is focused on building a greater sense of community by fostering social connections and enabling local residents to make a more positive contribution to their surroundings, the company explains in a blog post. Its ambassadors strive to encourage investments in tokenized projects that can have a meaningful impact on local communities, improving the quality of life for everyone who resides within them.
The Australian digital asset firm DigitalX has created the Housing Asset Reference Token or HxART fund, which gives investors exposure to real estate investments in tokenized form.
The HxART fund is at the forefront of efforts to solve Australia's housing deposit affordability crisis, with a concept based on co-ownership. The homes’ residents own the majority of the properties within its portfolio, with the remainder owned by the fund, which is financed by the sale of tokenized fractions of its share of the homes.
The project seeks out homeowners who are qualified to obtain a mortgage but who don’t have the required deposit. HxART fund covers the cost of the deposit on their behalf, with investors who acquire the tokenized shares being repaid with interest over time until the resident is ultimately able to pay off the mortgage and acquire full ownership.
Driving Positive Change
Tokenized real estate provides further advantages to affordable housing projects, with its transparency enabling donors to verify the impact of their contributions. Moreover, it helps to create a market where the value created by social impact initiatives can be measured by its supply and demand dynamics. It also encourages engagement on a global scale, giving poorer communities the opportunity to fund their social good projects.
By increasing access and participation, real estate tokenization can have a hugely beneficial impact on affordable housing, transforming projects into novel investments and increasing their accessibility, empowering communities to get involved.
“This not only creates a ripple effect of positive change but also nurtures a deeper connection among community members, fostering a sense of ownership and belonging, amongst other things,” says Blocksquare ambassador Mitch Scott-Rogan.
Ultimately, tokenization is about more than just creating new opportunities for individual financial empowerment. It’s about fostering a sense of ownership and pride within communities, aiding their development and advancing the prospects of more disadvantaged community members.