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itcoin and ether holders can now use their cryptocurrency as collateral to acquire tokenized properties. Propy, a real estate firm, is offering a condominium in Honolulu, Hawaii, for sale with a starting price of $250,000. Prospective buyers can take out a loan from Propy, using 100% of their bitcoin or ether holdings as collateral, and pledge the property as well.
The loan comes with a 10% yearly interest rate and is repayable over two years. If the cryptocurrency's value drops by more than 50%, the buyer will face a margin call, potentially leading to liquidation of their crypto holdings and resale of the property at an auction. However, if the cryptocurrency doubles in price, the buyer can repay the loan using their gains.
The property has been tokenized, allowing for faster settlement times and increased liquidity. Upon completing repayment, the buyer will automatically be able to reclaim their crypto. Propy's CEO, Natalia Karayaneva, sees this as a milestone in the future of real estate, demonstrating how blockchain technology can simplify home buying by replacing lengthy loan approval processes with instant solutions.
Propy has been using smart contracts to make real estate purchases quicker and reduce attorney fees, but tokenizing properties is a relatively new development for the firm. They have set up an LLC for the property in the county register and created a token, which takes roughly two weeks to complete. Upon acquisition, the LLC is amended to reflect the change of ownership, and the property's token is transferred to its new owner.
Karayaneva notes that pure crypto-native deals currently account for only 5% of Propy's volume, but they aim to increase this number by providing loan products and escrow services in collaboration with Coinbase. Once a property has been tokenized, nothing prevents the buyer from selling it to another crypto native without going through Propy. The buyer can also unwrap the property from the LLC and own it traditionally, a process Karayaneva calls "un-chaining."
