T
he global real estate market is valued at around $379.7 trillion, making it one of the largest markets in the world. Elizabeth Sample and Brenda Powers from Sotheby's International Realty in NYC note that using blockchain technology to create digital tokens for property rights can automate buying, selling, and transferring of real estate, increasing liquidity in this huge asset class.
A rapidly growing market for tokenized real-world assets is emerging, with a potential market size projected to reach between $10 trillion and $16 trillion by 2030. Real estate is predicted to account for around one-third of the tokenized asset market, making it the most prevalent category. The US Federal Reserve's efforts to restrain inflation through higher interest rates are driving investors towards collateral-based cash flows backed by real estate assets.
Historically, real estate has been a reliable hedge against inflation, allowing investors to invest in traditional REITs and maybe even real estate tokens. Recent reports suggest that President-elect Donald Trump and his son, Donald Trump Jr., are developing a new real estate token project called "World Liberty" to integrate real estate investments with decentralized finance using blockchain technology.
Blockchain technology can serve as a transparent record-keeping system for real estate ownership and transfers at the city registry level. Smart contracts can be integrated with existing legal processes to automate and record these transfers, lowering transaction costs by removing dependency on intermediaries. Tokenization of real estate assets digitally represents proof of fractional ownership, managing transferability and providing a medium of exchange.
A tokenized real estate asset may be represented by 1,000 or more tokens minted on a blockchain platform, each representing a fraction of the overall real estate asset/investment. Real estate tokens can represent various fractional interests in physical assets, equity interests in legal entities, or ownership of collateralized debt.
Tokenization offers several advantages, including faster processing times for token buy-sell transactions and increased accessibility to a wider range of investors. While it does not modify the legal concept of property ownership, it makes real estate more accessible by fractionalizing property ownership into tradable tokens.
In the United States, an owner-occupied fractional equity residential real estate tokenization transaction has already been undertaken. In the Netherlands, EstateX is building a dedicated RWA blockchain real estate tokenization platform that is expected to launch in Q3 2025.
A comparison of real estate tokens and REITs highlights their differences in liquidity, diversification, ownership & control, regulatory & tax, and transaction costs & dividends. Real estate tokens offer direct fractional ownership, transparency, and a sense of control over investments, but are subject to a more dynamic and evolving regulatory landscape.
