NFTs or Non-Fungible Tokens are tokens that are issued on a blockchain similar to cryptocurrencies. The only difference is that every NFT is unique which means, it cannot be exchanged with another NFT. It has become extremely popular in recent days and the best part is that it has applications beyond just collecting artwork. While we discover more about NFTs, people are finding more ways to utilize them.
Different Applications of Non-Fungible Tokens
NFTs can certainly be used as collectibles of unique items. It’s like collecting antiques or rare art in the modern world. All of us may have collected stamps, sports cards, or game cards. NFTs are similar and although this doesn’t have a direct use case people do it for the love of doing it.
NFTs can also be used for ticketing in events, and some also believe that they will play a key role in the metaverse. Brands entering into the metaverse are using NFTs as a way to present uniqueness while establishing their brand identity.
Apart from this, NFTs can prove extremely beneficial to artists, musicians, writers, etc. to claim ownership of their creative work. Artists can leverage NFTs to get the recognition they have always deserved, explore more revenue streams, and all-in-all empower themselves.
While these are only a few use cases of NFT, people are still exploring new avenues of application and not-so-surprisingly Real Estate is one of them. This might sound new but in 2017, the Founder of TechCrunch, Michael Arrington bought a real-estate NFT. Through Propy, he purchased the world’s first blockchain-backed apartment. In 2021, he sold it off for 36 ETH.
NFTs in the world of Real Estate
Buying a property is a slow and tedious process. You can also say that the real estate industry has not seen a lot of innovation. NFTs can find a place in real estate to help make things better. NFTs in real estate can majorly reduce the risk of fraud and become proof that you actually OWN a property. The introduction can certainly be complicated in the beginning but the future looks bright.
Virtual and Physical Real Estate NFTs
Virtual real estate is what exists in the digital world, popularly known as the metaverse. That means you buy and sell property in these worlds. NFTs can without a doubt work in the digital world and people can register real estate using them. This is also because regulations surrounding the metaverse are still limited.
One can say that it is still difficult to register a physical property as an NFT. When you register a physical property like a house, building, etc. on the blockchain, you get a physical real estate NFT. You can also tokenize a physical property in the digital world as a replica of the real-world location. Here’s where NFTs can be used in real estate:
NFTs for Fractional Ownership
Property owners can mint fractional ownership NFTs and put up a small section of their house (property) for sale to many investors. This means the tokens will work like shares. The owners of the token can then be paid rental income as well as an incentive if there’s an appreciation of the property’s price. This will open up investment opportunities in the real estate world to many people.
NFTs in Mortgages
NFTs can be fruitful to borrow funds in a certain way. Suppose you issue NFTs backed by the ownership of property, investors can buy this token which would represent a part of the debt. Similarly, they will receive the repayments in the proportion they lent out (plus interest) via blockchain. In short, you can consider it as a mortgage payment without the need for a middleman.
Verification and Authentication
Since NFTs are minted on blockchain the record of every transaction will be provided. Let’s say, you mint your deeds and other documents of your property, you can easily know who was the previous owner, or if there was any legal dispute, etc. This will help owners beware of falling prey to fraud and also guarantee their ownership when they are holding the property.
Basically, this means it will be a proof of ownership for you and it will reduce a lot of paperwork in the real estate world as these tokens bring efficiency.
The Pros and Cons of NFTs in the world of Real Estate
The best part of pairing NFTs with the world of real estate is that with the help of a smart contract, you know exactly what you are getting into. The transparency and ownership guarantee that comes is something everyone needs in real estate.
The best part of pairing NFTs with the world of real estate is that with the help of a smart contract, you know exactly what you are getting into. The transparency and ownership guarantee that comes is something everyone needs in real estate.
We are also well aware of how long can the process of paperwork and ultimately buying a property is. Now with NFTs, since there is no need for a middleman, the process not only becomes secure but also fast.
The introduction of NFTs in the world of Real Estate will surely help a lot but it has the potential to remove the use of intermediaries too. One can imagine for whom this would/wouldn’t be beneficial. Plus, the real industry is slow and not very receptive to new technology. Hence, the shift is going to take a lot of time. You can consider the reaction of people when the internet was first introduced; we are standing somewhere similar when it comes to NFTs, blockchain, metaverse, and also crypto.
The Future of NFTs in the Real Estate World
The dawn of NFTs in the world of real estate is still somewhere ahead. Only when people truly understand what NFTs and blockchain are, they can move ahead to understand their potential and advantages. Once people start actively using NFTs in the world of real estate, we will discover more benefits and challenges along the way.
Laws in the real estate world also make it difficult to hold real estate properties right now. As of now, the prediction that whether the techniques that theoretically make the processes in the real estate industry easy will work in the real world too is hard. However, the real estate industry is in desperate need of some technology upgrades, and looking at the use cases, NFT can certainly help.
