Traditional property development requires cash. Lots of it. However, along with the modernisation of the financial market, new methods of buying and selling goods are emerging. Digital assets such as cryptocurrencies and NFTs provide an alternative way to buy and/or sell goods – a way which doesn’t rely on cold hard cash.
One of these new methods, using NFTs as a form of payment, is particularly promising. It’s so promising that countries around the world are starting to take it seriously. In 2019, the UK Land Registry (Her Majesty’s) successfully completed a blockchain trial in the purchase of property. The trial included using smart contracts for a transparent, quick, and easy sale. Following the success of this trial the Land Registry stated that “they (we) are really excited about continuing to work with the industry to see how they (we) can influence fundamental change in the future” (HM Land Registry, 2019).
It’s time we gave the usage of blockchain technology in the real estate market some serious thought now that the HM Land Registry has given it the thumbs up.
What are NFTs?
Here’s a quick recap before we go on.
NFTs are unique tokens issued on the blockchain that can’t be replicated. They are commonly used to sell digital products such as art or music, certifying ownership with a unique, unforgeable signature – a smart contract.
However, the use of NFTs is expanding to represent physical item ownership in the real world, making them an excellent option for buying and selling real estate properties.
Why use NFTs for Real Estate?
Quick and Simple Exchange:
A major challenge that accompanies buying or selling real estate is the hassle of transferring property ownership. It’s notoriously tedious and slow, involving intermediaries and numerous procedures that complicate the process. NFTs can help to speed up and simplify the process by automating these procedures and eliminating the traditional middleman.
Instead of it taking weeks or even months to buy a property, NFTs allow you to complete the whole process in a matter of minutes. According to Forbes, “NFT has the potential to deliver a far more cost-conscious option” (Forbes, 2022).
Automated Processes via Smart Contracts:
As we mentioned, NFTs can automate real estate procedures to streamline the whole process. When you buy a property traditionally, you need an intermediary to transfer ownership and monitor any actions related to the property. However, if you buy a property with a smart contract functionality, you can automate these actions (e.g. rentals, dividends, payments, maintenance and more).
Fractional property ownership breaks down the property into tokens which operate as shares. Fractionalised NFTs in the real estate world allow people to share the ownership and costs with multiple people. The smart contracts that accompany NFTs can also alter the terms of the agreement to suit all parties. For example, they could hold individual parties independently accountable for their contributions and, in cases involving several investors, make each investor accountable for decisions made by a majority vote.
NFTs also provide greater security. A paper deed to your property can easily get lost, altered or falsified. Due to the immutable nature of the blockchain ledger, minting your deed or any other important documents as an NFT could significantly reduce these security risks. Digital transactions are frequently vulnerable to cyber fraud. However, you can achieve higher security and data integrity levels by utilising blockchain and NFT technology. This protects both buyers and sellers while also making it much easier to transfer assets without incident.
Additionally, NFTs provide an irrefutable history of ownership. The history of every step and transaction for each asset is provided on the blockchain ledger. This means that if you buy a property with an NFT property, you can check every previous owner, action, legal dispute, payment, investment, and more.
As we’ve seen with the introduction of new technologies such as cellphones and the internet, with the good comes the bad, and there will undoubtedly be challenges to the adoption of NFT and blockchain technology in property development.
Currently the main challenge is a lack of mainstream acceptance. There are plenty of cryptocurrency enthusiasts and even government organisations interested in the use of NFTs in the real estate market, but older generations some of the general public haven’t jumped on board yet. This means that NFTs will be relatively niche in the real estate market for the time being.
That being said, that could be considered a positive as well. Since it isn’t a mainstream idea yet, we now have the opportunity to be ahead of the curve and invest in an area that has significant projected growth in the upcoming years.
Next? Get buying. When it comes to buying and selling NFTs, you can only fully learn about it when you try it for yourself. So, familiarise yourself with the procedure and get ahead of the curve.
Disclaimer: All investments, including real estate investments, carry inherent risks such as asset depreciation, financial losses, and legal ramifications. The information in this blog is solely for educational, informational, and reference purposes. Before making legal or financial commitments, speak with a licenced real estate or financial professional.