Tokenization of Real Estate
Digitizing an illiquid asset
Investments in Real Estate are gaining popularity rapidly: The transaction volume in the German real estate market is increasing steadily and is expected to grow even further. The interest in and demand for real estate is everly increasing, but there is only a small number of suitable investors. Due to many intermediary parties, traditional real estate investments are very illiquid and expensive to issue.
Tokenization, the digitalization of securities, is developing and disrupting financial services and is spreading onto the real estate market. Tokenization utilizes blockchain technology: a distributed ledger secures identical copies of data across a network of authorized stakeholders. This new and innovative technology can help issuers automate many intermediary transactions and bring liquidity to real estate, enabling new investor groups to participate.
Why tokenize Real estate?
Advantages of tokenization
New investor groups because capital requirements are lower and better diversificated
Increased liquidity for investors due to digitalization and transferability of the security token
Automation reduces cost, the need for intermediaries while lowering fees and organizational efforts
Higher transparency due to unique qualities of the blockchain which stores transactions immutably
Traditional investments in Real Estate are very illiquid
Real estate traditionally suffers from low liquidity: Capital commitments are very high and transaction processes are very long and expensive. This also means that investments are only suitable for a very narrow investor group. At the same time, real estate investments are gaining sufficient popularity, as they are a very interesting and attractive security. The tokenization of real estate brings liquidity into this market and enables a broader group of investors to engage.
Unlocking new possibilities
Tokenization of Real Estate
Real Estate GmbH is a company involved in various real estate projects. Real Estate GmbH decides to tokenize one of its objects, a co-working space hosting different startups. Real Estate GmbH decides to employ Cashlink to take care of the technical and legal handling of the project.
Tokenization offers two important advantages:
- New investor groups attracted because of the higher liquidity and flexibility of the digital securities
- Lower cost for managing and issuing the estate as a security
Steps of a tokenization
Comparable to a traditional securities offering, Real Estate GmbH needs to decide on terms and conditions before starting processes to tokenize real estate. Specialized law firms from Cashlinks partner network assist them during the legal structuring of the contracts.
The legal contracts are digitally mapped by so-called smart contracts. These smart contracts generate so-called tokens to represent shares in the tokenized real estate project. They can also automatically execute actions according to the legal contract they are based on. The all-in-one software solution from Cashlink includes everything required. For Real Estate GmbH, there is no need to interact with the blockchain layer – Cashlink takes care of the tokenization process.
3. Secondary Market
Because the real estate tokens are transferable 24/7 globally, liquidity is further enhanced. Tokenization is applicable on a wide variety of real estate assets, which additionally facilitates liquidity. As invested capital is not locked up for long periods of time and new investors can participate in the market.
New Status Quo
With the help of Cashlink, Real Estate GmbH has successfully finished tokenizing their real estate project. This enables a wide variety of investors to hold the real estate tokens: companies inhabiting the co-working space, alongside with investors interested in the companies inside. Investors from all over the world now have the possibility to invest in the co-working space.
What Cashlink offers
We provide tokenization services fit for the complete value chain of tokenized securities. Every service required for a successful tokenization project is provided and built on top of our unique software solution.
Our software-as-a-services solution covers every process from distribution to secondary markets. Cashlink provides you with a complete end-to-end solution, so that you can keep a focus on your core business.
Our license shield provides you with all necessary licenses. Barriers for market participants are lifted and compliance is ensured along the value chain. Thorugh a strong cooperation network, all licenses are provided.
The possibilities of real estate tokenization are endless. Get in touch with our expert team to learn more about how your business case can profit from tokenization!