Rovshan Rasulov is a tech entrepreneur focused on innovation, tokenization, and transforming legacy industries.
Blockchain and tokenization are reshaping participation in premium development projects, but greater regulatory certainty and visibility are needed.
Anyone who has seen the price of their property appreciate over time knows that real estate can be a safe, lucrative way to preserve and grow capital. But the biggest payoffs for investing in real estate have long been out of reach for the vast majority of investors. The highest-yielding moments in the real estate development cycle are traditionally reserved for a select few: institutional funds, banks and developers.
Now, thanks to blockchain and tokenization, that is starting to change.
The Developer’s Hour Of Profit
As a private investor, developer and technology entrepreneur with over 25 years of experience, I have led and completed more than $100 million in development projects, focusing on integrating innovative financial and technological solutions, including tokenized investment structures and blockchain infrastructure for real-world assets.
Through my career, I’ve found that often, the real money for institutional investors in real estate is made during the “developer’s hour of profit.” This is the pre-construction phase, when developers sell equity or units at significant discounts in order to raise capital quickly and launch their projects.
Those who invest at this phase buy low and often sell later for much higher prices on the public markets. But getting into deals this early requires legal expertise, insider knowledge and often $1 million or more in capital, plus the ability to wait three to five years without liquidity. That has meant that, until recently, private investors had no access to these opportunities.
Today, tokenization technology is beginning to open access to the developer’s hour of profit to more people. By applying blockchain technology to the real estate sector, entrepreneurs are not just transforming how people are investing in real estate; they are also transforming who is investing.
How Tokenization Is Changing Real Estate Investing
Early efforts to improve access to high-margin real estate investing focused on crowdfunding and real estate investment trusts (REITs). These vehicles opened some opportunities for retail investors but at later stages of the development cycle, after most of the upside was already priced in.
Tokenization is a blockchain-based technology that converts ownership in real assets—such as real estate or debt structures—into digital tokens. These tokens can be programmed with smart contracts, embed investor rights and be offered to investors in the U.S. under compliant regulatory frameworks such as Reg D and Reg S, for accredited U.S. and international investors, respectively.
Moving these transactions onto the blockchain creates a new legal, technical and operational infrastructure for fractional ownership.
Whereas traditional real estate investing often demands access to millions in capital, tokenization allows smaller investors to participate in premium real estate projects with as little as $1,000. This helps them more easily diversify across multiple deals. Their rights are legally protected and secured on-chain.
And when it comes time to exit, tokenization provides investors more options beyond just selling a unit or units. Peer-to-peer transfers, secondary market trading and structured buybacks offer investors greater liquidity at the time of their choosing.
The ultimate aim is to open up the most lucrative phases of real estate to private investors. Smaller players will have access to institutional-level strategies without needing to lead an institution.
Rapid Adoption
Deloitte predicts: “This technology could help build trillions of dollars of economic activity for the real estate sector over the next decade, in part, by allowing it to expand its investor base and product offerings. The Deloitte Center for Financial Services predicts that US$4 trillion of real estate will be tokenized by 2035.”
This process of introducing tokenization to the real estate sector is already well underway in the U.S. In 2019, the startup Harbor created tokens on the Ethereum blockchain representing $100 million in shares in four real estate funds. DAMAC Group announced a $1 billion tokenized real estate partnership earlier this year. BlackRock is aiming to tokenize $10 trillion of real-world assets in partnership with Securitize, including real estate tokenization.
But while tokenization is already active and fast-growing in the U.S. market, regulation around these assets continues to develop. “The regulatory landscape for tokenized assets is still evolving, with different jurisdictions imposing varying rules regarding securities,” EY notes.
Greater clarity in the regulatory landscape could further accelerate the tokenization of real estate, opening up new opportunities for smaller investors. As will greater awareness and understanding of these technologies.
“The most significant setback in real estate tokenization is the lack of knowledge about blockchain technologies in the real estate realm,” Victoria Chynoweth reports for Forbes.
The Risks
While tokenization offers access to premium real estate strategies, it is not without risks. Investors may face challenges related to legal enforcement, platform reliability and the liquidity of secondary markets, which can vary depending on jurisdiction and demand.
Additionally, early-stage tokenized projects may lack the institutional protections or historical performance data typically required by conservative investors. As with any emerging asset class, participants must thoroughly evaluate the underlying asset quality, regulatory compliance and technological integrity of the issuing platform.
Yesterday Exclusion, Today Access
As regulatory and visibility issues are overcome, the future impact of tokenization in real estate investing could be vast.
Real estate tokenization creates scalable, secure, transparent models for participating in institutional strategies through public infrastructure. Deals that used to get done among a few insiders behind closed doors can now be accessed by more investors.
Tokenization offers a new architecture of access. It allows private investors to participate in value creation and value consumption. The builders of these tools are not just launching new funds. They’re laying the foundation for a new, more inclusive future for real estate investing.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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