Blockchain is reshaping the real estate market by opening up new ways to buy, sell, and trade property.
For many years, real estate investment has been associated with high capital barriers, tedious transactions, and illiquid assets. That formula is now being rewritten. Blockchain is reshaping the real estate market by opening up new ways to buy, sell, and trade property.
- Tokenization, the process of dividing real estate assets into digital tokens on a blockchain, allows investors to own fractional shares of properties. Instead of purchasing an entire building or parcel of land, investors can buy smaller portions, akin to purchasing stocks.
- These tokens, recorded on a distributed ledger, offer an unprecedented level of transparency, efficiency, and liquidity to an industry often criticized for its complexity.
- Empowa, a pioneering blockchain-based initiative, has also partnered with the Nairobi Securities Exchange (NSE) to develop tokenized financial instruments that will facilitate accessible funding for housing projects while ensuring transparency and scalability.
According to a report by Chaintum Research, tokenization can be utilized for projects such as the Konza Technopolis, where ownership of each part of the city can be achieved fractionally.
“The housing crisis in Africa is not poverty-based but structural. Research has proven what everyone living in Africa knows, more than 85% of income is informal, meaning that it is unrecorded, intermittent and variable,” the report from Chaintum Research states.
“The only financial product for a complete home is a mortgage, which requires formal proof of regular, consistent income. This means that more than 85% of African consumers are immediately excluded from the housing finance market,” it continues.
Tokenization of real estate assets allows micro-investments from regular small-holder investors. In the long run, this will do away with costly intermediaries that have traditionally been a part of the property-buying market and accelerate real estate ownership. It also allows investors to divide it into tokens that can be traded on secondary markets. This will increase liquidity in the real estate sector encouraging greater capital flow into the continent’s real estate sector.
The shift is already attracting institutional investors and fintech innovators. Real estate investment trusts (REITs) and private equity firms are exploring blockchain-backed asset management, while digital exchanges are emerging to facilitate the trade of tokenized properties.
Global financial institutions such as Goldman Sachs and BlackRock have launched their decentralized asset financing projects in an attempt to explore tokenization opportunities. In Kenya, the Capital Markets Authority (CMA), admitted AlphabloQ and Yeshara Tokens into its regulatory sandbox to test the capabilities of tokenized real estate platforms.
AlphabloQ, a blockchain-powered investment platform, was founded by Trevor Kimani and John Mbui to enable individuals to put their money into fractionalized digital assets, including real estate. The two pioneers in this sector are hoping to challenge the assumption that real estate tokenization is a preserve of advanced economies.
Their platform offers exclusive pre-market access to tokenized properties, from 127 Imela Place in Nairobi to Park Villas in Nigeria’s Lakowe Lakes Golf and Country Estate.
Yeshara, founded by Njoki Muthuuri, is also an investment platform that allows fractional ownership. Its ambitious business model includes going beyond just real estate to include other assets, from traditional ones such as treasury bonds and bills, to others such as public service vehicles.
Real estate tokenization in the continent faces an array of challenges including regulatory uncertainty. Many African governments grapple with how to classify and oversee tokenized real estate, as the blockchain industry remains largely inscrutable to them.
“Blockchain is still a relatively new technology and is often mistakenly conflated with crypto, which carries a negative reputation due to scams. This misunderstanding also affects tokenization—a vital use case of blockchain,” the report states. Despite these obstacles, industry momentum is building.
The global tokenized real estate is projected to grow by $3 trillion by 2030—and with institutional support growing in Africa, local tokenization firms are set to seize the upcoming opportunities.
Analysts do not perceive tokenization as a replacement to traditional financing, but as a complementary ally that will hasten inclusion and stamp out prevailing difficulties in property ownership.
