Recently, Deloitte, a globally renowned professional services firm, released a forecast that by 2035, tokenized real estate is expected to account for 10% of the global market share, with a market value exceeding 4 trillion US dollars, and the industry’s annual growth rate is projected to reach 27%. This highly forward-looking prediction has sparked widespread discussions in the real estate and financial sectors. Abdul Rafay Gadit, co-founder of ZIGChain, in his guest article, deeply analyzed the current development status, transformation potential and future direction of tokenized real estate around this trend.
At present, the global real estate market is huge. The value of the real estate market in the United States exceeds 100 trillion US dollars, while the total value of the global real estate market is as high as 700 trillion US dollars.
However, in sharp contrast, the liquidity of real estate assets is extremely scarce. The World Economic Forum report points out that the insufficient liquidity in the real estate market makes transaction costs account for 1% to 3% of the property value, and the transaction costs incurred as a result amount to tens of billions of US dollars every year. This liquidity barrier not only hinders the value exchange between homeowners and potential investors, but also keeps the Crypto asset capital market, which is over one trillion US dollars in scale, out of the door, making it difficult for them to enter the traditional trusted asset field of real estate.
To understand the development of tokenized real estate, it is necessary to first clarify the concept of real-world assets (RWA). In 2015, Ethereum was the first to propose the concept of asset tokenization, allowing various assets to be split into tradable digital shares. In recent years, the tokenization cost on many blockchain platforms has dropped significantly to nearly zero. The concept of RWA is broad, covering tokenized assets of all non-native Crypto assets. Among them, “soft” RWA includes stablecoins and tokenized equity. “Hard” RWA is the tokenization form of physical assets such as real estate, vehicles, and precious metals.
Although there have been successful cases in the real estate sector such as the completion of a $18 million tokenization issuance of part of the equity of St. Regis Aspen resort, the key to truly driving industry transformation may emerge in the global middle-class real estate market.
Tokenized real estate is expected to bring fundamental changes to the real estate market. In the past, insufficient liquidity has always been a key factor restricting the development of RWA. For real estate RWA to succeed, it is necessary to achieve a two-way flow of liquidity. On the one hand, tokenized real estate products should be widely launched. On the other hand, a reasonable incentive mechanism should be designed through a networked team to attract capital inflows. Dividing large asset-backed debt into small shares enables retail investors to participate in the investment with a small amount of funds, thereby expanding the potential liquidity pool.
However, feasibility does not necessarily mean success. RWA builders need to strategically attract institutional and retail funds to prevent the market from falling into a failure predicament. At present, the industry has shown early signs of network effects. Every new tokenized property added enhances the utility of the entire ecosystem, attracts more investors, and thereby prompts more homeowners to choose to tokenize their properties. As the critical scale required for this virtuous cycle accelerates its formation, its development speed has exceeded the expectations of many industry veterans. Those projects that can deeply integrate traditional real estate expertise with blockchain infrastructure are highly likely to become the leaders of the future market. Like Propchain, which tokenizes part of the real estate share, compared with traditional real estate investment, it not only provides annualized returns but also shortens the lock-up period. KiiChain, on the other hand, focuses on tapping into the potential of RWA in Latin America, which are typical representatives of innovative development in the industry.
The function of tokenized real estate goes far beyond optimizing existing processes; it fundamentally reshapes the connotation of real estate ownership and investment in the digital age. Its transformative power is reflected in multiple aspects: achieving fragmented ownership, splitting real estate into thousands of tokens, and significantly lowering the investment threshold; Achieve programmable compliance with smart contracts, automatically meet regulatory requirements, and reduce intermediate links; Break geographical restrictions, form a global liquidity pool, and attract global capital to participate; Build an all-weather trading market and break free from the constraints of traditional business hours.
Although people had doubts about the tokenization of real estate due to the 2008 financial crisis, in fact, there is an essential difference between the two. The financial crisis of that year originated from combining high-risk mortgage loans into abstract “de-risk” units, while tokenization is to split assets into smaller and more transparent parts. Although tokenization cannot eliminate asset risks, it significantly enhances market liquidity and gives more people the opportunity to participate in the wealth appreciation of real estate. Tokenization is expected to alleviate the two major social problems of housing affordability and the shortage of investment opportunities by enabling more people to participate in leveraged and stable asset investment.
The real estate market is standing at a crossroads of transformation. Participants who stick to the traditional model may gradually be surpassed by tokenized alternatives. RWA is not only a technological upgrade, but also a complete reconstruction of the valuation, transactions and leverage utilization methods of the $700 trillion real estate market.
For investors, it is crucial to follow this trend. As the regulatory framework gradually improves and institutions accelerate the adoption of tokenized real estate, the time window to seize market opportunities is rapidly closing. This liquidity revolution will not only change the way real estate is traded, but also make real estate, the world’s most enduring store of value, more accessible, and is expected to release trillions of dollars of frozen capital. In the current context of increasing volatility in the financial market, tokenized real estate, with its characteristics of both stability and accessibility, is becoming a common pursuit for both traditional investors and Crypto asset investors. In the future, whoever can lead the transformation of real estate tokenization will be able to take the dominant position in the market. Those participants who failed to keep up with the pace of change in time may have to explain to shareholders why they missed this major development opportunity.
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