Non-fungible tokens are driving innovation in the real estate sector

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Over the last few years, non-fungible tokens (NFTs) have changed the way people think about asset ownership in the real and digital world. From art to real estate, NFTs are driving innovation across different industry verticals. In the real estate sector, deeds are widely used to represent the ownership of actual property. Buyers employ escrow holders, insurance companies, and lawyers to authenticate deeds. However, NFTs provide a much more efficient way to potentially bypass all these intermediaries, as blockchain technology can be used to verify ownership and settle transactions. A handful of transactions have already taken place in the real estate sector using NFTs. For instance,

• In May 2021, Propy, a tech firm active in the real estate NFT space, sold a property as an NFT for US$93,000 in Kyiv, Ukraine. In April 2022, Propy sold another real estate property as NFT for US$215,000 in Hyde Park, Tampa.
• More recently, Roofstock, a real estate technology firm, announced that the firm had completed its first property sale through NFT. Notably, the property located in the Columbia, South Carolina was sold for US$175,000. The purchase was completed using USDC, which is a digital stablecoin pegged to the United States dollar.
• In October 2022, Roofstock in partnership with Origin Protocol launched an NFT marketplace for physical real estate. Notably, the seller fees are reduced by more than 50% on the NFT marketplace when compared to traditional standards. In 2022, the firm also raised US$1.9 billion in a Series A funding round. After raising the capital, the firm entered into a strategic partnership with Origin Protocol to launch a real estate project offering on-chain transactions that are represented as NFTs.

There are several advantages of adopting NFTs in the real estate sector. For instance, tokenizing real estate creates frictionless transactions while simplifying the process. Another benefit of tokenization is that potential buyers can easily access real estate. These transactions are completed using stablecoins, and as a result, buyers do not have to worry about the volatility of the crypto markets.

However, NFT-based real estate transactions are expected to remain rare in the United States at least from the short to medium-term perspective, because regulations and county land record offices do not recognize NFT-based ownership transfers. It is expected that the traditional real estate industry and all the stakeholders associated with the market are likely to be slow in adopting the NFT technology and its application in the real estate world. But innovation is growing in the space.

Along with physical-world real estate, innovation is also taking place in virtual-world real estate. Several startups are operating in the space and are also raising funding rounds to innovate and drive market growth. For instance,

• In June 2022, Parcel, an NFT marketplace for virtual real estate, announced that the firm had raised US$4 million in a seed funding round, which was led by Framework Ventures. Launched in July 2021, the firm generated over US$500 million in sales in 2021. Further improving on its performance, Parcel surpassed US$1 billion in sales during the first six months in 2022.
• At present, the NFT marketplace aggregates real estate listings from several virtual worlds on the Ethereum blockchain, including Decentraland, The Sandbox, Voxels, NFT Worlds, Somnium Space, and Mona. Parcel is planning to use the June 2022 capital to further develop and expand its product suite. Notably, the firm is planning to launch a creative directory, Creatoverse, which will allow landowners to discover and employ virtual architects.

Over the next three to four years, as the prominence of NFTs continues to grow in the real estate sector, both physical and virtual, TechInsight360 expects more startups to emerge and innovate in the space. Furthermore, this will also lead to more investment opportunities for private equity and venture capital firms that are seeking to capitalize on the future growth potential of the NFT industry.

To know more and gain a deeper understanding of the global NFT market, click here.