Smartlands, a UK-based startup, is launching a real estate tokenization project that will enable retail and institutional investors to purchase a fraction of properties and benefit from capital appreciation while simultaneously enhancing the liquidity of the market.
Enhancing Real Estate with Blockchain
Blockchain and Distributed Ledger Technologies (DLT) are continuously making steps in the traditional finance securities.
This time the British startup Smartlands is developing an ambitious project of tokenization of real estate. Smarlands provide a platform designed to connect asset managers and property owners with investors through the provision of blockchain-based, asset-backed securities.
The company counts on a diverse team with experience in banking, compliance, fintech, venture capital and, of course, blockchain technology. With headquarters in London, Kiev, and Vilnius, Smartlands aims to build a 2.0 crowdfunding platform that allows users to purchase pieces of real estate thanks to tokenization.
The ultimate goal, according to CEO Arnoldas Nauseda, is to enhance the liquidity of the real estate market thanks to the blockchain technology that allows the fractionalization of properties.
Real estate is traditionally an illiquid market. Tokenization, however, will facilitate liquidity through the exchange of tokens that are directly representative of a slice of tangible property.
Smartlands first project consists of the tokenization of a £12 million (~$15 million) student accommodation building in Nottingham. These kinds of investments are usually a privilege of institutions or pension funds, but tokenization opens the market to a new demographic.
Retail investors can purchase a token from as little as £500 (~$600). The token itself represents their beneficial interest in the underlying property and in any capital appreciation or earnings, such as rent, gained through it.
A second upside is can be seen in the case of exiting a property-based investment. Nowadays such procedures are very bureaucratic and time-consuming. Tokens can be traded in a peer-to-peer market allowing the investors to exit in a minimum span of time, making the whole market significantly more liquid and efficient.
An additional advantage of a tokenized real estate market is that it can be broadened globally. In the current market, the opportunity for retail investors to access projects in another jurisdiction is often difficult due to bureaucratic obstacles and asymmetric information.
Smartlands carried out an ICO in January 2018 on the Stellar Blockchain Network. Naturally, tokenization of properties will also be enabled via the Stellar Blockchain, which has proven to be very cost-effective with 5,000 transactions on the network costing no more than a penny.