The real estate market includes residential projects and connected with almost every type of commercial activity – be it office spaces, various facilities, factories, logistics, or warehouses.
This means a significant part of the world economy depends on the real estate market’s performance and growth. Interestingly, though many major problems plague the industry, it is still growing year over year. If these problems are removed from the equation, the industry can grow at an unprecedented rate.
Before processing to discuss it, let’s start with the picture of the present real estate market.
The Real Estate Market Scenario
According to the MCSI report published in June 2020, the market cap of professionally managed global real estate investment markets rose from $8.9 trillion in 2018 to $9.6 trillion in 2019 – a 7.8% growth. This is more than double the growth rate of 4.1% for 2017-2018.
At 41.3% in 2019 (from 31% in 2009), the US real estate market is still the single biggest contributor by a substantial margin followed by Japan (10.6%), UK (9%), China, Germany (7%), France (5.3%), and Canada (4.4%) respectively. Upped by $271 million from 2018, the current US real estate market is worth $3.418 trillion, which is substantially higher than that of Japan ($881.4 million).
The Issue with the Current Centralized Global Real Estate Market
Though some parts have been digitized, the current real estate market is still primarily reliant on pen-and-paper methods. This entire system is highly centralized in nature by tradition, and some factors have prevented it from modernizing. In its search to offer security, the system has compromised with speed and efficiency. Here are a few primary issues associated with this archaic model –
Illiquidity – Being immovable, real estate falls into the highly illiquid asset category. The high price and building time associated with it means developers and investors have to stay invested for years, even decades. Then finding buyers willing to offer the right price adds to further waiting periods. All these developments and asset transfers involve multiple middlemen like a certifying notary, which increases complexities. This has led to a high entry barrier for potential investors who are unwilling to make long-term investments.
To address the problem Real Estate Investment Trusts (REIT) was launched, which acts similar to a mutual fund. While REITs periodically pay investors dividends, some of them are tradable in exchanges. Though the US adopting REITs in the ’60s has managed the liquidity issue quite a bit, it remains a young investment method in most countries. So far, only about 20 countries have introduced REITs and that too in the 21st century.
Lack of transparency – The real estate market is plagued with fraudulent activities over the decades. The exchange-traded REITs, despite being highly regulated, have also faced numerous scams. These incidents are particularly high among non-publicly traded funds. This means investors have to be cautious and do their own research or legal practitioner consultation before investing in any. All these shortcomings resulted in REITs becoming a still risky, diversification option for middle-class investors. Also, the sheer number of paper trails involved means there’s an inherent possibility of error or open to scam.
Complicated regulatory environment – Real estate investment and trading, even with REIT facility, needs to abide by various regulatory guidelines. These guidelines vary widely across the globe most often. Therefore cross-border real estate purchase and trade complicate the matter farther. These regulatory complexities in REITs translate into high fees for the maintenance and management of the investor portfolios. Therefore the entire process naturally becomes laborious and very slow-rolling.
Additionally, many other unforeseen issues collectively make it a high-friction area and investment option.
The Advantages of a Decentralized Real Estate Market
It is clear that the traditional centralized real estate system is inefficient and self-sabotaging. The answer lies in a decentralized system leveraging blockchain technology. It offers the following advantages that make the decentralized approach a game-changer.
Fractional Ownership – Blockchain technology, by its very nature, allows the tokenization of assets – a virtual representation of a real estate asset. This means now, a group of buyers can purchase a real estate asset. Since the asset can be denominated to any number of tokens representing ownership, this grants them fractional ownership. The token holders can list and trade their tokens on any CEX or DEX, thus offering liquidity.
Shared database – Blockchain promotes a shared database system that is not governed by any single entity and accessible to anyone. This level of transparency offers investors a comprehensive overview of all transactions, ownership share, and others. Just like RIETs, dividends can be paid using tokens. This way blockchain’s shared database mitigates fraud and also simplifies share trading.
Trustlessness – A transparent database means there’s no need to depend on anyone’s word to make a trade or check validity as they can check for themselves. This completely removes the trust factor generally associated with RIETs. Also, Blockchain’s inherent immutability feature (with some protocol offering full finality feature) prevents data to be changed, giving investors the needed confidence.
Moving transactions to smart contracts – The smart contract feature of blockchain executes all pre-programmed conditions automatically and is tamper-proof. Smart contracts can execute any automated payment logic, shorting, etc, when certain conditions are met. This makes the entire process faster and less vulnerable to error.
No middlemen – Since blockchain’s algorithm-driven distributed network is self-correcting and absolute, this drastically reduces the maintenance cost, and therefore the need for intermediaries. Also, token transfers on the blockchain are done automatically without any third-party assistance.
All these blockchain features collectively cause the private equity space or the real estate market to be highly liquid, secure, and accessible to the general population.
The Realio Solution
One such project is Realio that aims to create the desired freedom within the private equity space.
It is a digital issuance, investment, and P2P trading platform developed leveraging distributed ledger technology. Realio integrates the functions of a tech platform provider and fund management. The platform includes a web-based platform and a mobile app for users to easily tokenize assets or build diversified investment portfolios of their own.
The Realio platform comprises several features and functionalities that make it a one-stop solution for real estate trade.
#1. Realio Networks
The distributed ledger network is designed to offer regulatory compliance in especially in a modular fashion within decentralized ecosystems. The asset-tracking protocol Realio employs records all transfers using a shared, chain-agnostic security token standard.
The modular, plug-and-play architecture enables Realio to create a single entry point for all public and enterprise blockchains. Currently, it supports Ethereum, Stellar, Algorand, Binance Chain, Fusion, and Ravencoin blockchains. This empowers companies to either publicly trade tokens on the network or privately among their members.
The Realio network has different validator nodes –
- The foundations in charge of the supported public blockchains such as the Algorand Foundation
- Other issuance platforms and issuers
- Asset managers
- Financial institutions
- PE funds
- Other major stakeholders
#2. Realio Tokens
Realio network functions using three tokens –
RIO – A true utility token, RIO is used to pay fees for different activities on the network, like token issuance, token listing on RealioX, trading fee payments, etc.
rUSD (RealioUSD) – A USD-pegged stablecoin (at 1:1 ratio), it is kept in reserve by Prime Trust, Realio’s custodial partner. This can be used to trade with USD pairs on either RealioX or other SwitchDEX-enabled wallets.
RST – Issued as an Algorand Standard Asset (ASA), RST is a hybrid security-utility token utilized to represent ownership and grant profit share rights within the network. Only verified investors who are KYC and AML compliant can own the token. Using Algorand functionality, the RST token is interoperable with other supported blockchains.
1) To avoid the inherent central-point failure associated with all centralized exchanges, Realio offers a built-in decentralized exchange called RealioX. The DEX facilitates P2P, OTC tradings, and swaps therefore completely cutting the intermediaries. RealioX brings a plethora of functionalities to promote the easy trading of real estate assets.
2) To encourage market makers (users) to add liquidity, the exchange allows makers to get 100% of the trade fee paid by takers plus an additional 1% for every trade value as a reward.
3) Though no KYC is required to access the exchange or trade tokens, the Realio compliance protocol ensures that only verified and legally eligible investors and traders can trade platform-issued tokens. This makes RealioX highly security compliant.
4) The Realio compliance protocol ensures that Realio platform-issued assets abide by the same rules outside its ecosystem i.e. other DEXs while gain added functionalities inside it. This empowers issuers to create enough control to ensure compliance of secondary markets, therefore listing their tokens on RealioX immediately.
5) Realio’s in-built interoperability function enables RealioX to allow P2P trading of any tokens generated on its supported blockchains.
6) RealioX directly conducts all OTC transactions as atomic swaps privately in its own network and offers a built-in chat feature to allow traders to negotiate directly. This will enable traders to do large trade without any middleman easily also benefits fund issuers with long lockups to avoid potential redemption.
7) RealioX will bring integrated trading bot features that can be customized as per traders’ requirements for hedging, market-making, and arbitrage activities.
8) The DEX is available 24X7 for trade thus promotes the financial inclusion and market efficiency. Users just need to wait for meeting the compliance criteria and serve the lockup period.
Partnerships for KYC and Investor Accreditation
As a mandatory compliance measure, Realio has enabled KYC and accreditation verification. In an effort to not save sensitive investor information on-chain, the firm has partnered with third-party leaders in the space.
As for custody and KYC providers, Realio has primarily partnered with Prime Trust along with other firms, including Polymath, TUSD, OKcoin, and Stronghold. The firm has collaborated with VerifyInvestor as its Investor Accreditation Verification provider.
#4. Realio Wallet
The Realio wallet is a multi-currency wallet that supports fiat as well as other asset-backed tokens. Once its custodian partner PrimeTrust verifies KYC/AML compliance, it provides USD accounts to investors. Now you can deposit USD (called fiat on-ramp) into your account directly through bank wire, credit card, or Automated Clearing House.
For crypto coins, tokens, and stablecoins, the Realio wallet system is non-custodial in nature, enabling a user to have total command over his own wallet. Additionally, it offers private key encryption services allowing users to choose the various optional levels of security. Realio will also provide cold storage features to hold token long term with added security.
The real estate space is ever-growing and therefore attracts an increasing number of businesses and people. Handling this increasing influx of transactions and keeping it fast, error-free, and transparent means the total incorporation of blockchain technology is only a matter of time.
Realizing the inevitable, Realio has developed itself to be one of the top blockchain-based projects focusing on this market. With its integrated one-point solution, it has not only solved the issue of speed, security, and intermediary fees, but has also brought a streamlined compliance layer, relieving investors of legal hassles. As a tech-savvy global population is on the rise, blockchain-powered Realio solutions naturally bring immense investor funds to the real estate market, thus enriching it further.