Why NFTs could be a changemaker in the Real Estate sector

Prashin Jhobalia, VP - Marketing Strategy, House of Hiranandani, writes that while how the use of NFTs in real estate will evolve is yet to be determined, the prospects are quite exciting. Real estate organisations in India are also looking at this domain with rapt interest and we are likely to see NFT projects from Indian real estate companies soon. In line with how other industries have approached NFTs, using this for customer engagement and marketing is likely to be the first step.

Non-Fungible Token or NFT is the talk of the town today. What was a niche market fuelled by the interest of a few enthusiasts today has boomed into a $40 billion market as of 2021. The boom has coincided with the general interest in cryptocurrency globally.

NFTs are not restricted to the niche corners of the internet anymore. There are over 28.6 millionwallets that have traded in NFTs in 2021, a huge jump from 545,000 in 2020. The popularity of NFTs has not gone unnoticed by brands too. Several leading brands including Coca-Cola, Gucci, and Adidas have launched their own NFT collections. Several celebrities and artists have launched their own NFTs too.

The real estate industry has not remained on the sidelines and has embraced NFTs in varying capacities. Ranging from marketing and promotional NFTs to the actual sale of properties as NFTs, there are many stories about how real estate marketers are leveraging this new concept.

NFTs in real estate

For an industry that is looking for new ways to engage with its audience, real estate organisations are quick to make use of the latest trends in marketing. NFTs are of course a no-brainer.

Globally, organisations are looking at various avenues in which NFTs can be used in real estate. Propy, an online real estate platform was the first to complete a real estate sale as an NFT. TechCrunch founder Micheal Arrington’s apartment was sold as an NFT for $93,000 in 2017.

While full-fledged real estate transactions happening as NFTs regularly may still be a while away, there is a lot more that organisations are doing using digital tokens to engage with their clients and to add value to the real estate transactions already taking place.

Why NFTs could be a changemaker in Real Estate transactions?

NFTs hold huge potential when it comes to the real estate industry. Blockchain transactions are protected by smart contracts, which makes determining ownership easy and secure. The transactions also become smoother given there are no intermediaries are involved in such transactions. However, the regulatory framework needs to change to incorporate these changes to make this a smoother process.

NFTs can also be a great way to liquidate the properties more effectively and make the process of mortgages simpler. Tokenizing of properties is a concept that is gaining momentum where the owners can issue NFTs that correspond to a fraction of the total value of the property.

Investors can purchase these fractions using their crypto wallets and can earn interest or rent based on pre-agreed terms with the property owners. Real estate organisations can also sell shares in the property they are developing as NFTs and get investors on board through the same process.

Going forward, the scope of using NFTs in real estate transactions is quite significant. Experts predict that the sale and transfer of properties could happen as NFTs shortly. There are some cases of this already taking place, but with changing regulations, buyers can buy a physical property by purchasing an NFT which is the digital token version of this.

How can Real Estate use NFTs?

While the concept is still in a nascent stage, there are many ways in which NFTs could be leveraged by real estate organizations. Here are some of them.

NFTs for customer engagement

One of the most popular ways that brands both real estate and others have been using NFTs is to boost engagement with current and potential customers. Most such campaigns involve competitions where NFTs are given as prizes to the winners which come with special privileges.

Innovative real estate organisations have come up with NFTs that represent the physical asset as digital tokens where the owners get the NFT along with the property and can use this NFT in various ways. The subsequent transactions could be in the form of NFTs with paperwork to augment the deals for legal validity.

Buying virtual real estate

Buying virtual property in the metaverse is also another great way to engage with the audience. Real estate companies launching new projects can also release virtual versions of these projects. Some platforms can even help virtual asset owners mortgage these virtual assets.

Sandbox platforms like Axie Infinity, Robolox, and Upland are quite popular among digital citizens. The buyers can purchase virtual land parcels using crypto wallets and these are sold as NFTs. The buyers get access to the virtual asset.

NFTs for mortgages and liquidity

This is something that was touched upon in the previous sections where property owners can use NFTs to tokenize their property and sell fractional ownership to buyers. Smart contracts based on the terms that are agreed on by the buyer and seller make these transactions possible.

Several investors can thus pool their investments to purchase a property and each owner can have rights to the property based on the percentage they own. It’s like buying a summer home in the mountains that is split between 2-3 families. These families can get rent or use the property when they need it, as per their agreement.

What’s next for NFTs in real estate

How the use of NFTs in real estate will evolve is yet to be determined. But the prospects are quite exciting. Real estate organisations in India are also looking at this domain with rapt interest and we are likely to see NFT projects from Indian real estate companies soon. In line with how other industries have approached NFTs, using this for customer engagement and marketing is likely to be the first step.

India is a growing market for NFTs and there is a growing interest among investors to allocate some of their funds into this evolving segment. Real estate is also everyone’s favourite investment given how the value appreciates especially in fast-growing cities. NFTs have huge potential in the real estate segment in India. How innovative organisations approach this and how the buyers take to this remains to be seen.