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Where blockchain meets physical real estate - filling the gap between physical real estate and REITs

A blockchain is a digitally distributed, decentralized, public ledger that exists across a network, that is used to record transactions immutably creating trust, security and transparency at reduced cost, with speed and traceability. While cryptocurrencies is one of the most common use cases of blockchain, it can be also used for payments, capital markets, trade finance, insurance, just to name a few.

Its application to real estate can help verify financing, ownership, reducing fraud and transparency throughout the buying and selling process, as well as providing liquidity for investments. More recently, real estate tokenization has been gaining traction as it lowers the barriers to entry for investors as it can provide further access to real estate assets, from minimum sum to range and type or real estate.

While REITs is a form of real estate investment, it is costly to list and has to comply with MAS rules and regulations. Private REITs (or private equity real estate) on the other hand, are less regulated and is not traded on a stock exchange, it's risk profile may not suit many. Further, only accredited investors and overseas investors have access to a wider range of products which that are exempt from the Financial Advisers Act (FAA) and the Securities and Futures Act (SFA).

Hence, real estate tokenization has the potential to fulfil this gap. Offering investors access to unique real estate efficiently. A Capital Markets Services (CMS) license is required from the Monetary Authority of Singapore (MAS) for companies looking to offer such instruments to local retail investors.

A recap on the characteristics of physical real estate and REITs:

Physical Real Estate: Heterogenous, indivisible, immobile, requires maintenance and management, illiquid, high transaction cost, long transaction time, and owners are subjected to restrictions and policies.

REITs: Homogenous, divisible, mobile, requires no maintenance, liquid, low transaction cost, short transaction time, REITs are subjected to MAS rules and regulations while REITs unit owners are subjected to less restrictions.