Andrew Carnegie, the legendary American industrialist and philanthropist said,
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than all industrial investments combined”
While those numbers may not be accurate in today’s world, a World Wealth Report showed that even in the last 7 years, high net worth individuals have an average of 17% of their portfolio in real estate. It is still one of the most stable asset classes and is widely considered to be the most suitable for an average person. Another survey done by the US Federal Reserve showed that the wealthiest 10% own 45% of real estate. Those numbers are likely much more extreme in developing economies like China, India, and Vietnam where real estate is the primary asset class for investment purposes. However, they aren’t frictionless. Real estate investments come with a lot of problems like
- Extremely high transaction fees. In some countries, agents charge a fee of 5–10% for conducting the transaction. There are lawyer fees, transfer fees, and a host of other fees which can get as high as 30% depending on where you are.
- Transaction times are usually measured in weeks or months depending on the property, not counting the time it takes to match a buy and a sell bid, which can take up to a year or more. This also makes the investment one of the least liquid out there. In finance, the lower the liquidity for the asset class, the lower prices it demands in comparison to assets with similar demand but higher liquidity.
- The options available to most investors are usually limited to their city or local area.
- The barrier to entry for a real estate investment is usually very high. The amount depends from country to country, but almost always, it is worth multiple years worth of wages for the average person in that country.
- Transparency can be very low in a lot of cases, and in some legislations with less than strict laws for real estate developers, the industry is filled with frauds and scams.
This is where we come in. Estate Protocol is tokenising real estate keeping in consideration the idiosyncratic and unique nature of properties. Unlike the other real estate tokenisation projects that came before us (there were very few), we use the ERC1155 standard of smart contracts to tokenise each property according to its individuality. How do we do it?
- Decentralisation eliminates third parties and reduces implementation risks;
- It also ensures faster transactions and minimises the paperwork. Standard registration of the title of deeds with notarised documents could take up to 60 days or more. Estate Protocol transactions will take less than 10 minutes;
- Costs decrease by a huge extent, the buyers and sellers don’t have to pay the many intermediaries like agents, lawyers, etc.
- Liquidity is reached by providing access to fiat and cryptocurrency investors;
- Tokenisation and property division into fractions means a much lower barrier for entry and gives an opportunity for medium and small investors to enter the market
- Seasoned investors are able to diversify and create a global portfolio.
- Transparency increases because distributed web and hashes, along with every single term of the contract are recorded to the blockchain and is accessible to everyone on the network.
Estate Protocol democratises the real estate market, providing investors of all scales a much better product, with numerous benefits over the regular way of real estate investing. As with a lot of other industries being disrupted rapidly, the crypto community gets access to the new and improved product first. Stay tuned here and on our Twitter for updates on the project!