real estate

Written by Erik Weijers 3 months ago

It has begun: buying and selling real estate as NFTs

There are several fintech startups today that sell real estate as NFTs. This sometimes takes the form of auctioning off an entire house and sometimes as fractional ownership. In any case, it will have a major impact on financial freedom for both buyers and sellers.

Vesta Equity, for example, lets homeowners sell part of their home through so-called fractional NFTs. Homeownership can thus be divided among several people. This form of real estate buying does not give residential rights. Instead, it becomes possible for anyone to invest in real estate, including people who do not have enough income to finance an entire house. On the other hand, homeowners get access to the capital their house represents without having to sell the entire house or use it as collateral.

Vesta uses the Algorand blockchain to mine the NFTs. Is all this allowed? According to Vesta, the SEC is clear on the matter: fractionalized real estate falls under so-called securities laws.

A lot is happening in the NFT real estate market. In March 2021, Propy, online platform for real estate deals, was the first to auction an entire house as NFT. The house, in Kiev, had been sold in 2017 via a smart contract on Ethereum and was also paid for in one lump sum in Ether. That was a first at the time. Currently, Propy has the paperwork in place to do the same in the United States. One obstacle is that the sale of houses can still happen without a loan: the buyer must pay the entire amount at once in Eth. Propy says it is now working on loan options.

Economic borders disappear

Trading real estate, whether in fractions or not, shows how important NFTs are for the democratization and inclusion of the opportunity to invest. Until now, investing in real estate funds was limited to the middle class of the Western world. Whereas, not long from now, a handy teenager in, say, Cairo can become the owner of a small fraction of a house in Beverly Hills. All he needs is a cell phone and a knack for crypto.

We see the same trend of democratization and financial inclusiveness with the introduction of NFTs in the music world, where fans can suddenly become co-owners of an artist's music rights. It all goes to show that NFTs are more than a passing fad. They are a technology for making things of value widely accessible.

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