3 Non-speculative NFT applications in the property market

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by Ahren Posthumus, CEO and co-founder of Momint.so, the #1 African Web3 marketplace powered by blockchain and smart contracts

Inflation, high mortgage interest rates and record high house prices make it increasingly difficult to buy a home. According to the September report by Fannie Mae, only 19% believe it is time to buy a home. Many respondents also indicate affordability constraints in light of the global economic state. At the same time, a statistic from MIT states that 93% of the property is out of reach for retail investors. 89% of US investors are interested in real estate, but only 3% can invest due to affordability constraints. The situation is exacerbated by the high fees buyers have to pay to enter their property and the long waiting times.

At the same time, we saw how the NFT bubble burst, causing many to lose faith in this technology. Hundreds of new collections are released daily, but according to one of Nansen’s reports, more than a third of all collections created trade for less than the amount it costs issuers to mint tokens. This was the case even before the NFT market collapsed.

However, the future of non-fungible tokens could be bright if the technology is used in the real world and used in its original sense – as a digital certificate of authenticity. Here are three non-speculative ways governments and reputable real estate firms can use NFT to provide the foundation for future stable growth in both traditional and digital markets:

Diversification and lower entry barriers

Real estate fractionalization, if done by reputable institutions, can boost the real estate market while lowering the entry barrier for retail investors. Interestingly, homeowners would not be required to sell the entire property. Instead, they could simply auction off a portion of their tokenized property to many people by issuing tokens. To make this concept more attractive to stakeholders, a seller can provide them with rental income in exchange for keeping assets or a profit share on capital growth on sale.

Also, fractionalization will allow people to spread their risk and have a stake in multiple properties without putting their entire portfolio at risk. It can also open up real estate investment for those who are interested but lack the necessary capital. People in South Africa, for example, will be able to buy a property token for as little as 10,000 rands (equivalent to $555) or even less. The amount of money required is determined by the price set by the owners and the number of shared NFTs they issue.

In the long term, this increases the number of market players. We may see fewer properties abandoned and unprofitable because they are too expensive to afford. The housing market will no longer be limited to only the wealthy. Futurent, Labs Group, Aqar Chain and RealT have all demonstrated notable applications of the concept of fractional real estate. Momint, the African Web3 marketplace, empowers property owners by allowing them to earn rental income from their tokenized property. They get an additional source of income and extract more value from the property without having to wait a long time or put in the effort for the property to pay off.

Secure data storage and monitoring

Real estate firms, both government and non-government, rely on paperwork to analyze and store ownership transfer information. In the event of a natural disaster, which has happened several times, this information will be lost or mixed up so thoroughly that the reorganization will take months. Mistakes will inevitably happen. Reports and agreements can still be written on paper, but to ensure data security, institutions can store digital copies of original documents on a blockchain that does not require an internet connection. Even if the keys to an NFT are lost, the digital certificate is not. It is permanently stored on the blockchain.

Furthermore, hackers often target public institutions. The information stored on Web2 can easily be replaced or stolen, putting people at risk. In this case, non-fungible tokens can prove their original function and prevent data theft and substitution.

Finally, the government would have an easier time monitoring the transactions and determining money laundering or tax evasion if all properties were tokenized. Because all data can be quickly compared to what is stored on the blockchain, there may be almost no unauthorized transactions.

The European Union Intellectual Property Office (EUIPO) recently released a document indicating that officials are considering using blockchain and non-fungible tokens to combat counterfeiting of real-world goods. The idea is to create a “digital twin” that is registered on the blockchain to prove that the item is real. EUIPO intends to have the new system fully operational by the end of 2023, which will necessitate the development of a registry system that will group together all EU IP holders, logistics operations and retailers. The authorities may use the same approach in real estate if all goes according to plan.

Faster and cheaper purchases

Real estate is more affordable if we exclude advertising costs and estate agents’ commissions, which typically take 2.5-6% of the total cost of the contract. In addition, a seller must pay closing costs and bank commission for the transaction. Even after that, the buyer may not have immediate access to the house. It can take up to 6 months to get everything in order and move in.

Buyers can avoid additional fees if recognized government institutions use a digital register. Transactions can be completed within seconds. Of course, contracting parties must examine the instructions before the transaction, but it is no more dangerous than a typical bank transaction.

It will not necessarily put traditional property companies out of business, but encourage them to seek more customer-oriented solutions. They can offer property purchase consultations via NFTs or paid access to their Web3 platforms, where interested buyers can view all available houses and examine their 3D models using VR technologies. Although it would require a higher level of qualifications, it could accelerate the sector’s overall growth and offer alternative sources of income for those ready to advance.

Propy, a blockchain real estate platform, recently helped TechCrunch founder Michael Arrington sell his apartment in Kyiv through an NFT auction. The firm continues to offer services such as deal management, a transaction platform and title and escrow. The European Regional Development Fund has officially supported the initiative.

Does every player in the real estate market need NFTs?

The bottom line is that tokenization is no longer a passing fad. The NFT market crash just showed that we should move on from speculative art collectibles. We now have a diverse selection of NFT applications that have nothing to do with hype or quick returns.

If we implement them correctly, non-fungible tokens can benefit individuals and organizations. Governments and non-governmental institutions will store and transmit data more securely, reduce the risk of cyber-attacks and speed up work without putting the public at risk.

Homeowners will generate more stable passive income by selling fractions of NFTs while maintaining ownership. Due to improved computing, home buyers would close transactions almost risk-free in seconds and receive the keys to their houses faster. Investors would participate in the established market without hundreds of thousands of dollars. It will increase public wealth and potentially improve the global economic situation.

I believe that if we issued universal instructions and started putting them into practice at the same time, mass adoption would be beneficial to each group. It just requires agreement on ground rules and careful regulation without trying to stop progress.