Berlin-based digital real estate investment company iFunded released an official announcement in which it announced the launch of its real estate tokenization platform, iEstate which is the first ever platform in the worldwide market that issues a security token based on real estate debt. Also, it will start issuing an equity-based token very soon.
The company is already established in Germany and aims to target institutional investors, banks and retail investors and connect them with real estate developers to help find financing for the projects.
Michael Stephan, CEO, and Founder of iFunded said:
“iEstate is iFunded’s evolution into the blockchain space, allowing us to build the first official platform that tokenizes real estate debt and equity with a security token, Private and institutional investors playing the field of the real estate market will have the chance to finally experience a transaction platform that offers liquid investments in a normally illiquid asset class. The platform provides access to pre-vetted real estate projects and the tools investors need to engage in profitable business deals instantly.”
Problems in Traditional Investment Platform
To purchase real estate properties and to invest in it is a tiring process which developers and investors usually experience. The problem includes:
High Investment Fees: Traditional real estate investments’ transaction costs are expensive as it demands taxes, commissions and legal charges. Other than this, management and participation charges are also required.
Lack of Liquidity: Direct investment in real estate properties is a very time-consuming process. Buying or selling property quickly and efficiently is almost impossible especially when the cash payment is required at short notice.
Lack of Transparency: Due to the complex tax system, legal procedures and lack of local market knowledge make the direct investment cumbersome, and thus investors have to involve third-party into it. Due to third-party involvement, the whole process becomes non-transparent.
Non-satisfactory Indirect Investment: Tradition real estate indirect investments are also non-transparent and time-consuming. Due to the involvement of intermediaries, investors cannot control their investments directly as the investment decisions are taken by middlemen. Also, intermediaries do not send regular feedback to investors which makes this process non-satisfactory.
Limited Access to Investors: Real Estate developers often face problems of high charges or interest rates. To finance their projects, they need to go to the bank for the loan which requires interest rates to be paid, or they have to pay brokers to search investors for them. Both options are expensive.
The Blockchain is the Foremost Solution. How and Why?
Low Fees and Faster Process: Blockchain Technology solves the issue of the time-consuming process of fund transfer and complex process of ownership transfer. Blockchain makes the real-time fund transfer possible which makes the ownership trading very simple and increases liquidity. These Blockchain advantages reduce the requirement of agents which make the investment costs relatively low.
Transparent System: By using blockchain technology, all parties like developers, investors, and mediators receive the real-time updates of the process and investments thus the whole process become transparent for everyone.
Accessibility to various types of Investors: As developers face the problem to find investors, tokenization of properties makes the real estate market open for both retail and large investors.
Smart Contract: Blockchain Technology uses a smart contract which eliminates the third party. Predefined actions to the system help to have fewer errors, less time consuming and of course less expensive.
Tokenized securities offer clear benefits like faster settlement time, increased liquidity in illiquid markets, ownership of assets and also helps get rid of unnecessary middlemen. Unlike utility tokens they haven’t really taken off due to regulatory uncertainties, it will be interesting how it will play out in 2019.
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