Fractional Ownership of Real Estate: Possible With NFTs or Not?
By Anthony Onwukwe
Yesterday, I watched a YouTube video uploaded by Jointly about equity ownership of real estate by either Co- investing in the construction or by Co-owning a property. And the possibility of not having to wait till one has the funds, to buy a complete property or land, before benefitting from the real estate market. You can own a fraction, unit, share, percentage of the whole pie and still cash in by receiving rental, from sale of property or via stakes..
Great right?
But is this possible with Non Fungible Tokens?
NFTs can be used to represent ownership of physical items and real estate too, and asides the provision of authenticity, uniqueness, value and other benefits of tokenisation, Fractional Ownership is possible with NFts.
Imagine I want to make profit from my new constructed mansion in Maitama, Abuja, Nigeria, price for the property is 700million naira, and I have noticed that purchasing capacity has diminished among buyers, because of inflation and other factors. So getting one to buy my property for the asking price at once, might be difficult.
What I can do is to issue out tokens in bits to a large number of Investors. I mean blockchain enables it. I can sell part of my property to a large number of Investors and make ownership in that property in fractions.
Here is how it goes:
A) I tokenise my property and issue tokens out. Each holder owns a percentage in the property. Of course validated by the purchase of the token. And it is going in to be in a cheaper price.
B) Investors who have the tokens become joint owners and can receive a rental income for doing so, profit split on capital appreciation upon sale or both.
C) If you are that person that likes sharp- sharp money, you can sell your fraction of ownership in my property to a buyer at a higher price or to a co-investor even without a middle man. Liquidity is not a problem here.
D) Investors can split costs. So Adekunle, Hakeem and Ekanem who receive a net-income of 10million, 30million and 45 million naira , respectively can decide to own a 50million naira estate in Jabi, without buying a land or erecting a structure.
They will own fractions and rights in the property, earn rentals and upon sale, get compensated according to their percentage in ownership.
This lowers the amount of startup capital needed to get into the real estate market, making it more accessible to new investors.
And as a real estate company, you can utilize the NFT and Blockchain technology to make ownership of properties in evenly divisible parts. Raise funds easily and this can bridge the gap between the middle class and the rich in terms of investing power and participating in the real estate market.
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