I came across some interesting insights shared by Kunal Bhasin of KPMG Canada recently. He spoke at the Collision Conference in Toronto about how, very soon, institutional operators may drive real estate into DeFi. This got me thinking about what kind of change and benefit that could bring to the real estate market.
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Imagine owning a slice of some significant commercial property, like some big shopping mall without buying the whole thing. That is the power brought by tokenization, said Bhasin, who added that it could shift who owns these properties. Rather than traditional real estate investors or pension funds, he said, it could be DeFi operators who are the owners. This potentially opens up real estate investments to people beyond those with massive financial resources. Tokenization enables property ownership to be fractionalized into smaller, controllable portions. For example, the Eaton Center in Toronto is a piece of property that a family office could own. This would allow real estate investing to be more democratized and open to many more people.
However, Bhasin said this would take a more "authorized" DeFi environment. Institutions want to know whom they're dealing with to be comfortable making that investment. Real estate in DeFi holds enormous potential. Once the environment is more regulated and institutional operators are done playing with DeFi, Bhasin believes real estate could finally come aboard DeFi. It would be among the significant cryptocurrency use cases driving interest and investment.
Looking at global examples, we can already see certain movements in this direction. Real estate has joined the digital revolution in El Salvador, where Bitcoin has already been accepted as legal tender since 2014. Just recently, Bitfinex Securities announced a tokenized bond for funding related to constructing a large hotel complex.
This bond will be running on Bitcoin's Liquid Network, one example of how digital assets might be used to raise capital for real estate projects. It illustrates how accessible these opportunities can be because investors can participate even with a minimum investment.
Developments in purchasing real estate with cryptocurrencies have occurred in Spain. For example, the real estate agency Spain Homes partnered with Binance Pay to enable property purchases using Bitcoin and other cryptocurrencies. This just goes to prove that this is not going to be a concept of the future but is already happening in most parts of the world. These examples show growing tolerance for and onboarding of digital assets within the real estate market while revealing new democratization opportunities in real estate investment.
Recall, though, that this shift into DeFi for real estate depends on constructing an environment that will be safe and regulated. The institutions are looking to feel confident about the counterparties in these transactions.