Abstract
The real estate industry is one of the most important and oldest asset classes in the world. It is also one of the most inefficient and inflexible ones. This paper explores a disruptive technology that could solve fundamental problems within the real estate market. With the advent of blockchain technology, and therefore the concept of tokenization, two major possibilities have arisen: first, the fractionalization of assets or any claims; second, the digital representation of asset ownership. The former feature has the potential to enable access to any investor to realize real estate investment opportunities. This could lead to a more democratized investment environment and greater liquidity. The latter aspect opens up room for real innovation by displaying asset ownership on a digital platform. This paper presents current use cases of blockchain application in the real estate industry. To further verify the business feasibility, it will provide insights gained through industry experts and real estate tokenization company representatives. According to the results, the concept will most probably disrupt the current real estate market and lead to major shifts in revenue and asset ownership in a digital environment. The paper identifies current challenges and hurdles that are yet to be overcome in order for blockchain technology to fully mature in this particular market.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Norta et al. (2018) describe the term trustless transactions as those between at least two parties who agree on terms with a certain possibility of contractual deviation by the counterparty. One way is to include an intermediary in order to minimize this possibility. Another way would be to utilize smart contracts. Smart contracts have the ability to dis-intermediate the so-called trustless transaction.
- 2.
According to the DLT-Draft Bill (2019) that was dispatched by the Swiss Federal Council in December 2019, the token economy in Switzerland received clear guidance on what types of tokens are issuable. With a precise and very positive regulatory framework for crypto assets, Switzerland was henceforth considered a pioneer in developing an innovative market for crypto assets.
- 3.
BaFin is the financial regulatory authority for Germany: “The Federal Financial Supervisory Authority”. In German: Bundesanstalt für Finanzdienstleistungsaufsicht.
References
Andoni, M., Robu, V., Flynn, D., Abram, S., Geach, D., Jenkins, D., McCallum, P., & Peacock, A. (2019). Blockchain technology in the energy sector: A systematic review of challenges and opportunities. Renewable and Sustainable Energy Reviews, 100(1), 143–174. https://doi.org/10.1016/j.rser.2018.10.014
Baum, A. (2020). Real Estate Tokenisation? The Future of Real Estate Initiative. Saïd Business School, University of Oxford Research. https://www.sbs.ox.ac.uk/sites/default/files/2020-01/Tokenisation%20Report.pdf
Baum, A., & Hartzell, D. (2012). Global property investment: Strategies, structures, decisions. https://www.researchgate.net/publication/288630809_Global_Property_Investment_Strategies_Structures_Decisions
Beck, R., Avital, M., Rossi, M., & Thatcher, J. B. (2017). Blockchain technology in business and information systems research. Business & Information Systems Engineering, 59(6), 381–384. https://doi.org/10.1007/s12599-017-0505-1
Bloxxter 1 GmbH. (2020, October 12). EU-Wachstumsprospekt. Bloxxter 1 GmbH. https://assets.ctfassets.net/tzwfn2nlmk5k/5sGlW7wDWN5ZB0pFHjkDAR/a522dfe5c519d6491879413eb7a321a5/Bloxxter_1_Zusammenfassung_Wertpapierprospekt.pdf
BrickMark AG. (n.d.). Homepage. https://brickmark.io/
Buterin, V. (2015, August 6). On public and private blockchains. Ethereum Blog. https://ethereum.github.io/blog/2015/08/07/on-public-and-private-blockchains/
Coinmarketcap. (2020, November 20). Crypto assets total market capitalization. Coinmarketcap. www.coinmarketcap.com
Cole, R., Stevenson, M., & Aitken, J. (2019). Blockchain technology: Implications for operations and supply chain management. Supply Chain Management, 24(4), 469–483. https://doi.org/10.1108/SCM-09-2018-0309
Crowdlitoken AG. (2020, April 6). Wesentliche Anlegerinformation. Crowdlitoken. https://crowdlitoken.com/wp-content/uploads/doc/kiid/KIID_CRT_DE.pdf
Equisafe. (2019, June 25). Throwback: First sale of building through blockchain technology in Europe completed on Equisafe platform €6.5 millions. Equisafe. https://www.equisafe.io/blog-posts/throwback-first-sale-of-building-through-blockchain-technology-in-europe-completed-on-equisafe-platform-eu6-5-millions
European Commission. (2020). Proposal for a regulation of the European Parliament and of the Council on Markets in Crypto-assets (MiCa), and amending Directive (EU) 2019/1937. European Commission. https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1600947409472&uri=COM:2020:593:FIN
Exporo GmbH. (2020, October, 21). Wertpapier-Informationsblatt. Exporo GmbH. https://assets.ctfassets.net/4xa6vepaoovq/66J06Zbt0XmmC1pfI8UHUa/dc5f8c7cf8dabc48b82ffadec80f0243/Wertpapierinformationsblatt_Exporo-Projekt-151-GmbH.pdf
Fabozzi, F. J., & Kothari, V. (2007). Securitization: The tool of financial transformation. Yale ICF Working Paper No. 07-07. https://ssrn.com/abstract=997079
Fandl, K. (2020, Spring). Can smart contracts enhance firm efficiency in emerging markets? Journal of International Law and Business, 40(3). https://scholarlycommons.law.northwestern.edu/njilb/vol40/iss3/2
Finexity AG. (2020, April 15). Basisinformationsblatt. Finexity. https://images.takeshape.io/b79f31a2-7325-4efd-9cef-65526ff6ab78/dev/9e0212f7-e701-475f-bb1a-4721d1bbf5aa/FINEXITY_neuprop040-2_BIB_HighRise.pdf
Finoa. (2018). The era of tokenization—Market outlook on a $24trn business opportunity. Medium. https://medium.com/finoa-banking/market-outlook-on-tokenized-assets-a-usd24trn-opportunity-9bac0c4dfefb
Fu, L. (2018, October 10). Peakside Capital launches its first tokenized RE fund. Perenews. https://www.perenews.com/peakside-capital-launches-first-tokenized-re-fund/
Gaur, V., Seshadri, S., & Subrahmanyam, M. G. (2011). Securitization and real investment in incomplete markets. Management Science, 57(12), 2180–2196. https://doi.org/10.1287/mnsc.1100.1155
Georgiev, G., Gupta, B., & Kunkel, T. (2003). Benefits of real estate investment. The Journal of Portfolio Management, 29(5), 28–33. https://doi.org/10.3905/jpm.2003.319903
iEstate GmbH. (2020, December 4). Vermögensanlagen-Informationsblatt. iEstate GmbH. https://ifunded.de/de/download/project/beautique-apartments/document/vermogensanlageninformationsblatt_pdf_7
Kalyuzhnova, N. (2018). Transformation of the real estate market on the basis of use of the blockchain technologies: Opportunities and problems. MATEC Web Conf. 212, 06004 (2018). https://doi.org/10.1051/matecconf/201821206004
Kamble, S., Gunasekaran, A., & Arha, H. (2019). Understanding the Blockchain technology adoption in supply chains-Indian context. International Journal of Production Research, 57(7), 2009–2033. https://doi.org/10.1080/00207543.2018.1518610
Kaulartz, M., & Heckmann, J. (2016). Smart contracts—Anwendungen der Blockchain-Technologie. Computer Und Recht, 32(9). https://doi.org/10.9785/cr-2016-0923
KlickOwn AG. (2020, February 25). Wertpapier-Informationsblatt (WIB). KlickOwn AG. https://www.klickown.com/file/Wertpapierinformationsblatt_Historisches_Lueneburg_Tokenbasierte_Schuldverschreibung.pdf
Ling, D. C., & Naranjo, A. (2002). Commercial real estate return performance: A cross-country analysis. The Journal of Real Estate Finance and Economics, 24(1/2), 119–142. https://doi.org/10.1023/a:1013938506550
Lizieri, C., & Ward, C. (2000). Commercial real estate return distributions: A review of literature and empirical evidence. https://core.ac.uk/download/pdf/1443073.pdf
Max Property Group B.V. (2020, April 1). Information document on Max Property Group Share Certificates (MPGS). Max Property Group B. V. https://maxcrowdfund.com/sites/default/files/mpgs-pdf-files/3_MPGS_Informatiedocument_20200401_UK.pdf
Ministry for General Government Affairs and Finance. (2019). Law on token and TT service providers; TVTG. Ministry for General Government Affairs and Finance. https://www.naegele.law/files/Downloads/2019-07-12_BuA_TVTG_en_full_report.pdf
Nærland, K., Müller-Bloch, C., Beck, R., & Palmund, S. (2017). Blockchain to rule the waves—Nascent design principles for reducing risk and uncertainty in decentralized environments. Proceedings of the 38th International conference on information systems, Seoul, forthcoming.
Nägele, T. (2019). Executive summary of the “Tokens and TT Service Providers Law” AKA the “Liechtenstein Blockchain Act”. https://www.naegele.law/downloads/TTTL_Summary.pdf
Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. Bitcoin.org. https://bitcoin.org/bitcoin.pdf
NASDAQ. (2020, November 20). Apple Inc. (AAPL). [Stock quote]. https://finance.yahoo.com/quote/AAPL/key-statistics?p=AAPL
Norta, A., Fernandez, C., & Hickmott, S. (2018). Commercial property tokenizing with smart contracts. 2018 International Joint Conference on Neural Networks (IJCNN). https://doi.org/10.1109/IJCNN.2018.8489534
Okada, H., Yamasaki, S., & Bracamonte, V. (2017). Proposed classification of blockchains based on authority and incentive dimensions. 2017 19th International Conference on Advanced Communication Technology (ICACT). https://doi.org/10.23919/ICACT.2017.7890159
Ølnes, S., Ubacht, J., & Janssen, M. (2017). Blockchain in government: Benefits and implications of distributed ledger technology for information sharing. Government Information Quarterly, 34(3), 355–364. https://doi.org/10.1016/j.giq.2017.09.007
Prince Michael von und zu Liechtenstein, H. S. H. (2019). The tokenization of assets and property rights. Trusts & Trustees, 25(6), 630–632. https://doi.org/10.1093/tandt/ttz051
Raskin, M. (2017). The law and legality of smart contracts. Georgetown Technology Law Review, N° 305.
Rawat, B. D., Chaudhary, V., & Doku, R. (2020). Blockchain technology: Emerging applications and use cases for secure and trustworthy smart systems. Journal of Cybersecurity and Privacy, 1(1), 4–18. https://doi.org/10.3390/jcp1010002
Rethmeyer, T. (2020). Introduction of a new asset class—Tokenized business processes as a new financing opportunity. Frankfurt School of Finance and Management.
Rind, S. (2019). Personal interview. Online communication.
Sandner, P., Lange, A., & Schulden, P. (2020). The role of the CFO of an industrial company: An analysis of the impact of Blockchain technology. Future Internet, 12, 128. https://doi.org/10.3390/fi12080128
Sandner, P., Nägele, T., & Gross, J. (2019, October 7). Liechtenstein Blockchain Act: How can nearly any right and therefore any asset be tokenized based on the Token Container Model? Medium. https://medium.com/@philippsandner/liechtenstein-blockchain-act-how-can-nearly-any-right-and-therefore-any-asset-be-tokenized-based-389fc9f039b1
ScalingFunds GmbH. (2019, September 9). ScalingFunds and Uavend to launch €35 million tokenised property in the U.K. ScalingFunds. https://www.scalingfunds.com/scalingfunds-and-uavend-to-launch-35-million-tokenised-property-in-the-u-k/
Smith, J., Vora, M., Benedetti, H., Yoshida, K., & Vogel, Z. (2019). Tokenized securities and commercial real estate. MIT Digital Currency Initiative, Working Group Research Paper. https://doi.org/10.2139/ssrn.3438286
Szabo, N. (1994). Smart contracts. Retrieved December 24, 2020, from http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html
Szabo, N. (1997). The idea of smart contracts. Retrieved December 24, 2020, from http://web.archive.org/web/20140406003401/szabo.best.vwh.net/idea.html
The Federal Council (Switzerland). (2019). Vernehmlassung zum Bundesgesetz zur Anpassung des Bundesrechts an Entwicklungen der Technik verteilter elektronischer Register. https://www.newsd.admin.ch/newsd/message/attachments/59307.pdf
Upadhyay, N. (2020). Demystifying blockchain: A critical analysis of challenges, applications and opportunities. International Journal of Information Management, 54, 102120. https://doi.org/10.1016/j.ijinfomgt.2020.102120
Wandmacher, R., & Wegmann, N. (2020). Tokenization and securitization—A comparison with reference to distributed ledger technology. In Y. Thorhauer & C. Kexel (Eds.), Facetten der Digitalisierung. Schriften der accadis Hochschule. Springer Gabler. https://doi.org/10.1007/978-3-658-29870-8_8
Wang, Y., Han, J. H., & Beynon-Davies, P. (2019). Understanding blockchain technology for future supply chains: A systematic literature review and research agenda. Supply Chain Management, 24(1), 62–84. https://doi.org/10.1108/SCM-03-2018-0148
Ziolkowski, R., Miscione, G., & Schwabe, G. (2020). Decision problems in blockchain governance: Old wine in new bottles or walking in someone else’s shoes? Journal of Management Information Systems, 37(2), 316–348. https://doi.org/10.1080/07421222.2020.1759974
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Zheng, M., Sandner, P. (2022). Asset Tokenization of Real Estate in Europe. In: Lacity, M.C., Treiblmaier, H. (eds) Blockchains and the Token Economy. Technology, Work and Globalization. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-95108-5_7
Download citation
DOI: https://doi.org/10.1007/978-3-030-95108-5_7
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-95107-8
Online ISBN: 978-3-030-95108-5
eBook Packages: Business and ManagementBusiness and Management (R0)