Dubai: A Dubai-based real estate firm, Arms & McGregor, has launched a real estate tokenization platform connected to a ‘DeFi’ liquidity pool.
“With this partnership, property owners in the GCC will for the first time gain the ability to extract liquidity from DeFi markets by uploading their real estate property to the blockchain,” said Denis Petrovcic, CEO of Blocksquare, which is providing the technology for the venture. “It opens up a new liquidity generator to fund mega-projects as traditional funding may fall short and not be as feasible.
“Real estate is the biggest asset class in the world, at the same time, it’s one of the most illiquid investments one can make. Technology will address such challenges. With the emergence of smart contracts and blockchain, we now have the ability to create protocols that can provide a transparent service for everyone involved in the lifecycle of a real estate transaction.
“Transfer of ownership will inevitably move online; however, the first step will happen on the investment part, as it is the one that requires the least input by regulators and can be fully executed without significant changes to current regulations.”
Investors holding these tokens will be able to see all the transactions that have ever taken place on that property. And all the orders placed in seconds rather than in days.
It will give tenants the “ability to purchase 10 per cent of a property to reduce the rental burden, start building equity without overextending to take a mortgage and add all the cash to purchase the whole house”.
Making tokenization work in real estate
Each property will have its own smart contract and the evaluation of properties is done through an open secondary market rather than paper-based reports.
Blocksquare aims to support real estate companies integrate blockchain technology and tokenization into their businesses.
Now, what DeFi?
It stands for ‘decentalised finance’, which is a blockchain-based form of financing. It bypasses traditional entities such as banks and brokerage houses. Instead, it provides blockchain-based contracts, with one of the most common ways being the Ethereum cryptocoin.
Makram Hani, CEO of Arms & McGregor International Realty, said, “The GCC real estate sector, especially in the UAE, has proved its resilience and overcame major challenges since the 2009 financial crisis and the pandemic. With the launch of the property tokenization platform, we aim to revolutionize the way developers fund and sell projects, [and] enable them to retain control over their projects. Property owners will also be able to sell portions of their property and liquidate the necessary rather than the whole asset. “