DeFi is revolutionizing real-estate investing and homeownership
There’s no denying the fact that the decentralized finance (DeFi) market has continued to evolve and mature quite immensely over the last couple of years, as is highlighted by the fact that the amount of capital entering this space has continued to grow exponentially. While in the market’s early stages, most of its associated projects were related to activities such as borrowing, lending, staking, and in recent months, the sector has evolved greatly with a variety of novel offerings making their way into the scene.
For example, with the rise of nonfungible tokens (NFTs), a number of diverse industries are beginning to witness an opening up of opportunities that previously, were never thought to be possible. In fact, DeFi’s growing mainstream clout has seen the technology make inroads into the real estate market since it allows for the fractionalized ownership of land, dissemination of cryptocurrency-backed mortgages as well as a host of other benefits including novel ownership deals/financing and payment models.
DeFi and real estate go hand in hand. Here’s why…
It is estimated that over the course of 2020 and 2021, the total value of tokenized real estate traded globally stood at a whopping $20 billion (approx). This is, in large part, because a growing number of investors are beginning to understand that by tokenizing physical assets, they can gain access to newer income streams as well as have more versatility in terms of facilitating complex land ownership deals.
Also, when it comes to processing major loan/mortgage agreements, traditional banking institutions can not only take many weeks to evaluate a simple application but also charge brutal interest rates that are heavily skewed in their favor, albeit for obvious reasons. On the other hand, there are many DeFi platforms in the market today that allow for the entire mortgage process to be simplified while charging negligible return rates. Not only that, their operational design allows individuals to sell a fraction of their property so as to reap dynamic profits — thereby reducing their overall loan liabilities.
Lastly, using a blockchain-based data maintenance system, it can become possible for individuals/businesses to draw up adjustable rent agreement contracts, wherein they can hire the exact office space they need, that too for a specific length of time. No longer is it necessary for a company to rent out a full floor or building for a month, year, etc. Instead, through the use of certain DeFi platforms, it is possible for a business to reserve desks or office square footage, allowing them to significantly save on their overhead expenses.
Decentralized projects that are transforming the real estate market
Widely considered to be one of the foremost real-estate-focused cryptocurrency projects in the market today, Propy’s core proposition is that it allows users to automate the entire home buying process via the use of a blockchain-based governance infrastructure. Propy’s name first entered the financial mainstream when it helped facilitate the sale of a tokenized real estate property located in Tampa, Florida for a solid sum of 210 Ether (estimated to be worth $650K at the time).
Additionally, using the platform, clients can access a wide array of tools such as a “proof of ownership” module that can serve as a digital identity for their real estate holdings. Not only that, property-centric NFTs generated by Propy can be deployed as collateral whenever individuals want to take a loan via the ecosystem.
Centrifuge is a DeFi ecosystem designed to help bridge the gap that currently exists between real-world assets such as real estate, invoices, royalties, and the burgeoning blockchain universe. Not only that, within the context of homeownership, Centrifuge helps bring down overhead capital costs for its clients while providing them with direct access to large liquid capital markets — all while eliminating the need for any intermediaries.
Furthermore, using the platform, individuals in need of funds can finance their homeownership/real estate deals without having to pay exorbitant interest rates or rely on a money lender to help them raise capital. In addition to this, through the project’s native Centrifuge Token (CFG), owners have the power to accrue lucrative rewards and monetary incentives in a highly seamless fashion.
Another project that is fast gaining a lot of attention within the realm of DeFi-centric real estate and homeownership is Milo. The fintech startup has its roots in Miami, Florida, and claims to be the world’s first ‘crypto mortgage’ provider, allowing clients to utilize Bitcoin as collateral for their loans.
Even though the project is still in its infancy, Milo has already processed a few major deals, however, it remains to be seen how sustainable the company’s financial model is in the long run — especially when one takes into consideration the volatile nature of the digital asset market which is subject to massive price swings on a daily basis.