Why cryptocurrencies, NFTs likely to become attractive payment tools for buying home
5 min read 03 Aug 2022, 11:17 PM ISTBuying a property or a house is seen to be less time-consuming and seamless with non-fungible tokens (NFTs). Further, DeFi cryptocurrencies or fiat currency is seen to emerge as a perfect intuitive for buying real estate online.
_1657197327094_1659546844320_1659546844320.jpg "The Web3 has opened the gates for many new digital opportunities and many governments are exploring this digital industry in real estate.")
PremiumDespite their volatile nature, Bitcoin and other cryptocurrencies are seen to have the potential for enhancing the digital world. Days have gone where you needed cash for everything. Sending money or buying a product, has become simpler and quick due to digital payments available globally that are more flexible and advanced. Due to the popularity of cryptocurrencies, NFTs, and other digital tokens, many companies across countries have started to warm up toward these virtual assets. Some countries have gone as far as legalising cryptocurrencies. Some big brands like Gucci, Microsoft, Starbucks, and others are now accepting these cryptos as payments for buying their products, while some firms like Twitter are working on paying their creators' salaries with cryptocurrencies. That said, what if you could buy your dream home or real estate using these digital currencies?
Cryptocurrencies, NFTs, and other digital assets have a wide scope in the real estate sector. The Web3 has opened the gates for many new digital opportunities and many governments are exploring the blockchain industry in realty.
Ashish Acharya, Founder, Propsoch said, "Web3 opens up a world of new opportunities for the real estate industry. Governments are looking into using blockchain to store land records. Tokenization enables fractional ownership for the masses. Digital land is being sold in the metaverse! But are we really ready for it? The widespread use of this technology looks far off given the high level of uncertainty and the restrictions surrounding security tokens in India."
The problem with the widespread adaption of Web3 in the real estate sector is currently that the platform is still very new and complex. Its adaption will be key with more clarity going forward.
Vinit Khandare, CEO and Founder, MyFundBazaar said, "While Web3’s relevance to the real estate market can be unclear, the correlation between an intangible like bitcoin and a solid home might pose questions to many. With the real estate market back in the post-pandemic business upsurge, Web3 is poised to have profound impacts on the way one purchases and invests in real estate as a whole."
Explaining the pros of blockchain in real estate, Abhijit Shukla, CEO and Director at Tarality turning real estate into tokens allows investors to use concrete assets to create readily liquefiable portfolios on the blockchain. It also opens up the world of real estate investment to less wealthy individuals. This is because tokenising assets–in this case, property--makes fractional investing possible.
For example, an individual who might never be able to afford to buy an investment property apartment for $250,000, might be able to afford a fraction of that amount, entitling him or her to a fraction of its ownership, which he or she could trade for an equivalent fraction of another property at any time. Shukla highlighted that one AI platform allows multiple investors to purchase a fraction of turnkey rental properties for as little as $50 apiece.
The Tarality CEO also shed some light on the controversies surrounding Bitcoin and other cryptocurrencies which often creates a panic among investors and refrains them from using these digital tokens.
Shukla said, the controversy surrounding bitcoin and other cryptocurrencies makes some wary of using them. However, those who see their potential are finding innovative ways to leverage cryptocurrencies to transform their financial operations.
Further, Shukla revealed that some fintech companies are addressing the issue of price volatility with an interest rate based on a ratio of cryptocurrency value to the loan amount, with a margin call issued if the ratio hits below a certain percentage, such as 65%. If it drops to 30%, the assets are liquidated and their value stored in USD. It’s also crucial to note that transactions involving cryptocurrencies need not be fully cryptocurrency-based. While some transactions can be done entirely using cryptocurrency, investors and sellers alike may want to use or receive cash for part of the payment.
"It’s important to be aware that government agencies and third parties involved in any given deal may require cash payments for their services," Shukla added.
Nevertheless, buying a property or a house is seen to be less time-consuming and seamless with non-fungible tokens (NFTs).
Khandare said, "With NFTs having developed into profoundly multifaceted tools, proprietary technology that includes a legal framework, allows NFTs to stand in for property ownership has also been developed, enabling purchase records to be lodged on the blockchain along with legal documents. What was once an arduous task that could take weeks can now be completed almost instantaneously. In the process, it cuts costs and allows buyers to purchase property more quickly than ever."
Further, DeFi cryptocurrencies or fiat currency is seen to emerge as a perfect intuitive for buying real estate online.
According to Khandare, with the younger generations of potential buyers, who’ve grown up online and use the web as their go-to marketplace, will likely find purchasing real estate online using DeFi, cryptocurrency, or fiat currency perfectly intuitive. Where the ownership of properties is shared, NFTs can be used to obtain mortgages from lending platforms. However, investors will need to stay well-informed when it comes to regulations, which may change over time as this form of investment becomes more popular. They should also hire a legal expert who has expertise in blockchain technology to assist them in such transactions.
Further, Tarun Sainani, Co-Founder at HouseEazy said, "from the traditional process of never-ending documentation and legal hassles for the average Indian homebuyer to a click-and-close experience, the ways in which Web3 is transforming the real estate industry are innumerable. A seamless transfer of real estate assets is now possible and accessible for all the stakeholders - the buyer, seller, and agent – with the help of Web3 technologies like smart contracts, NFT, and blockchain. A few of such transactions have already been done across the globe where the property transaction was done completely online and the payments were settled through cryptocurrency."
Sainani cited that as per a survey conducted by an American ibuying company in 2021, 12% of first homebuyers tapped into their crypto funds to secure down payments. Digital currencies are also likely on the rise as a payment method among homebuyers because millennials and Generation Z are taking up an increasing share of the housing market.
"While as a country, India might be at the cusp of digital transformation for the real estate industry, the writing is on the wall for the traditional systems as the new age companies penetrate the market and make transactions easier and seamless for the consumers," HouseEazy co-founded added.
