Is tokenization of real estate ready for lift off in APAC?
| DOI | https://doi.org/10.1108/JPIF-10-2021-0087 |
| Published date | 16 November 2021 |
| Date | 16 November 2021 |
| Pages | 284-290 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Yuen Leng Chow,Kok Keong Tan |
Is tokenization of real estate ready
for lift off in APAC?
Yuen Leng Chow
International University of Japan, Minami Uonuma Shi, Japan, and
Kok Keong Tan
FundPlaces Pte Ltd, Singapore, Singapore
Abstract
Purpose –Blockchain and distributed ledger technologies are set to disrupt the real estate sector in all areas:
ownership, sale, management and investment. Tokenization moves physical real estate to the digital space and
could result in substantial costsavings in the pre- and post-tokenization process.This article discusses whether
real estate as an asset class is ready for digitalization in the Asia-Pacific (APAC) region.
Design/methodology/approach –Globally, the APAC region has the highest digital adaptation/adoption
rates. Regulators in the region are also moving fast to clarify their stance on digital assets. This article adopts a
holistic view, from trends, regulations, and technology, to discuss the benefits and challenges of digitalizing
real estate in APAC.
Findings –Real estate tokenization is a nascent market but platforms like BrickX, KASA, ADDX, and
Minterest have successfully launched real estate tokens in Australia, South Korea, and Singapore, respectively.
Tokenization may prove to be a viable fundingsource for those relatively poorly capitalized financial markets
in the APAC region.
Practical implications –This paper discusses the current regulatory and business contexts in relation to the
pace of tokenization of real estate in APAC. Opportunities and difficulties are outlined in a concise manner to
facilitate more discussion in this area.
Originality/value –Existing reports and research articles tend to focus on the western markets. This article
provides a new perspective on tokenization, specifically in the APAC context.
Keywords Tokenization, Blockchain, Distributed ledger, APAC
Paper type Viewpoint
Introduction
Generally, the difficulties of investing in real estate are: indivisibility, large capital
investment, illiquid, lack of information especially for developing or closed markets, long
settlement time, long search process for the right property, high transaction costs (lawyers,
consultants, valuers, taxes, fees, etc.) and high administrative costs for funds (dividend
distribution, updates to the register of owners, etc.) Consequently, retail investors are usually
excluded from investing in real estate, either due to capital constraints or access to the
projects. Problems related to real estate investing also deter savvy investors from allocating a
larger portion of their funds to real estate. According to Baum (2020), in 2019, institutional
investors only allocated 10% of their funds to real estate though portfolio theory supports a
more optimal asset allocation of 30–60%.
The advent of securitization mitigated the divisibility issue –stakeholders could now
buy shares of a real estate investment trust (REIT) and enjoy the revenues originating from
the physical asset. However, governance problems related to sponsor–satellite
relationships (first-right of refusal for sponsors’properties), nonalignmentofinterest
between shareholders and asset managers (non-yield-accretive acquisitions that increase
the asset base) are some of the highlight problems with REITs. The rapid evolution of
technology has solved many “old world”problemsin the present financial system: high cost
of money transfers, high proportions of the population that are “unbanked”or
“underserved”by the banking system, high barrier to investing in physical real estate
JPIF
40,3
284
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 25 October 2021
Revised 27 October 2021
Accepted 27 October 2021
Journal of Property Investment &
Finance
Vol. 40 No. 3, 2022
pp. 284-290
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-10-2021-0087
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