Traditionally, investing in real estate has been a capital-intensive venture, requiring large amounts of money upfront and long-term commitments. However, new technologies, coupled with a shift towards building a more accessible and inclusive economy, are creating solutions that enable a broader-base of investors to enter the property market. This is being driven primarily by the ability to tokenise and fractionalise real estate using blockchain technology.

"Blockchain and tokenisation technology is revolutionising the way we approach real estate investment," says Barry Tuck, co-founder of Fraxeum, a blockchain that has been created specifically to tokenise equity in any kind of asset. "By tokenising a property, it can be divided into smaller units or fractions which represent ownership in the asset. These tokens can then be bought and sold on an exchange, allowing investors to easily sell or invest in fractions of a property."

Tokenisation refers to the process of representing a real-world asset, such as a piece of property, as a digital token on a blockchain. This token can then be bought and sold on an exchange, opening up the asset to a much wider pool of potential investors. Fractionalisation, on the other hand, allows investors to purchase a fraction of a property rather than the entire asset. This makes it possible for individuals to invest in high-value properties that may have previously been out of reach.

The benefits of tokenisation and fractionalisation using blockchain technology are numerous. For investors, it provides an easy and secure way to purchase a stake in a property without the need for extensive paperwork or intermediaries. It also allows for increased liquidity, as assets can be easily bought and sold on a global scale.

For property owners, tokenisation and fractionalisation present a new source of funding and a way to diversify their portfolio. It also allows for the creation of a secondary market for property ownership, enabling owners to sell their stake in a property without having to go through the traditional sale process.

"The benefits to both property owners and investors are vast," Tuck continues. "Most property owners are tied to the ownership of an entire property, increasing their risk exposure. Fractionalisation enables owners to liquidate a portion of their asset and then reinvest this capital into fractions of other properties, diversifying their portfolio and mitigating their exposure. In other instances, an owner may need access to a portion of their investment, and this is now possible."

Conversely, tokenisation has a wide range of benefits to the investor market too. For a broad-base of retail investors, the barrier to entering the property market are insurmountable. According to the South African Deeds Office, 9,057,890 South Africans own property, while a 2018 report by Stats SA reported that 35.3% of South African households own a dwelling.

"This means there is a massive untapped market of South Africans who want to enter the South African real estate market," Tuck continues, "but are prohibited due to their financial situation. Providing a platform that enables property investment from as little as R100 per month was never possible before, but the Fraxeum blockchain enables this, having the capability to seamlessly manage millions of micro-investment portfolios."

By breaking the equity in a property down into fractional units, it becomes more affordable for individual investors to buy into a property. This increased accessibility allows for a wider range of investors to participate in the market, including those who may not have had the resources to invest in a whole property before.

"We have developed a plug-and-play solution," Tuck explains, "with a range of API-based fintech modules layered over the Fraxeum blockchain to create a white-label property micro-investment solution. The platform includes seamless onboarding in terms of KYC, AML and other requirements, a simple fiat payment on- and off-ramp, an asset directory in which properties can be listed, and an OTC trading desk where a secondary market can buy and sell their shares."

Fraxeum's Property Invest solution automates the administration of all investor portfolios, making ownership simple to track, accounting quick to confirm, and profits/dividends easy to disburse.

The potential for tokenisation and fractionalisation of real estate using blockchain technology is vast, and it is clear that it will significantly impact the way we approach real estate investment in the future. Those who are able to get in on the ground floor will be well-positioned to take advantage of the exciting opportunities that this technology presents.