Real Estate NFTs - Will Blockchain Disrupt Ownership?
Category Market Insight
NFTs are creating a big buzz across a lot of industries and real estate is no exception. They're poised to solve a major pain point in the industry and can help to seriously speed things up. NFTs could replace title deeds and totally disrupt current transfer mechanisms.
What Is an NFT & What Are the Benefits?
NFT stands for Non-Fungible Token. Long story short, NFTs function like certificates of authenticity in the art world, combined with the functions of a ledger keeping record of each ownership transfer. NFTs have some amazing benefits for the real estate world:
- As part of the blockchain, NFTs cannot be falsified
- As a decentralised digital asset, there's no need for so called 'wet ink'
- No waiting for days, weeks (or even months) for the deeds office
- NFTs are public record, visible on the blockchain to all
- NFTs can also accommodate fractional ownership models
Why Use NFTs in Real Estate?
NFTs are used in a wide variety of industries, from fine art to sports collectibles. They're being used to certify the authenticity of items, and help to protect them from forgery. Instead of needing to physically transfer title deeds, an owner can issue an NFT and transfer ownership digitally within minutes.
Are NFTs Legally Recognised?
There is no regulation in South Africa dealing with NFTs yet. PPM Attorneys report that in the United States, the IRS considers block-chain based assets such as NFTs to be property. However, in South Africa, SARS is regulating crypto assets and taxes those who gain income from their trade but it does not regard crypto assets to be legal tender. In this regard, there is still some way to go for legal systems to catch up to the forward march of technology.
Current Limitations
It's vital that everyday South Africans are protected and supported in property ownership. Title deeds don't only contain information about ownership. They also contain information about the extent of the property, the erf number, where applicable the name of the sectional scheme, and much more besides. While NFTs can absolutely contain this information, this information ought to be regulated, corroborated, and verified by a third-party.
"World's First Real Estate NFT"
In May of 2021, Michael Arrignton (the founder of TechCrunch.com) sold an apartment in Ukraine's capital. This sale was touted as the world's first real estate backed NFT trade. However, the platform which facilitated this transaction still required all of the usual documents to do so. Title deeds and officially recognised paper trails are still needed in these cases.
Are NFTs the Future of Real Estate Ownership?
This remains to be seen. No-one can predict the future... But, it's clear that blockchain technology has a lot to offer the real estate industry and ownership in general. But the existing structures need to catch up and legitimise its use case scenarios. Additionally, title insurance companies, escrow holders, and conveyance attorneys all stand to lose if they fail to adapt. Whatever happens, it's going to be interesting!
Author: Paul Wasson
