Because of this tokenisation, the process of investing and managing the property is much simpler, more efficient, and automatic. For example, the application of smart contracts would allow verification of the property without the need to depend on third parties to prove it, or could even establish clauses of automatic compliance when certain conditions occur.
All these are predictions and possibilities usually cited by those who defend the possibilities of NFT applied to any field, not just real estate. But the real estate possibilities are enhanced by the fact that the uses of these properties are, in essence, very similar to what we’d give them in physical life. We could build a residential building on virtual land or we could build a shopping centre for users to visit. The owner (or owners – one of the characteristics of this tech is that it enables easy property division) of that shopping centre could rent the different premises within it to third parties. And, we users could go shopping at that centre.
This may sound futuristic, but it’s already happening in Decentraland; there’s a commercial district baptised as Metajuku (in honour of the Tokyo fashion district of Harajuku), where two tenants are already installed: Dressx and Tribute Brand, two fashion brands that sell NFT garments.
All these predictions are linked to the visions of tech-giants becoming a reality. ARK’s Big Ideas for 2021 stated that “Society interacts daily with virtual worlds which today are in their infancy. According to our research, revenue from virtual worlds will compound 17 per cent annually from roughly US$180 billion today to US$390 billion by 2025.” In a internal event, Mark Zuckerberg made special mention of the possibilities of metaverses.
Technological development allows dreams to materialise in virtual universes. If it were real, it would be a reality with no implications on governance or international taxation, among other aspects.
Investment in real estate, linked to an asset, is also determined by the specific legislative framework of the market in which it is located. But in what market or country are we operating if we invest in digital real estate? What obligations would we have? Would we be taxed? Where? Which jurisdiction would prevail in the event of litigation? Governments and regulatory bodies are beginning to consider these questions.
In March 2021, the European Union proposed changes to its Regulation of the European Parliament and of the Council on crypto-asset markets and amending Directive (EU 2019/1937), popularly known as the MiCA Regulation (Markets in Crypto-Assets). Although a step in the direction of legislating the technological universe, elements such as non-fungible tokens have been omitted.
So, although there are opportunities on the horizon for businesses to expand into virtual worlds, there’s still a long way to go before ‘normal’ protections are available.
These latest innovations are revolutionising the way we use technology in our daily basis, and, the real estate sector is included in the revolution.
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