Decentralizing Real Estate Markets: Evaluating REITs and Blockchain Tokenization Approaches

Abstract

Blockchain-based tokenization is transforming the real estate sector, presenting a compelling alternative to the traditional model of Real Estate Investment Trusts (REITs). As the industry shifts from financialization to decentralization, driven by technological advancements, these two models offer different approaches to democratizing real estate investment.REITs have been a foundational aspect of real estate financialization, enabling individual investors to participate in large-scale real estate ventures through fractional ownership of diversified property portfolios. This has broadened the investor base and improved market liquidity. However, the emergence of blockchain technology and decentralized finance (DeFi) introduces a new paradigm: real estate ownership can now be fractionalized into digital tokens. This enhances liquidity, transparency, and accessibility through global 24/7 trading platforms. While REITs have made significant strides in expanding access to real estate investment, blockchain-based tokenization can further enhance these achievements by lowering entry barriers, reducing transaction costs, and decentralizing market operations. Nevertheless, the adoption of blockchain technology in real estate also comes with challenges, including regulatory uncertainties, technological risks, and the need for robust governance frameworks. As the lines between finance and technology continue to blur, it is essential to adapt regulatory frameworks and investment strategies to navigate this evolving landscape. The critical review highlights the future implications of these trends, emphasizing the importance of continued research and regulatory innovation to fully realize the potential of decentralized real estate markets. This is particularly relevant in addressing issues of housing inequality and affordability, as housing serves not only as an investment vehicle but also as a fundamental shelter for people.