African investors can now own property via blockchain technology. Cape Town-based property investment specialist Flyt Property Investment launched Africa’s first property-backed security token.
The Flyt token dubbed FLYT, which resides on the Ethereum blockchain, allows investors to subscribe for, redeem and transfer shares in the Flyt Hospitality Fund, a South African Section 12J fund investing in hospitality property and apart-hotels. One Flyt token currently valued at R100 is equivalent to one share in the Flyt Hospitality Fund.
What is blockchain?
Ideally, blockchain is a reliable, difficult-to-hack record of transactions with digital information (the block) being stored in a public database (the chain). These ‘blocks’ store verified information about transactions such as the date, time, and amount paid, along with who is involved, thanks to their unique digital signature.
For a little over a year now, South Africa has developed a forward-looking financial sector and it is not surprising to see it on a short list of countries embracing next-generation financial technology. This is the first example of a blockchain-based token servicing a fund operating within a regulated, legal and compliant environment in Africa.
Some of the prominent property sector use cases are:
With blockchain technology, property can be tokenized and traded like a stock on digital platforms. This makes this method very efficient in terms of security and transparency in comparison to more traditional methods.
Tokenizing property will in turn make it a liquid asset, so a seller won’t have to wait for a buyer who can afford the whole property in order to get some value out of it. If real estate is traded like a stock or a bond, prices might rise due to increased liquidity. The reverse is also true.
More efficient fractional ownership
Fractional ownership is prevalent in the holiday homeowning space and allows people to buy portions of a property via the relevant fraction of a token, thereby lowering barriers to real estate investing. With blockchain technology, Managing fractional ownership of properties by multiple parties will become more efficient with blockchain.
Globally, blockchain technology has shown no signs of slowing down and has proven to be the future. We anticipate blockchain to transform the property industry over time, but the question arises as to what this technology would mean for all the current stakeholders. While it is uncertain, one thing for sure is it will alter, not eliminate their roles.