Investing in real estate located at premium locations is out of reach for most people, given the high upfront costs. But what if it could be done without buying the entire unit and with as little as ₹10,000? That’s the promise of real estate tokenization.
It is the process of dividing a property into digital tokens on an online platform, each representing fractional ownership. This allows investors to buy small portions of high-value properties through these tokens, making real estate investment more affordable and accessible.
“It can be as accessible as a mutual fund,” Avinash Rao, founder of Alt DRX, highlighted at the Mint Money Festival, saying real estate need not be a hyperlocal asset class.
He argued that the scale of opportunity is significant.
“Around 300,000 homes are sold each year in India’s primary real estate market alone, representing more than $200 billion in value. Yet, only a fraction of investors actively participates because of high entry costs and illiquidity.”
How real estate tokenization works
The income from tokenized real estate is in the form of rent and capital appreciation. If the property generates rent, investors receive a share in proportion to the tokens they hold. Rao emphasised the potential of such investments in portfolio diversification.
“You don’t need to make a bank-breaking investment to participate in capital appreciation. Smart, smaller investments across multiple properties can yield meaningful returns over time,” he said.
Platforms such as Alt DRX allow investors to browse listed properties, check related information like location, market value and developer details, and invest digitally. Investors can choose from land plots, holiday homes and rental housing, depending on their goals.
The platform lets investors track rental income and asset updates and provides access to a resale marketplace to sell the tokens.
“Most people invest in real estate for capital appreciation and tokenization makes that possible even with small ticket sizes,” Rao said.
Rao said these are treated like digital assets and income is taxed at a flat 30% tax rate.
Real estate tokenization is different from Real Estate Investment Trusts (Reits). Tokenization gives investors direct fractional ownership of a property, and the returns are linked to its rent and value appreciation.
Reits, on the other hand, pool investor money to buy and manage a portfolio of properties and investors own units of the trust, not individual properties. In short, tokenization is property-specific, whereas Reits offer diversified, fund-like exposure.
Know the risks
While tokenization democratises real estate investment, it is not without risks. It is currently unregulated and sudden regulatory changes could impact investors. Rao said they are working with regulators to become a regulated financial product.
“Gift City has already mooted norms for tokenization,” he added. International Financial Services Centres Authority, the regulator at Gift City, is examining tokenized models for physical assets.
Liquidity may also be constrained since the secondary market for tokens is still developing, meaning exits may not always be immediate. As with all investments, careful research, platform selection, and a long-term perspective remain essential for mitigating these risks.