Real Estate Tokenization—Once a Niche Experiment—May Soon Become a Core Pillar of How Property is Financed

The market of tokenized real estate could reach $4 trillion by 2035, growing at a compound annual rate of 27% from the current size of under $300 billion

Real estate tokenization—still a niche experiment—may soon become a core pillar of how property is financed, owned and traded, according to a Thursday report by Deloitte Center for Financial Services.

The market of tokenized real estate could reach $4 trillion by 2035, growing at a stunning compound annual rate of 27% from the current size of under $300 billion, the firm forecasted.

Tokenization of real-world assets (RWA) is a fast-growing sector at the intersection of crypto technology and traditional finance. It consists of creating digital versions of assets like bonds, funds and real estate, that are owned and transferrable on a tokenized ledger, or in simpler terms, in a computerized register. The process offers several advantages, such as operational efficiencies, cheaper and faster settlements and broader investor access.

For the real estate sector specifically, tokenization's appeal lies in its ability to automate and simplify the complex financial agreements, the report explained. It allows for launching a real estate fund on-chain with pre-coded rules to manage ownership transfers, capital flows and other administrative tasks.

As an example of an early-stage initiative in this space, Deloitte highlighted Kin Capital's $100 million real estate debt fund tokenization platform Chintai with trust-deed-based lending.

The report further breaks down the anticipated evolution of tokenized property into three distinct categories: private real estate funds, securitized loan ownership, and under-construction or undeveloped land projects. Of these, tokenized debt securities are poised to take the lead, reaching an estimated value of $2.39 trillion by 2035, according to the report's projections.

Private funds are expected to contribute a significant portion with an estimated $1 trillion, while land development assets are anticipated to contribute around $500 billion to the total market size.

Despite the promising advantages, the report also notes several challenges that need to be addressed for the large-scale adoption of real estate tokenization. Among the key challenges highlighted are regulation, asset custody, cybersecurity and default scenarios.