From real estate financialization to decentralization: A comparative review of REITs and blockchain-based tokenization

Abstract

Blockchain-based tokenization represents a transformative force in the real estate sector, offering a compelling alternative to the well-established model of Real Estate Investment Trusts (REITs). As the real estate industry evolves from financialization to decentralization, driven by technological advancements, these two models offer distinct approaches to democratizing real estate investment. REITs have long been a cornerstone of real estate financialization, allowing individual investors to participate in large-scale real estate ventures through fractional ownership of diversified property portfolios, thus advancing financial supply and share of the housing market. However, the advent of blockchain technology and decentralized finance (DeFi) introduces a new paradigm where real estate ownership can be fractionalized into digital tokens, enhancing liquidity, transparency, and accessibility through global 24/7 trading platforms. The findings suggest that while REITs have successfully broadened the investor base and improved market liquidity, blockchain-based tokenization has the potential to advance these achievements further by lowering entry barriers, reducing transaction costs, and decentralizing market operations. However, the adoption of blockchain technology in real estate also presents challenges, including regulatory uncertainties, technological risks, and the need for robust governance frameworks. As the lines between finance and technology continue to blur, this research underscores the necessity of adapting regulatory frameworks and investment strategies to navigate the evolving landscape of real estate investment. The critical review concludes by discussing the future implications of these trends, highlighting the need for continued research and regulatory innovation to fully realize the potential of decentralized real estate markets, particularly in examining housing inequality and affordability, as housing is not only an important investment vehicle but also as a fundamental shelter for people to live.