What are REITs?

Real Estate Investment Trusts (REITs) are vehicles used to collect funds from investors and then invest those funds in real estate assets. REITs collect funds by selling shares that are then invested in various real estate assets such as office buildings, shopping centers, apartments, or even shares of real estate companies. The profits from these investments, such as rent, asset sales, or dividends, are distributed to shareholders as dividends.

How REITs Work

1. Fund Collection: REITs collect funds from the public through the sale of shares.
2. Investment: The collected funds are invested in various real estate assets.
3. Profit Sharing: The profits from these real estate investments are distributed to shareholders as dividends.

Benefits of Investing in REITs

1. Diversification: Reduces risk by having a diversified investment portfolio.
2. Professionalism: Managed by professional investment managers with expertise in the property sector.
3. Liquidity: Investors get more liquid investment returns compared to direct investment in property.

REITs Tokenization

REITs tokenization is a recent innovation that enables the digitalization of real estate ownership certificates on a blockchain. These tokens represent ownership or investment in the underlying real estate, allowing fractional ownership with increased liquidity through trading on digital asset exchanges.

Collaboration for REITs Tokenization in Indonesia

A collaboration between D3 Labs, Bank Tabungan Negara (BTN), and Reliance Manajer Investasi (RMI) has pioneered the development of Indonesia’s first property tokenization product through a blockchain-based REITs scheme.

The REITs tokenization scheme is made possible through cooperation between BTN as the asset owner, RMI as the investment manager, and D3 Labs as the blockchain technology provider for digital asset tokenization. The goal of this collaboration is to attract foreign investment in property, especially from investors in the blockchain ecosystem.

This strategic collaboration is also supported by a joint trial conducted by the Financial Services Authority (OJK) involving RMI and D3 Labs. Through SeaSeed, a blockchain extension module from D3 Labs, financial institutions can develop tokenization of their products and services with a focus on security, transparency, and accountability.

Benefits of REITs Tokenization for Banking and Investors

1. Cost Efficiency: Reduces transaction costs by up to 50% compared to traditional transactions.
2. Transparency: Blockchain technology ensures an immutable and secure transaction record.
3. Access for the Younger Generation: The ease of transferring ownership and the divisibility of real estate tokens make it attractive to young investors.
4. Global Investment: Opens up global investment opportunities in previously inaccessible real estate markets.
5. Smart Contracts: Ensures automatic execution of agreements without the need for intermediaries.
6. Diversification: Enables greater diversification across various property types and locations.
7. Security and Transparency: Blockchain technology ensures a high level of security and transparency in property transactions.
8. Democratization of Investment: Lowers barriers to entry for retail investors.
9. Easier Fund Raising: Simplifies the fundraising process for real estate projects.

Potential Market for Indonesia’s Real Estate Tokenization

According to reports, the size and market share of global real estate tokenization is expected to grow at a CAGR of 2.90% between 2024 and 2034. Market revenue from USD 3.8 billion in 2024 is expected to grow to USD 26 billion in 2034. The collaboration between BTN and D3 Labs is a critical collaboration in developing real-world asset investment products, given BTN’s 40% market share of housing loans in Indonesia. Focusing on the real estate investment sector, Indonesia’s real estate performance remains robust despite weakening global conditions. This is what attracts global investors from Southeast Asia, Hong Kong, China, India, Australia, Japan, and France to continue investing in real estate projects in Indonesia.

REITs tokenization offers a revolution in the way we invest and manage property. With all the advantages offered, REITs tokenization opens the door for more people to participate in the previously inaccessible real estate market, making it a safer, more transparent, and efficient future investment solution.