Tokenize residential real estate: Open up an attractive asset class

We should use blockchain tokens to create a new market that offers investors an ideal blend of safety, liquidity and returns

- G.N. BAJPAI

Traditional investment avenues, such as bank deposits and other fixed income instruments, often fail to deliver positive real rates of return. Though equity markets do, the possibility of losses and volatility is a challenge for investors. A consistent performer, residential real estate, has long been in the shadows.

Investing in real estate bears some distinct advantages. Globally, since 2000, residential real estate investments have delivered high annual compounded growth rates across major emerging markets, including India. During the past decade (2012-2022), while inflation in India averaged 5.7%, housing prices appreciated at a robust 8.04% annually, delivering an over 2% real rate of return in capital appreciation, in addition to rental income. And these investments are fully secured by the underlying physical asset.

Regional variations in returns tell an interesting story. Kochi leads with 10-year annual returns of 9.94%, followed by Lucknow at 9.11% and Bengaluru at 8.98%. Even metropolitan centres like Mumbai (6.71%) have shown positive performance. Home prices of grade-A properties in emerging locations have grown even faster than these blended averages, with periodic rent increases being the icing on the cake. With rental income taken into account, the returns-boost hovers around 3%.

Though residential prices sometimes stagnate in certain markets, historically, this asset class has hardly experienced downturns in India, making it one of the most stable investment options with a nearly negligible possibility of loss.