Introduction
When most people hear about NFTs, they think of digital art or collectibles. But in reality, non-fungible tokens (NFTs) go far beyond that. Real estate is one of the most promising industries where NFTs can create efficiency, transparency, and global accessibility.
In this article, we’ll break down the main NFT tokenization models — single-title ownership, and utility tokens — and explore why some revenue-linked models (such as rental or appreciation tokenization) are better understood as fungible-token systems rather than NFT-driven.
What is a Real Estate NFT?
An NFT (non-fungible token) is a digital certificate stored on a blockchain with two defining features:
- Uniqueness – no two NFTs are exactly the same.
- Proof of ownership – each NFT certifies ownership of a specific asset or rights connected to it.
In real estate, NFTs make sense when representing property titles or unique utility rights tied to a property.
Some argue that tokens representing rental income or appreciation rights are also NFTs because they relate to a specific property. I disagree. These tokens are typically fungible:
- They are not unique and can be freely exchanged with one another.
- Each token represents the equal right to the income.
That’s why, in practice, ownership and utility tokens fit the NFT definition, while income tokens behave more like fungible assets.
Tokenization Models
1. Single-Title Tokenization
Full ownership of a property is represented by a single NFT.
- Problem solved: High transaction costs and delays in ownership transfer.
- Impact: Tokenization enables faster, lower-cost transfers, sometimes even bypassing traditional registries (where legally allowed).
- Example: Propy has successfully executed NFT-based property sales.
2. Utility Tokenization
Tokens provide access to property-related services or platform benefits.
- Use cases: Access to amenities, voting rights in governance, or discounted fees.
- Problem solved: Weak user engagement.
- Impact: Utility tokens drive loyalty and incentivize participation in the ecosystem.
- Example: Oceanpoint has successfully implemented BST tokens to incentivize community engagement and platform participation..
How Real Estate NFTs Are Minted
The minting process usually includes:
- Legal structuring – mapping property or utility rights into a compliant digital format.
- Smart contract creation – coding ownership or utility rights into blockchain logic.
- Minting the NFT – generating the digital certificate tied to the property or its related rights.
- Marketplace listing – enabling investors to buy, sell, or trade the NFT.
Tokenization platforms typically provide the full technical stack (steps 2–4) and often connect issuers with legal partners for step 1.
Risks of Real Estate Tokenization
Real estate NFT tokenization offers exciting potential but faces key risks:
- Regulatory Uncertainty: Varying and evolving rules on securities, taxation, and compliance across jurisdictions create confusion, complicating global tokenization efforts.
- Security Vulnerabilities: Tokenized systems risk hacking, smart contract flaws, and data breaches, threatening asset integrity and requiring strong cybersecurity.
- Education Gaps: Limited understanding among investors and stakeholders about NFTs slows adoption, as many lack technical or legal expertise.
- Market Fragmentation: Lack of standardized platforms and blockchain interoperability reduces liquidity, siloing assets and limiting scalability.
- Privacy Issues: Public blockchains’ transparency conflicts with privacy and AML regulations, needing solutions like selective disclosure to balance compliance.
For a full list of tokenization risks, visit dedicated page at DigitalPropInvest.com.
At DigitalPropInvest.com, I’m committed to guiding founders through the challenges and opportunities of real estate tokenization — including choosing the right tokenization platforms. Join the conversation on LinkedIn or explore the latest insights on the portal.
