Real Estate is a leveraged asset class. I can't see why this changes when ownership becomes tokenized - I also do not see this changing when you buy a fraction of a property. It's a numbers game.

To be clear, I am a big advocate for fractional ownership, it has genuine utility for diversification and access. The real transformation comes (which is happening) when the title deeds themselves are tokenized - when someone buys a home and the deed is natively digital. That’s where the infrastructure needs to work at scale, where normal homebuyers need mortgages and where banks become essential rather than optional.

Whether you own 100% of a tokenized title deed or 10% of a fractional share, the fundamental question remains: can you borrow against it?

Real Estate works better with leverage. You rarely, if ever buy a house with cash. You put down 25% and borrow the rest. That's how normal people access property, always has been.

The pitch for tokenized Real Estate focuses on what it unlocks - fractional ownership, instant settlement, global liquidity, secondary markets. All of that really matters, but without lending infrastructure it removes the main part of what makes Real Estate work for many.

I think back to the launch of a UK lender, Atom Bank, they came to market as a new digital bank and launched with rates that were far cheaper than others, it was great marketing, pricing 5 year fixed rates lower than most others 2 year fixed rates. To use them, they had better UX, faster approval, great branding and all the same protections and regulatory approvals as any other lender, it really should have been an easy sell.

It wasn't. Most clients weren't really interested, 'I have never heard of them' - 'what happens if X, what happens if Y' - 'I have heard stories before where X'.

It obviously wasn't the product, it was the name, something new but more importantly someone they'd never heard of. When you're borrowing considerably more than your net worth, which is often the case for Residential Real Estate transactions, you go with the bank you know, have heard of and more importantly, trust. Even if that costs you more.

Tokenized Real Estate is making the same mistake, just worse.

Not only has the buyer got to overcome the barriers or concerns buying via whatever platform is selling the tokenised Real Estate, they have a larger barrier to overcome when it comes to lending.

You can't sell someone fractional ownership of a building and then, when they want to borrow against it, tell them the solution is a faceless 'protocol' they've never heard of.

The likelihood is you have to deposit your tokenized Real Estate to the lending entity - so how safe is that? What are the risks? What protections do I have? Who governs it? Who backs the capital? What happens if something goes wrong? It is going to be an uphill struggle to recover anything should the unthinkable happen.

To someone 'crypto native', the downside is so obvious, it makes the upside not worth the risk but now imagine someone who has no knowledge of crypto, you will always struggle to convert the masses.

Banks do not make things work by being clever, it's just convenient, boring and recognizable. When Standard Chartered, HSBC or RAKBANK offers something, people assume someone checked it. Maybe they didn't. (they did) But the assumption exists and that assumption is worth more than any fancy branding or big worded whitepaper, it's backed up by far more regulatory and compensation schemes than anything else and that initial barrier is not there.

DeFi is trying to route around this. The argument was users don't need banks, they just need code. This is entirely correct for certain asset classes, especially highly liquid ones, you can lend against BTC or ETH and code handles everything. But Real Estate isn't either of them.

One of the biggest things overlooked with tokenized Real Estate is enforceability. There is this huge misconception that just because a smart contract can trigger a repossession in seconds lending is fine or it makes the lender comfortable, it does not.

Real Estate itself is not a token or a liquid asset, it never will be. With a property comes a physical construction, maintenance, renters, utilities, service charges, disputes and more. A huge undertaking if wholly owned and on the fractional side, If you end up with the majority of owners being repossessed through reckless lending on DeFi protocols, the management company is trying to negotiate the sale with what, a DAO? Not ideal.

There is what can be programmed and then there is what occurs in the real world. You can't forget the details when excited by the possibilities, you have to take it step-by-step.

It makes me uneasy when I think about how many consumers I've had to talk through how to download their payslip or bank statement, we actually created a PDF to send to clients to reduce our time spent there, now we expect those same people to self-custody private keys to their house deeds or shares, connect wallets, deposit, borrow, off-ramp. There is a huge disconnect between what gets built and the end user's behaviour.

The everyday person wants someone trustworthy to handle it, they want to simply know the risk, the potential return and where to sign, they want their bank to handle it. The same bank that handles their current account, savings account, kids accounts, their bank manager, it's not laziness, it's just what they are used to, to them, it's time saving and sensible.

When I talk about banks lending, we can build the infrastructure for it to exist in the background but it is the banks that must keep the customer relationship. Because that is what the customers want and are comfortable with.

Boring infrastructure that works is good. I think that's the problems we have seen - people are trying to build what they think is exciting, consumer facing, talking about technology, this, that and the other, when actually what most consumers value so much more is the legitimacy of a Bank. The boring products that just work. Most people do not get excited by Real Estate or savings accounts or Investments. It is boring. It is what the average consumer is used to. And that's how it needs to be here.

This creates a problem people don't like admitting. You can easily build perfect infrastructure and fail completely if regulated entities like banks won't touch it. Your pool of users is always going to be heavily restricted to those that understand and are open to risk, which in the grand scheme of things, especially Real Estate as a relatively low risk asset class, is pretty small.

To me, the key difference between an experiment and a market can literally be whether conservative people in expensive buildings with regulatory & compliance departments are involved. People may not like that, but it is the world we live in and will continue to do so.

Institutions are already moving but what it also proves is that it's going to take time. It is a careful process. There is no way that we can tokenize, lend and securitize at scale immediately. It just has to be done step-by-step until all of the infrastructure is onchain.

People internally to banks still need educating to understand, that will only come in time, as long as you have someone who gets it internally and has the staying power and drive to make the change, eventually it will happen.

The infrastructure work happening right now is genuinely impressive. Native tokenization integrated with land registries. Institutional custody, Banks launching stablecoins and blockchain/DLT integration. Not all are just pilots anymore and on the Real Estate side, in some cases properties are selling out in minutes. The issuance, custody and regulatory frameworks are forming.

What then allows this to mirror traditional infrastructure is the next layer. Banks providing consumer lending against these assets. That's when tokenized ownership becomes the norm for homeowners and a wealth-building tool for investors, rather than just distributed reporting and ownership.