Istoken : The digital revolution of fractional Ownership & Real estate tokenization model in Türkiye

Abstract

Real estate access has become increasingly challenging due to high property costs and financial difficulties in Türkiye , especially in major cities like Istanbul.These limits have hindered the ability of individual and small-scale investors to engage in significant real estate developments. Nevertheless, innovative solutions like fractional ownership ideas and real estate investment funds have arisen to address these difficulties and make real estate investments accessible to a wider range of individuals. Fractional ownership is the division of big assets into smaller shares, allowing investors to get these properties at a reduced price. This strategy allows individuals and small-scale investors to acquire real estate assets with less cash. Real estate tokenization has emerged as another viable strategy that has gained significance in addition to these alternatives. This thesis analyzes the current fractional ownership practices in Türkiye and proposes methods for regulating tokenization by referring to several real estate investment fund applications. An innovative real estate tokenization concept, called "ISToken" (Istanbul Token), has been created. It provides technological, legal, and financial solutions to enhance accessibility and liquidity in the real estate industry. The selection of a blockchain platform is pivotal for the triumph of the ISToken real estate tokenization methodology. The selection of Ethereum as the platform is based on its well-established community, successful advertising strategies, and seamless integration with the wider blockchain ecosystem. In order to assess the viability of ISToken real estate tokenization in Türkiye , we examined real estate investment funds backed by regulatory-supported instruments as a point of comparison. This concept emphasizes the transformation of current regulatory issues to support tokenization. Smart contracts are being recommended as an alternative to Takasbank, which currently handles the secure trading of financial products. Additionally, Distributed Ledger Technology (DLT) is being considered as a replacement for the Central Securities Depository (CSD), which has a multi-central structure that aims to enhance security. The CMB (Capital Markets Board) is the primary regulatory authority overseeing the supervision and regulation of these institutions. It exclusively interacts with portfolio management firms (PMC) under the ISToken model. Regulated PMCs are the only direct counterparts in dialogue with SPK in the ISToken model. However, the only entity that can be considered as a counterpart to the investor is the Special Purpose Vehicle (SPV), which has been specifically created for the purpose of real estate tokenization using ISToken. The rationale behind establishing a Special Purpose Vehicle (SPV) for the ISToken model is that SPVs are already in place for particular financial transactions or projects, namely specialized initiatives, and all aspects of SPVs are governed by the Capital Markets Board (CMB). The ISToken tokenization approach entails the transformation of properties into digital assets, enabling investors to acquire ownership of properties through smaller, fragmented shares. This enables anyone to participate in real estate projectswith modest financial investments, and investors may maintain ownership of properties through digital tokens. Tokenization efficiently and dependably handles these transactions, ensuring a quicker and more economical investing procedure. In Türkiye , the democratization of real estate access is facilitated by a combination of financial instruments and digital innovations, which provide investors with a wider and more efficient selection of investment options. Consequently, the real estate business becomes more easily reachable and varied, resulting in more robust growth for individual investors and the overall sector.