What if you could put your bitcoin (BTC) or ether (ETH) as collateral to buy a house?
That’s essentially the idea behind real estate firm Propy’s upcoming sale, a condominium located in Honolulu, Hawaii, which is selling for an asking price of $250,000. If they so decide, the potential buyer will be able to obtain a loan from Propy to purchase the property, as long as they provide 100% collateral in bitcoin or ether, and also guarantee the property.
“It’s a great proposition for bitcoin holders,” Propy CEO Natalia Karayaneva told CoinDesk in an interview. “It is not a taxable event. “They get a loan and buy real estate with it, instead of getting out of bitcoin, paying taxes, and then buying real estate.”
It is a two-year loan and has an annual interest of 10%. If the value of the given cryptocurrency drops more than 50%, the buyer will face a margin call; In the worst-case scenario, cryptocurrency holdings could end up being liquidated and real estate resold at auction. However, if the cryptocurrency doubles in price, the buyer could end up repaying the loan simply through their profits. Interest payments and the loan itself can be repaid in bitcoin, ether, or USDC.
Another important aspect of the deal is that the property has been tokenized. Launched in 2017, Propy aims to bring real estate transactions on-chain, thereby accelerating settlement times and liquidity. In the case of the Hawaii property sale, scheduled for January 29, a potential loan would be processed immediately and upon completing payment, the buyer would automatically be able to claim their cryptocurrency.
“This is not just a milestone; “It is a glimpse into the future of the real estate sector,” said Karayaneva. “We are demonstrating how blockchain technology can simplify home purchasing, replacing the traditionally lengthy loan approval process with an instant and efficient solution.”
Buy real estate in chain
Based on Ethereum’s Layer 2 Base solution, Propy has not regularly tokenized properties, at least so far. Most of the time, the company simply uses smart contracts to streamline real estate purchases and reduce legal fees. “The main business comes from normal consumers. “They don’t even know that we use smart contracts on the back-end, but they love how fast and transparent the whole process is,” Karayaneva said.
When you tokenize a property, the company creates an LLC for the property at the county registry and then creates a token, a process that takes about two weeks. Upon acquisition, the LLC is amended to reflect the change in ownership and the ownership token is transferred to its new owner.
Right now, purely native cryptocurrency deals only account for about 5% of the company’s volume, according to Karayaneva. One of these deals, for example, involved TechCrunch founder Michael Arrington turning his apartment into an NFT. Propy also auctioned a 17th-century Italian mansion on blockchain in 2017. “We haven’t done many of those transactions yet because we needed the loan product to be able to scale,” he said. “People need a mortgage or a loan to get real estate exposure.”
Propy also provides escrow services in collaboration with Coinbase, with the goal of helping the crypto community make crypto real estate purchases. For example, the escrow service helps bitcoin holders avoid wrapping their holdings in ERC-20 tokens like wBTC.
Once a property has been tokenized, nothing prevents the buyer from eventually selling it to another crypto native without necessarily going through Propy. If the token is sent to a new wallet, the buyer will automatically receive a link to provide Know Your Customer (KYC) information; Your name will later appear in the LLC as the owner of the property. And the buyer can also detach the property from the LLC and own it the traditional way, a process Karayaneva called “triggering.”
“Our main goal is really to chain together as many real estate assets as possible,” Karayaneva said. “Imagine doing an on-chain exchange between an on-chain real estate asset and a bitcoin asset or another crypto asset. …It’s a $300 billion market. Imagine if it turned into liquid.”
Read More: Propy Partners with Abra to Offer Crypto-Backed Property Purchases
