UAE-based property developer LandOrc is set to enter the booming Indian real estate market with a focus on the country's tier 2 cities by tapping into alternate funding available from the large capital base within Decentralised Finance (DeFi) and crypto assets of $2.2 trillion globally.
The Indian real estate industry is in the spotlight as global investors have invested $5 billion of investments in 2020 alone and the sector has seen the participation of marquee investors like Blackrock, Oaktree, Bain Capital, Capital Land, Sumitomo, Meritz, according to industry experts.
However, the capital has been focused on the larger cities and is still inadequate to fill the funding requirement in India. VC Circle estimates the real estate funding gap in India at $100 billion.
This funding gap is most felt in the 104 Tier 2 cities in India, already representing 75% of India's aggregate GDP. Real estate activity in the Tier 2 and 3 cities are experiencing the highest growth rate, especially in the smaller scaled projects.
Now LandOrc is focusing specifically on this segment. Offering lending with an average deal size of $150,000 per project and with tenures of less than six months to fill the funding gap in Tier 2 and Tier 3 cities.
The low value, high volume and fast turnaround of projects offers risk mitigation to lenders. Ensuring a high debt scenario for a single property developer like Evergrande is unlikely to happen.
Additionally the lending is secured against a land collateral, held via a Non Fungible Token (NFT) on the blockchain.
The transparency and speed of a blockchain based approval system ensures that the property developers are able to access lending at a faster time frame and the cost of capital is lower than what is available locally.
Thus, LandOrc is enabling the reduction of the cost of housing and providing a growth driver to the real estate industry.
The LandOrc team on-ground has deep experience in real estate and finance to ensure that the lending process is done within local regulatory frameworks and is scalable over time, said a company spokesman.
This tokenization of lending allows for global investors to participate from the comfort of home to achieve upto 20% APR (annual percentage returns) on the LandOrc platform.
The real estate industry globally has been facing a funding gap despite all the governmental quantitative easing efforts during the pandemic. Most of the benefits from the easing have been targeting end consumers and individuals and not the businesses. This has further accentuated the funding gap already faced by real estate developers prior to the pandemic, he stated.
According to him, LandOrc is in the process of replicating the same lending model in other markets like Australia, US, Sri Lanka, Canada focussing on high interest segments.
The World Economic Forum had estimated the size of tokenization of assets to reach $24 trillion over the next six years. The rise of technologies like blockchain has fast forwarded the growth of tokenization, for any asset or financial instrument.
This impact is seen in the growth of NFT marketplaces that have reached $2.5 billion sales focussing primarily on art, entertainment and gaming sectors, he added.-TradeArabia News Service