‘Metaverse’ has become one of the biggest buzzwords of the 21st century. The rising popularity of blockchain applications has been one of the major reasons behind the conquest of Metaverse. The term has become so popular that Facebook’s CEO – Mark Zuckerberg changed Facebook to Meta–which is an attempt to usher in the metaverse, a new world of built-in virtual reality. Many wonder about the origin of the ‘Metaverse’. The terms first came into the limelight in Snow Crash – a book by famous author Neal Stephenson in 1992. The book was a science fiction which turned out to be a cornerstone in the development of digital platforms.
There has been an exponential surge in the number of blue-chip & Fortune 500 companies buying property in Metaverse as it empowers them in reaching out to new customers.
Some of the examples of top-notch companies that have bought virtual land at metaverse are as follows –
- Microsoft has made US $69 Million Dollar Down Payment on the Metaverse into a new open source project called Decentraland
- Big 4 auditing firm – PricewaterhouseCoopers has a plot in The Sandbox, where it aims to set up “a Web 3.0 advisory hub to facilitate accounting and taxation.
- Adidas has also bought land there, as “a way of expressing our excitement around the possibilities it holds”,
- Warner Music Group is working to set up a virtual concert venue.
- Republic Realm, which spent US $4.3 million on land in The Sandbox (the biggest deal so far)
- Tokens.com’s purchased land worth US $2.4 million in Decentraland
What is the Metaverse?
For those who are hearing this term for the first time, the metaverse is a digital space where users can communicate and move virtually in their three-dimensional avatars or digital representations. It is expected to be the future of business and human interaction.
Metaverse is composed of virtual worlds which consist of real estate segments called parcels. The platform allows users to purchase and sell parcels using the Metaverse platform’s currency. Metaverse is based on the principles of augmented reality and merges physical and virtual existences in a shared online space. The rising popularity of Metaverse has encouraged global corporations from Microsoft to GUCCI to invest in these platforms to elevate the user experience and foster sales.
How do Real Estate Investors Buy Land in the Metaverse?
The most effective way to buy land on the metaverse is through cryptocurrencies. Some of the popular cryptocurrencies used by the investors include – Ethereum, the Sandbox (SAND), and MANA (connected to the community-based Decentraland platform). SAND & MANA have always been the preferred choice of the investors when it comes to owning online land and property due to its established infrastructure. Investors can purchase land directly on these platforms. The sales & ownership of metaverse land are maintained via. transfer of non-fungible tokens (NFTs) in a wallet capable of storing these. Some of the most preferred wallets today include – Binance and Metamask. Investors can either buy them directly from the platform or they can choose to purchase them from third-party resellers’ markets. Opensea.io and nonfungible.com are some of the most popular third-party reseller platforms who act as decentralized estate agents for the digital domain. These platforms allow sellers to list their property & prices and facilitate buyers in negotiating.
According to an article by CNBC, the last few years have witnessed an exponential rise in investors buying land in Metaverse. Metaverse has completely revolutionized the way real estate used to operate. Not only real estate investors, but lenders and mortgage providers are lining up to make the most of this opportunity and buy digital real estate.
Top Reasons to Buy Land in Metaverse
Here are the top 7 reasons for the real estate investors to invest in virtual property in the metaverse
1. Allows a Large Number of Buyers to Invest
Unlike the actual real estate world, Metaverse allows everyone to invest in Metaverse land. The land parcels are available on various platforms at different prices based on their size, shape, and location. Metaverse allows buyers to set up a cryptocurrency wallet based on their preferences and start investing in global real estate. Metaverse also makes it possible for small investors to buy land by allowing them to purchase micro land parcels based on their affordability.
2. Higher Returns
Buying virtual land on metaverse might cost exactly like real land however returns on investments are multifold higher than in the real world. There are instances where investors have enjoyed returns up to 1000% in a very short period of time.
3. Countering Real estate Malpractices
Metaverse is powered by blockchain technology which makes it impossible for any third party to occupy the land illegally or perform any type of land scam. Every transaction at metaverse is recorded in a blockchain ledger which makes the entire process of buying land and registry more transparent. This overcomes any possibility of common real estate frauds such as – delays in possession, forced cancellation of land, selling land without authorization, and making fake promises to name a few.
4. Stable Source of Investment
Stability is the most important factor which makes Metaverse an ‘apple of an eye’ of global real estate investors. Buying land in Metaverse allows the investors to use it for multiple purposes such as: constructing a house or an office space. Investors can also buy land in the metaverse for investment purposes as well. However, like any other investment, investing in the metaverse is also subjected to risks. There is no assurance that the value of the land will only go up. However, the data suggests that prices of a parcel of land in the metaverse have increased at an exponential pace. When Decentraland held its first LAND auction at the Terraform Event in December 2017, a parcel of land cost merely US $20. Those parcels sold for an average of over US $6,000 in 2021. By the start of 2022, the prices have skyrocketed to approximately US $15,000 per LAND token. The average prices have increased by a factor of 10 over the past year. There has been a huge proliferation in the interest of the investors in buying digital land as they consider it a stable source of investment which won’t lose its value drastically anytime soon like any other investment despite current economic downturns such as – the Covid-19 or the Russia-Ukraine war. Investors are also banking on buying-to-let options as well to take advantage of the thriving rental market.
5. Size & Location of Land Holds the Upper Edge over Utility
In the ideal scenario, the investors prioritize the utility factor of the land over its size or location. However, in the case of digital real estate, it’s another way round. The real utility is the least priority of the investors as they will never inhabit the land or visit it in person. The primary objectives of buying land in Metaverse are either to develop it or to lease it out to a third-party entity. Thus, size & location become key factors compared to utility. In the last few years, there has been a surge in the number of real estate developers and tech developers looking to build master communities which are equipped with ultra-modern facilities such as – clubs, schools, and high-end restaurants whilst living in the metaverse. Taking it to a new level, a list of real estate developers in the US have unveiled a one-to-one metaverse replica on an augmented reality platform to complement the physical town.
Technology companies and real estate developers are joining hands to build virtual cities. Recently, an Indian firm – Lepasa created virtual cities in Metaverse and plans to create 15-20 different cities over 416 sq km, with each city having a different theme.
6. Easy to Secure Loans
Another reason to embrace buying land in the metaverse is it is easy to secure loans. Loans are given easily through a multi-blockchain network which facilitates faster liquidity deployment at a far lower cost. Decentralized finance (DeFi) is the only entity which facilitates money lending or borrowing of a cryptocurrency against collateral. In the metaverse, the collateral is a Non-fungible token (NFT). DeFi allows anyone to borrow crypto assets without requiring KYC documents or performing a credit check. It is highly secured and is automated through smart contracts.
7. Convenient to Host Community Events and Commercial Activities
Buying a digital land at metaverse also opens an opportunity to host real-world events such as: community events, workshops, exhibitions, trade shows, and social gatherings. Attendees can attend these events from the comfort of their homes. Several companies have used metaverse to host events. DAMAC Properties is also in the process to build a novel Metaverse project, featuring numerous brand collaborators such as Paramount Hotels and Resorts, Fendi Casa, Cavalli, Radisson, Versace Home, The Trump Organization, and Rotana. Dubai has also hosted the world’s first-ever economic summit on Metaverse in March 2022.
Here is a short recap of the top 7 reasons for real estate investors to invest in Metaverse
- Allows a Large Number of Buyers to Invest
- Higher Returns
- Countering Real estate Malpractices
- Stable Source of Investment
- Size & Location of Land Holds the Upper Edge over Utility
- Easy to Secure Loans
- Convenient to Host Community Events and Commercial Activities