A couple of years ago, if someone asked us to invest in a virtual platform primarily focused on video games, we would have laughed at the impracticality of the matter. However, as the lines between the physical and virtual realities merge, the Metaverse is poised to become the future of real estate investment.
Metaverse is here to stay and these facts are confirmed testimonies:
Real estate transactions in the Metaverse exceeded $500 million in 2021 and might reach $1 billion in 2022.
Metaverse Real Estate Market would grow at a 31.2% CAGR through 2028
Nothing is buzzier than the Metaverse technology and virtual real estate is inviting several financers. The substantial profits entice investors who want to enter the Metaverse realty before it really takes off.
Amidst the chaos in the traditional and crypto markets, actual adoption is taking place in two niches i.e. NFTs and the Metaverse that appear to be immune to the broader segments. What began as a small segment of niche enthusiasts has evolved into a full-fledged ecosystem. Metaverse land is particularly compelling since it incorporates a concept of inherent worth from the real world.
Before delving into the virtual real estate market, and how it actually works, let’s touch upon the basics.
Table of contents
What is Metaverse?
| “A metaverse is a network of three-dimensional virtual environments centred on social interaction. It’s a fictional version of the Internet that uses virtual and augmented reality headgear to create a single, worldwide virtual world.” |
Let’s review what “Metaverse” is all about. When Facebook changed its name to Meta in October 2021, you likely heard the term a lot. Jumping the bandwagon of trends, even Nike and Microsoft plan to foray into the Metaverse.
The Metaverse is a 3D virtual environment setup where the physical and virtual worlds fuse together. They utilise technologies like virtual reality (VR) and augmented reality (AR). VR headsets and AR glasses together with smartphone applications aid this immersive environment.
As digital avatars, users will communicate, explore new arenas and will be able to create distinct content. Eventually, the Metaverse is expected to give rise to a virtual playground of opportunities.
There are already a number of Metaverses, such as virtual gaming platforms including the Sandbox and Decentraland. Individual Metaverses will form a bigger, connected, interoperable Metaverse, similar to how a website operates a substantial part of the two dimensional world wide web.
It might sound unrealistic to you but the Metaverse realty boom isn’t.
What caused the (un) real estate metaverse boom? Why did the market expand exponentially?
The Metaverse Real Estate Boom in 2022
There were hardly any brands in the Metaverse a year ago. It was mostly player-driven, with a few platform-sponsored events flaked to drive engagement. In 2021, businesses began taking cautious steps into this virtual world in the hopes of reaching out to an entirely new audience.Special event platforms were introduced with NFT-entangled objects.
With numerous brands such as Nike, Facebook and Microsoft entering the virtual world, celebrities began to arrive at the Metaverse to build estates. Then, the virtual real estate corporations lined up. More people were enraptured as the real estate ventures built virtual properties. The Sandbox and Decentraland could suddenly fetch a million dollars based upon property locations. Eventually, the buzz around Metaverse was no longer a rumour.
The main motivation for purchasing virtual real estate includes high returns on investment. Several virtual real estate projects are lined up to launch in the Metaverse. The premise is similar to that of purchasing an NFT: you own the digital asset stored on the blockchain and anyone can check its legitimacy. You can subsequently sell your virtual land if it grows in value, or can rent it out for events.
After you’ve learned the main reasons for investing in virtual real estate, you’ll must also learn to know how to go about doing so.
How to Obtain a Land in the Metaverse?
| The major participants in the (un)real estate market are Sandbox, Decentraland, Cryptovoxels and Somnium. In 2021, the real estate transactions on these platforms totaled $501 million. |
Purchasing virtual land may be the foremost way to venture into the Metaverse. Here’s how to do it.
Get a Digital Crypto Wallet
Initially, you need to get a digital wallet to purchase and reserve your cryptocurrency. Preferably, the chosen wallet must integrate into the browser. In general, people count on the MetaMask, Trust Wallet and the Binance Chain Wallet.
Note: Make sure that the chosen wallet supports the cryptocurrency you are about to use for land purchase.
Choose a Real Estate Platform
You can purchase property through numerous virtual Metaverse sites or platforms. Decentraland and Sandbox are the most popular platforms for virtual realty. OpenSea is an excellent alternative if you wish to move forward with a third party purchase.
Browse and Select the Piece of Land
You can get certain information about the chosen property pieces such as its distance from famous landmarks. Although, properties with close proximity towards famous localities somehow increase the price trends. Additionally, you get the option to bid or even purchase it outright, depending upon the chosen platform.
Connect Wallet to Confirm Your Land Purchase
To validate your virtual purchase, connect the wallet with your account. All you have to do is sign in to the platform through your wallet. As soon as you connect the wallet, the virtual land will be affiliated to your account and you will become the sole owner of the property.
As you become the owner of a virtual real estate property, what are you going to do with it?
What Can You Do with Virtual Land?
“Land” is a token in the Sandbox Metaverse that symbolises a digital portion of the platform. Gamers purchasing land through Metaverse can populate the virtual land with games and assets, where they are tokens generated by players or brands. These investors are responsible to create and assemble user-generated content.
These assets are then exchanged on various platforms as non-fungible tokens (NFTs), and are mostly utilised to enhance one’s experience. Landowners can create a variety of gaming scenarios and offer them to other players for free or at some price. As a result, having a venue to develop digital experiences is the first benefit of owning land.
Landowners can rent out the virtual lands for people to build their own games, conduct events, and engage in other social activities, just like in real life.
What if you don’t have sufficient funds for the purchase? Not an issue, as mortgage finances are available for virtual purchases too.
Paying for Real Estate in the Metaverse
In reality, people purchase property with the help of a mortgage. This is also becoming a possibility in the Metaverse.
TerraZero Technologies has put forward the first-ever Metaverse mortgage for the purchase of virtual property.
What is the mechanism behind it?
Potential virtual land owners intending to fund the acquisition of real estate (expressed as a non-fungible token) can count on NFTs. It will work as a digital asset collateral for land purchase in the Metaverse.
Virtual land mortgage provider retains ownership of the land NFT until the loan is repaid, but the borrower will have the ‘deployment rights.’ This allows the borrower to construct structures on their property, arrange events, operate internet marketplaces, or host an organisation’s internal office.
With the repayment of the mortgage, the virtual land/NFT is transferred to the borrower.
It’s more of a small business mortgage contrary to a consumer loan. Borrowers’ business ideas are examined for their ability to make money using virtual real estate, rather than speculations about growing land prices.
By now everything must sound enthralling, but you can’t escape from the risks involved in the Metaverse real estate.
Metaverse Real Estate Market: Risks and Rewards
Metaverse real estate is fundamentally a non-financial transaction (NFT). Because of its rapid growth, there are a number of frauds associated with it. Always purchase from official and reliable platforms. If an offer appears too good to be true, it almost certainly is.
Buyers need to beware and do their homework when choosing virtual space. Check to see if the Metaverse you’ve chosen offers plans for the next 5, 10, or 15 years. Without utility, the item can only be used as a picture or poster on the wall and with utility, the item may be used for a longer period of time and extended lifespan.
Metaverse might be escalating rapidly, but there are three problems associated with it:
- Metaverse properties remain a specialised interest with a narrow market.
- If a Metaverse platform fails, so does your investment.
- The Metaverse is a fickle market for real estate investment since it is rooted in virtual reality.
However, we must not overlook the benefits it provides to virtual investors. There are numerous advantages to becoming a landlord in the Metaverse currently.
- You can make money while your virtual land grows in value.
- Commercial tenants are more readily available than you would think.
- In comparison to the real world, input costs are modest.
The Future of Real Estate in the Metaverse
This vision is a long way off. However, if this seems absolutely ludicrous, recall the time when people originally doubted the Internet’s presence and social media’s potential significance. In the coming years, experts anticipate that the Metaverse will evolve into a fully functional economy, giving a coexisting digital experience integrated into our lives.
For someone who used to be a gamer, this is a dream come true. Years ago, gamers’ conscience kept telling them to face reality and get back to study. Deep down inside they always wished gaming overlapped with real life and this vision seems to be inching closer and closer every day
