The Rise of Real Asset Tokenization in India: Cost-Efficiency and Democratization of Ownership

India's real estate market is undergoing a seismic shift, driven by the rapid adoption of real asset tokenization. By leveraging blockchain technology, this innovation is not only redefining how physical assets are owned and traded but also addressing long-standing inefficiencies in the sector. For investors, the implications are profound: lower costs, increased liquidity, and unprecedented access to high-value assets. This article explores how tokenization is reshaping India's real estate landscape, with a focus on cost-efficiency and the democratization of ownership.

Cost-Efficiency: Cutting Costs and Friction

Traditional real estate transactions in India are notoriously cumbersome. High administrative costs, opaque processes, and the need for intermediaries like brokers, lawyers, and banks inflate expenses and delay settlements. Tokenization disrupts this model by digitizing asset ownership through blockchain, eliminating many of these inefficiencies.

For instance, tokenized real estate allows for fractional ownership, enabling investors to purchase small portions of high-value properties at a fraction of the cost. This reduces the capital barrier for entry, which is particularly significant in a market where average property prices in cities like Mumbai or Bangalore are often out of reach for most individuals. According to a report, the India asset tokenization market was valued at USD 122.4 Mn in 2025 and is projected to grow to USD 222.3 Mn by 2032, with real estate accounting for 30.2% of the market share.

The cost savings extend beyond capital requirements. Smart contracts automate processes such as rental income distribution and compliance checks, reducing administrative overhead. For example, tokenized properties can distribute rental income daily or monthly in stablecoins, compared to the quarterly payouts typical of traditional REITs. This automation not only lowers operational costs but also enhances transparency, as blockchain's immutable ledger ensures all transactions are recorded and verifiable.

Democratization of Ownership: From Elite to Mainstream

One of the most transformative aspects of real asset tokenization is its ability to democratize ownership. Historically, real estate investment in India has been dominated by institutional players and high-net-worth individuals. Tokenization changes this dynamic by enabling retail investors to participate in markets previously inaccessible to them.

In 2025, India's first tokenized real estate project was launched in GIFT City, Gujarat, by Terazo in partnership with Tokeny. This initiative, built on the Polygon blockchain and approved by the International Financial Services Centres Authority (IFSCA), represents a milestone in making real estate ownership more inclusive. Similarly, Telangana's release of a Technical Guidance Note on asset tokenization signals growing state-level support for this model.

The impact is measurable. According to data, institutional investors now account for 23.8% of the tokenization market in 2025, drawn by the flexibility and liquidity tokenized assets offer. Meanwhile, platforms are attracting retail investors by offering fractional stakes in commercial properties, residential complexes, and even infrastructure projects. This shift mirrors global trends, where tokenization is being hailed as a tool to bridge the wealth gap by enabling broader participation in traditionally exclusive asset classes.

Regulatory Evolution: A Balancing Act

India's regulatory framework for tokenization is still in its infancy, but progress is accelerating. The Securities and Exchange Board of India (SEBI) and IFSCA are at the forefront, with IFSCA's February 2025 consultation paper on tokenization outlining a roadmap for balancing innovation with investor protection. This paper addresses critical issues like asset classification, issuance protocols, and risk management, signaling a structured approach to regulation.

However, challenges persist. The absence of a specific legal framework for blockchain-based transactions means tokenized assets often fall under ambiguous categories, such as SEBI's Collective Investment Scheme (CIS) framework. Additionally, the Information Technology Act 2000 does not explicitly recognize smart contracts or blockchain transactions, creating legal uncertainties around enforceability. These gaps highlight the need for updated legislation to fully unlock the potential of tokenization.

The Road Ahead: Opportunities and Risks

While the benefits of tokenization are clear, investors must navigate a complex landscape. On one hand, the technology promises to reduce costs, enhance liquidity, and broaden access. On the other, regulatory ambiguities and technological risks-such as cybersecurity vulnerabilities in smart contracts-require careful consideration.

For now, early adopters are capitalizing on the momentum. Platforms in GIFT City are experimenting with regulated tokenized real estate markets, while states like Telangana are setting precedents for policy innovation. As the market matures, the integration of tokenized assets with legacy banking systems and custody solutions will likely become a priority, further aligning this emerging sector with traditional finance.

Conclusion

Real asset tokenization in India is more than a technological novelty-it's a paradigm shift with the potential to redefine real estate investment. By reducing costs through automation and blockchain, and democratizing access via fractional ownership, this model is unlocking opportunities for both retail and institutional investors. While regulatory and legal hurdles remain, the rapid growth of the market-projected to nearly double in size by 2032-suggests that the future of real estate in India is being rewritten in code.

For investors, the key takeaway is clear: the time to engage with this transformation is now.