ABSTRACT
Green financing in the real estate sector has been rising recently because of trend towards ESG (environmental, social, and corporate governance) investing and increased consensus towards a need for carbon neutral construction in the real estate sector. The popular instruments of green financing include, green bonds, green loans, equity-based instruments, sustainability-linked loans etc. However, the green investment vehicles face several bottlenecks such as high transaction costs for managing the principal agent relationship, higher minimum sum to be invested, and opportunity costs. The recent popularity of green bonds also leads to high incidences of green washing. Blockchain based tokenized securities can improve transaction efficiency, liquidity, and transparency through better management of intermediaries in the real estate sector. However, they face certain risks such as the regulatory risk, technology risk, and acceptability of the asset class. The objective of this research is to determine whether the blockchain technology has the potential to solve the existing problems of paper-based transactions, high transaction costs, lack of transparency, high costs of property valuation, slow and opaque process, fraudulent transactions, and green washing related to green real estate bonds. The benefits and barriers of tokenizing real estate green bond issuance were also explored. The data sources include in-depth interviews with diverse stakeholders such as developers, subject matter experts including practitioners and academicians, and industry analysts as well as other secondary sources of data. It is found that the blockchain based tokenized securities for green real estate bonds can help in improving liquidity and efficiency of real estate transactions. The transparency is also improved due to disintermediation. The study regarding potential of tokenization is still in its infancy. The interviewed experts also opined that the potential of tokenization has not yet been fully realized because of paucity of technical infrastructures, weak state capacity for regulation, immature asset class, volatilities in the token market, and missing out of an entrepreneurial public sector.
