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HOME NRI JOURNAL New Alternative Investment Method Created With Combination of Real Estate, Finance and IT

NRI JOURNAL

Innovation magazine that generates hints for the future

New Alternative Investment Method Created With Combination of Real Estate, Finance and IT

Hirofumi Tatematsu, Senior Managing Director, Nomura Research Institute Tomohiko Taniyama, Member of the Board, Bit Realty

Sep. 05, 2018

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The real estate investment platform Bit Realty was created with the aim of combining real estate, finance, and IT to develop a new real estate investment framework for individuals. And this new platform is about to be launched with partnership from real estate asset management company Kenedix. Hirofumi Tatematsu of Nomura Research Institute, a real estate sector specialist, and Tomohiko Taniyama of Bit Realty discuss the current conditions of the real estate investment market and the outlook for the new platform.

Individuals Have Limited Choices in Real Estate Investing

Real estate investment is not a familiar matter for ordinary people. You may have heard some people say, “I’ve bought a condo in central Tokyo for investment purposes” or “I’ve built a condo/apartment building on a piece of idle land,” but in general, people think of real estate investing as requiring a large amount of funds and being risky.

Real estate investment trusts (J-REITs) debuted in 2001 with the aim of making real estate investing more retail investor-friendly. J-REITs indeed made real estate investing possible with a small amount of funds, and thus did succeed in bringing in a wider range of investors. However, because J-REITs are listed on securities exchanges, their unit prices have a strong tendency to be correlated with the stock market, undermining the appeal of real estate investing of being a generator of long-term stable rent income. For this reason, when individual investors consider investing in real estate, they have to choose between either purchasing a property that costs tens of millions of yen (several hundred thousand dollars) to start a leasing business or buying a J-REIT that has a strong correlation with the stock market. Those are the only available options under the current circumstances.

Providing Truly Alternative Investment Opportunities to Individuals in a Smart Way

The type of real estate investing in which institutional investors and other professional investors engage requires a massive amount of capital. Investments, however, are made in office buildings and commercial facilities in prime locations with thorough management, and because of their risk and return characteristics which are different from those for stocks and bonds, investors enjoy returns that are stable over the long term as well as the strong effects of diversification.

We wanted to enable ordinary individuals smartly engage in such type of truly alternative investment that pros engage in, and thought we might be able to realize that by combining real estate, finance, and information technology. This is how online real estate investment platform Bit Realty was launched as a joint venture between Kenedix, which boasts a wealth of experience in real estate and finance, and NRI, which is well-versed in finance and IT. Bit Realty is a real estate crowdfunding platform that solicits capital from a broad range of investors online and directly invests in non-public real estate investment products.

 

The most important thing in developing such a new investment platform is to create a framework that allows investors to place their money with peace of mind. Recently there have been cases of unauthorized appropriations of capital from crowdfunding and cases where companies with poor security were attacked and investor capital was damaged. Fintech and real estate tech startups with little experience in the financial sector that focus too much on rapid growth tend to have a poor business structure and weak handling of system security, and that is just unfortunate.

Bit Realty’s policy is to tap NRI’s wealth of knowledge in developing an IT system with strong security and stability and to apply cutting-edge technologies. We not only separately manage investor money but also ensure the traceability of and information disclosure from investees. Bit Realty also seeks to design products with the expertise and pride of real estate pros and offer to individuals high-quality asset management services that are on a par with those for institutional investors.

Aiming to Serve as the Foundation for Innovations in the Real Estate Market and Create a New Ecosystem

Bit Realty aims to do more than merely offer attractive real estate investment opportunities to individual investors. We aim to become the foundation of technology-enabled innovations in the real estate industry down the road and contribute to solving social problems in a broader sense.

To make innovations in the finance and real estate fields, it is important to closely follow the latest technology trends and deregulation moves. Hot technological developments include IoT, artificial intelligence, big data and blockchain. Digital transformation in the real estate industry, known as PropTech, has been making headlines recently, but expansion is difficult with just individual services. This is why Bit Realty wants to not just build an online real estate investment platform but to also turn this platform into the base of various innovations, and partner with a variety of tech services and the physical real estate market to develop a new ecosystem for the real estate market.

Moreover, Bit Realty will not only create a new flow of funds between investors and real estate to help build a two-track financial system, it will also develop a framework for matching real estate that will contribute to rural revival and urban renewal with the money from committed investors. We hope that this will lead to the effective use of individuals’ financial assets and help stimulate the real estate market.

As we discussed earlier, Bit Realty will develop a framework for bringing the opportunities to invest in real estate in Japan and abroad that were available until now only to institutional investors, financial institutions and other pro investors to more people. By doing so, we will offer truly alternative investment opportunities to individual investors and support efforts to realize various kinds of value, and we hope to help stimulate the real estate investment market and furthermore contribute to urban renewal, rural revitalization and efforts to solve social problems.

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Contact

Nomura Research Institute, Ltd.
Corporate Communications Department
E-mail: kouhou@nri.co.jp

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