What if you could put your bitcoin (BTC) or ether (ETH) as collateral to buy a house?
That’s the key idea behind real estate firm Propy’s upcoming sale, a condominium located in Honolulu, Hawaii, for sale at a starting price of $250,000. If they choose, the prospective buyer can take out a loan from Propy to acquire the property — as long as they provide 100% collateral in bitcoin or ether, and also pledge the property.
“This is a great proposal for bitcoin holders,” Natalia Karayaneva, CEO of Propy, told CoinDesk in an interview. “This is not a taxable event. They take a loan and buy real estate with it, instead of leaving bitcoin, paying taxes, and then buying real estate.
It’s a two-year loan, and it comes with 10% annual interest. If the given cryptocurrency’s value drops by more than 50%, the buyer faces a margin call; in the worst case scenario, crypto holdings could be liquidated, and the real estate resold at an auction. However, if the price of the cryptocurrency doubles, the buyer can repay the loan only through their earnings. Interest payments, and the loan itself, can be returned in bitcoin, ether or USDC.
Another important aspect of the deal is that the asset is tokenized. Launched in 2017, Propy aims to bring real estate transactions on-chain, thereby speeding up settlement times and liquidity. In the case of the property sale in Hawaii, which is scheduled for January 29, a potential loan will be processed immediately, and once the payment is completed, a buyer will automatically get their crypto back.
“This is not just a milestone; it is a glimpse of the future of real estate,” said Karayaneva. “We’re showing how blockchain technology can simplify home buying, replacing the traditional long loan approval process with an instant, efficient solution.”
Buying real estate on-chain
Based on the Ethereum layer 2 solution Base, Propy has not regularly tokenized properties, at least not yet. More often than not, the company simply uses smart contracts to make real estate purchases faster and reduce attorney fees. “The main business comes from normal consumers. They don’t know that we use smart contracts in the back-end, but they like how fast and transparent the whole process is,” said Karayaneva.
When it tokenizes a property, the LLC firm sets up the property in the county registry and then creates the token, a process that takes about two weeks. Upon acquisition, the LLC will be amended to reflect the change in ownership, and the property token will be transferred to its new owner.
Right now, pure crypto native deals account for only about 5% of the company’s volume, according to Karayaneva. One of these deals, for example, involved TechCrunch founder Michael Arrington turn of his apartment in an NFT. Propy also auctioned a 17th century Italian mansion on the blockchain in 2017. “We haven’t done many of those transactions yet because we need the loan product to scale,” he said. “People need a mortgage or a loan to get real estate exposure.”
Propy also provides escrow services in partnership with Coinbase, the goal is to support the crypto community in making real estate purchases in crypto. For example, the escrow service helps bitcoin holders avoid wrapping up their holdings in ERC-20 tokens like wBTC.
Once a property is tokenized, there is nothing stopping the buyer from selling it to another crypto native without having to go through Propy. If the token is sent to a new wallet, the buyer will automatically be given a link to provide Know-Your-Customer (KYC) information; their name will appear on the LLC as the owner of the property. And the buyer can also unwrap the property from the LLC and own it the traditional way — a process Karayaneva calls “un-chaining.”
“Our main goal is really to on-chain as many real estate assets as possible,” Karayaneva said. “Imagine doing an on-chain swap between a real estate on-chain asset and a bitcoin asset, or another crypto asset. … It’s a $300 trillion market. Imagine if it would be liquid.” Read More: Propy Teams With Abra to Offer Crypto-Backed Property Purchases
