Virtual real estate transactions have begun emulating their brick-and-mortar counterparts with the introduction of metaverse mortgages.
Vancouver-based TerraZero Technologies, a self-described “vertically-integrated metaverse technology company,” recently provided the first metaverse mortgage to buy virtual real estate in Decentraland.
“An entirely new economy is emerging and we want to offer entrepreneurs and others similar products and services for the metaverse that are available to them in the real world,” said TerraZero CEO and founder Dan Reitzik.
TerraZero serves as a mortgage broker for virtual land listings, offering information about size and location. Interested investors can take out a mortgage and TerraZero will provide them with ‘deployment rights’ to build on the land, organize events and run digital storefronts, making monthly payments until the mortgage is paid off and the virtual plot is transferred to the owner.
Metaverse mortgages are an intriguing development that could signal increased growth of the virtual world.
“Mortgages and financing availability will expedite the development and adoption of the metaverse, and we are excited to be at the forefront of this new and exciting economy,” said Reitzik.
Virtual real estate heating up in the metaverse
Virtual worlds such as Decentraland and The Sandbox allow users to meet and communicate as digital avatars. Cryptocurrency and non-fungible tokens (NFTs) are the primary method for completing transactions in the metaverse, and virtual real estate has recently become a hot commodity.
To ensure digital real estate has value, supply is limited. For example, Decentraland is made up of 90,000 pieces or “parcels” of land, each measuring 52.5 square feet. According to CNBC, virtual property prices have increased by as much as 500 per cent since Facebook’s transition to Meta, and some virtual plots have become as expensive as a real-world house.
In November 2021, a subsidiary of Toronto-based Tokens.com called the Metaverse Group, bought a plot of 116 parcels in Decentraland’s fashion precinct for a then-record-setting US$2.4 million. The space will be used to host digital fashion events and sell virtual clothing for avatars.
“Fashion is the next massive area for growth in the metaverse,” Sam Hamilton, head of content at the Decentraland Foundation, said in a statement. “So it’s timely, and very exciting, that Metaverse Group has made such a decisive commitment with this land purchase in the heart of Decentraland’s fashion precinct.”
The following week virtual land developer Republic Realm established a new record, buying a plot of land in The Sandbox for US$4.3 million from video game company Atari SA.
Measuring virtual real estate’s value
While prime real estate in the physical world is based on distance, the value of real estate in the virtual world is measured by traffic, which is why developers are working to create events that draw people in.
Last week The Sandbox announced partnerships with record label Warner Music and rapper Snoop Dogg to create a music theme park and concert venue to virtually engage with fans and generate real revenue streams.
“We’re shaping The Sandbox as a fun entertainment destination where creators, fans and players can enjoy first-of-a-kind immersive experiences and be more closely connected to their favourite musical artists through NFTs,” said Sebastien Borget, COO and co-founder of The Sandbox.
Investors are also being offered real-life solutions, such as pooled funds into real estate. MetaSpace Real Estate Investment Trust (MREIT) recently became the first REIT to launch in the metaverse, debuting on PancakeSwap in December with a focus on buying, leasing and minting high-traffic virtual real estate.
“It’s the biggest opportunity of our generation,” said MREIT found Eric Klein. “Especially for those of us who work in real estate and have seen the industry shift in unprecedented ways. If you’re not on board, you’re being left behind. That’s just a fact.”
