Learn why land in the metaverse is attracting investors and companies

Since Facebook announced that it changed its name to Meta in October 2021, brands and people have paid more attention to the metaverse.

This parallel digital world replicates the dynamics of virtual life, and that includes the real estate market. Companies and investors are buying land on major metaverse platforms — such as Decentraland, The Sandbox, CryptoVoxels and Somnium Space. The business is done through NFTs (non-fungible tokens), which is the right of ownership over a virtual asset.

Rapper Snopp Dogg announced, in partnership with Sandbox, his own space in the metaverse, the Snoopverse, where there will be concerts, exhibitions, parties and a replica of his mansion in California. Shortly after, a user of the platform acquired land next to Snoopverse for the equivalent of BRL 2.5 million.

Retail and banking giants also invest in the platforms. In February, Carrefour announced the purchase of land in SandBox. According to the group’s director of digital transformation, Elodie Perthuisoit, it will be a space for experimentation.

The American bank JPMorgan decided to be present at Decentraland. HSBC has already invested in land in the Sandbox, of undisclosed value, to create brand experiences, Reuters reported on the 17th. In the same week, the institution announced the closing of 69 physical branches in the United Kingdom.

The only resemblance to the real-world housing market, for experts, is in speculation. As these platforms are still starting to become popular, those who guarantee their space there today hope that the land will appreciate in the future, so that they can resell or rent it.

“You don’t need it to sleep, but you can host people, rent your space for events,” says Bruno Hora, co-founder of InvestSmart, who gave the interview directly from his virtual office in the metaverse through Facebook’s Horizon Work Room platform.

If an artist or brand buys land, it is also a reason to generate value in the area. The prices, however, are not for beginners. “If you compare, the price in the Sandbox is New York, absurd”, says Hora. “If it weren’t so expensive, I would buy land there, even if it was a flat”, he adds.

In addition to the variation in the price of land due to pure speculation, the values ​​also fluctuate according to the price of the cryptocurrency used on each platform.

For Hora, for now, the purchase of land and real estate in the metaverses makes sense for companies and artists – who gain media by announcing their news, can profit from the exposure of their brands and guarantee a space if the platforms really become popular in the future.

For ordinary people, having a home of their own in the metaverse will make sense when platforms are spaces in which events that are now in real life will take place, such as meetings, classes and meetings.

There are already clothes and accessories for avatars (virtual representation of users of the platforms), which are sold by major brands. “If people are migrating to have virtual experiences, it makes sense to be able to build their avatars and virtual homes”, says Fábio Araújo, managing partner of the real estate consultancy Brain.

In these systems, programmers and 3D designers will be the bricklayers of the future, says Hora.

For the virtual land investor, however, it does not matter what is already possible to do on these platforms, but the expectations of what will be in the future.

Flávio Tavares, founder of Welcome Tomorrow, which promotes meetings about technology and innovation, analyzes that the metaverse will only become really popular when a device is created to access it in an immersive way and at a price that allows mass sales.

“When that hardware comes out and it’s democratic, maybe we can have this thing that everybody points out, of using the metaverse for meetings, meeting friends, because today it’s even easier to do a video call.”

Until then, the immersive experience on these platforms is provided by devices like Facebook’s Oculus. The item is not marketed by the company in Brazil, but can be found on sale sites for around R$2,800.

Even with the possibility of gains in virtual transactions without having to worry about works and managing tenants, the metaverse real estate market should not take space from the physical real estate market, experts say.

For Tavares, the purchase and sale of virtual land is something that is more identified with investors who like to take risks and who are already betting on cryptocurrencies, necessary for transactions in the metaverse. “Those who invest in physical properties are more conservative, they want ballast, they are not looking so much at yield”, he says.

Companies that work with construction and sale of real properties can blend in with the metaverse if they take advantage of the virtual space to publicize their ventures.

Araújo imagines that a developer can build a digital version of its most important building and rent the units so that users can spend a weekend in the virtual property, for example.

Another imagined way for this intersection is to use virtual properties as collateral or part of the payment for real homes, and vice versa, points out Vinicius Motta, executive director of the real estate startup Minha Casa Financiada.

But if Mark Zuckerberg’s plans come to fruition and the metaverse becomes part of everyone’s lives, it is expected that more taxes will be levied on virtual interactions, similar to their peers in the physical world.

Lawyer Fernando Zilveti explains that today it is already necessary to declare real estate transactions in the metaverse to the Federal Revenue, in the area of ​​goods and Income Tax rights. They are categorized as movable goods, however, because they are intangible.

“For now there is no IPTU, electricity bill and condominium, but soon they invent”, he says.

Digital real estate can be used as collateral for loans

NFTs can also be tied to real estate. The Netspaces platform, a digital property management startup, has been digitizing physical properties since last year, which now have an NFT as a kind of virtual registration. Through a partnership with the fintech Rispar, they can also be used as collateral in credit operations, known as home equity.

Today the transaction can be completed in 15 minutes, but it has the potential to be done in real time, says Jonathan Darcie, chief legal and product officer at Netspaces, whereas a traditional transaction of this type would take days.

The time saving occurs because all the property information is saved on blockchain (a system that records information in a virtual way) and is easily accessible.

The first home equity transaction through a property in the form of a token was made this year in Porto Alegre, Netspaces’ hometown.

In addition to the credit operation, the token can be used to speed up purchase and sale transactions and allows for a fractional acquisition of the property, which has also been done by the company in the capital of Rio Grande do Sul.

The buyer can move into the property and pay rent on the remaining amount, while buying new installments of the property each month, for example.

Digitization also facilitates the purchase of real estate in Brazil by people who are abroad. “You give access to the Brazilian real estate market to several foreigners who would have difficulty acquiring property if it weren’t for this format”, says Darcie.

The properties digitized by the company are available on virtual real estate agencies such as Imovelweb. The company is expanding its operations to the capital of São Paulo and Rio de Janeiro.