The rise of metaverse real estate
Metaverse is driving a hyper-connected, digital interaction-led transformation with increased interest to invest in virtual real estate.
What is Metaverse? Mark Zuckerberg, the CEO of Facebook, in his Connect Keynote in 2021, discussed his vision of the metaverse and the company's rebranding to Meta. Following that, there has been a huge increase in searches for the metaverse. From titans like Microsoft to Roblox and Epic games, everyone is embracing the metaverse. Metaverse has evolved to become more than just a gaming environment. The science fiction "Snow Crash" by Neal Stephenson, published in 1992, and Ernest Cline's sci-fi film "Ready Player One" contained some of the earliest examples of a metaverse.
In a nutshell, the metaverse is a seamless amalgamation of physical, augmented, and virtual realities. It helps access a digital alternate space mirroring the physical world, where we can create avatars. It can also be transactional in nature regulated via a digital wallet, with the currency being crypto. The purpose behind the metaverse is to usher in the next phase of social connectedness.
According to Bloomberg Intelligence, the metaverse market is predicted to be worth US$800 billion by 2025 and might reach US$2.5 trillion by 2030. Decentraland, Sandbox, Axie Infinity are some of the key platforms in the metaverse domain.
Of all the high-end investments, virtual real estate appears to be capturing investors’ attention with possibilities of virtual workplaces, shopping malls, etc., where our digital identities can have a presence. For example, Microsoft aims to connect its VR and AR platform Mesh with Teams and has hinted at potential immersive spaces. Moreover, Horizon Workrooms were created by Meta to host meetings using Oculus headsets.
Key real estate investments:
- Republic Realm paid a record US$4.3 million for virtual land to build 100 islands, named Fantasy Islands, each with its own villas and jet skis.
- Metaverse Group, a subsidiary of Tokens.com, invested US$2.4 million in 116 plots measuring 52.5 sq. ft. apiece, totalling 6,090 virtual sq. ft.
- Genesis Land plots owned by Axie Infinity sold for US$2.3 million.
Will India accept it?
People have begun to invest their crypto assets in real estate. However, there are some major pain points:
- Transparency and security: For the Indian buyer, the anonymity of crypto's origins and transactions is likely to be a drawback. Cryptocurrency’s security and storage are also ambiguous and vulnerable to human error. It is also highly volatile, which is evident with the high peaks and profound lows that the market saw in 2020 and 2021.
- Regulation: As per the union budget 2022-23, the Indian government would impose a 30% capital gains tax on all cryptocurrency transactions and a 1% TDS. This action acknowledges cryptocurrency as a valid ecosystem and its trading as a lawful activity. However, the high tax rates might deter investments.
Depending on how things are going, we may be spending the better part of our life in the metaverse through an avatar in more ways than one. Even though this new reality appears to be ambiguous and full of speculation, it hasn’t stopped individuals and companies from investing large sums of money. Part of this enthusiasm was inspired by the rise of the non-fungible tokens (NFTs).
To make the metaverse a reality beyond gaming, tech companies will need to advertise VR and AR technology and develop ways to promote it to a broader audience. This vision is undoubtedly a long way off. Still, if it seems far-fetched, we should recall that people initially doubted the potential significance of the internet and, subsequently, social media.