Aave platform plans to issue mortgage loans

The company behind the Aave platform announced in the official blog that it plans to launch a new service for its customers. The partnership of the Aave protocol with the RealT project will allow users to obtain a mortgage loan in the project’s tokens.

Tokenized real estate on RealT

The Aave V2 platform announced recently that it intends to expand its presence in the markets and launch several new features at once. One of the new projects of the platform was cooperation with the RealT project, which was launched in 2019 as one of the first projects to tokenize real estate on Ethereum for its further integration into the DeFi ecosystem. According to Aave blog, users will get the opportunity of depositing their tokens into the Aave Protocol in order to use them later as collateral to borrow stablecoins. It means that their assets can be used in many ways.

The ability to use RealT assets as collateral makes Ethereum mortgages available to a wider audience. In other words, RealT will provide its tokens to the Aave platform with the subsequent their issuance to users for the purchase of real estate, home and garden equipment, travel, etc.

In the near future, the organizers of the RealT service are ready to launch functions for private real estate tokenization. This means that ordinary users will be able to buy or sell real estate through the blockchain, converting their property rights to real estate into tokens.

What are the risks?

The platform understands that the question is complicated taking into the account the volatility of the market, therefore accuracy of the updates is a necessary component of properly working system. It should be in line with the property market of the real world therefore oracle service will be employed to make sure the price feeds are correct. The platform will employ Chainlink’s decentralized oracle.

Despite the promising prospects, the market for tokens that are pegged to real estate is also at risk. And the main one is the fall of the real estate sector during crisis situations. For example, during the 2008 crisis, the US real estate market shrank by almost half. The company declares that it takes into account possible risks and has already developed a mechanism for their leveling. It includes, for instance, necessary KYC verification and complex selling process. The process of liquidation is going to be difficult and time consuming. There are other measures as well that will help to avoid the problems in this connection.

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