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Saturday, October 14, 2023

Unlocking access to real estate: Goro’s tokenization of rental properties in Indonesia

The investment landscape is constantly plagued by volatility, as investors struggle to grasp the essence of their investments. Indonesia, with its sizable population of 270 million people, harbors a significant portion of Indonesians who are hesitant to venture into investments due to this issue—exemplified by a survey ↗ conducted by the Financial Services Authority in Indonesia, which revealed that the capital market was the least understood financial sector among Indonesians.

Robert Hoving paints quite a different picture. By delving into the Bali property market, he was previously able to establish a passive income stream from his investments, much to the envy of his friends. This achievement sparked a thought: How might high-yield property investment options be made more accessible to all? Hoving started Goro ↗ to answer this question.

Early beginnings

Originally hailing from the Netherlands, Hoving first met seasoned entrepreneur Andryan Gouw in Indonesia. Despite their different backgrounds, they shared a common vision to make property investments more accessible. Goro is a product of that shared vision, co-founded by both individuals, with Hoving serving as CEO while Gouw undertakes the role of chief growth officer.

All properties under Goro’s management were purchased without incurring debt, and Hoving recounted how he relied on his friends and family to secure the required funds. Aware of his track record with property investments, many were willing to contribute.

To attract users, Goro committed extensive efforts to raise awareness about the platform. For Hoving, his dedication shone through in various ways, albeit most notably for the elevator pitches he made to taxi drivers on hailed rides. Hoving recognized the value of understanding users well and utilized their feedback to refine Goro’s proposition and marketing strategies.

More recently, having achieved tangible outcomes with its initial array of properties, Goro began engaging in discussions with Indonesian real estate developers, management firms, and property agents, securing several deals.

Tokenization, but without the blockchain

Numerous barriers to property investments exist, including rising property prices, inflation, soaring interest rates, and more. These factors have obstructed the path to entry for many.

“We’ve effectively redefined the entry point to property ownership, making it possible for someone to invest the price of a coffee and acquire a fraction of a property,” Hoving said.

Goro’s approach involves the issuance of tokens to represent property ownership. Each token has a value of IDR 10,000 (USD 0.66), and the number of tokens issued for each property is determined by dividing the property’s value by this amount. These tokens can encapsulate various aspects of property transactions, including rental yield, capital appreciation, and voting rights, among others. Subsequently, users can trade these tokens on Goro’s platform, whether to expand their property share or liquidate their holdings.

Properties tokenized and listed on Goro’s platform are managed by external parties that possess significant market expertise, while Goro focuses on property sourcing, user engagement, and collaboration. Users can benefit in two ways: monthly rental income and capital appreciation realized when a property’s exit prerequisites are fulfilled. Token holders can vote on the sale of properties, and the proceeds of a sale are divided among them.

While there is considerable hype ↗ surrounding the tokenization of real-world assets on the blockchain, Goro’s platform does not utilize blockchain technology at the moment. Instead, it prioritizes delivering value to users by providing access to the Indonesian real estate market.

“People transact on Goro for the returns, and not because the platform is on the blockchain.  While blockchain narratives have garnered significant attention, in my perspective, the blockchain component is more of a backend element. Hence, our approach is to ensure there’s tangible demand for the product first, verifying if we are indeed addressing a substantial issue before [migrating the platform] to the blockchain,” Hoving said.

Nevertheless, Hoving is keen on eventually migrating Goro’s platform to the blockchain, recognizing the technology’s potential to enhance transparency and accuracy. This encompasses creating definitive records of tokens created, token sales and trades, and more. According to Hoving, Goro will conduct research to delve into considerations like gas fees and coin volatility before this migration takes place.

Ensuring credibility

To ensure the credibility of assets offered, each property listed on Goro’s platform undergoes a meticulous selection process that factors in considerations such as location, condition, tenure (leasehold or freehold), and lease duration for leasehold properties. This is followed by a request for comprehensive management reports that typically cover a six-month period, providing insights into operational and maintenance costs, as well as income generated.

“We approach purchasing properties differently, where we start with the projected returns and base our evaluations on that premise, rather than buying a property and then determining potential returns,” Hoving said.

Nearly 95% of properties evaluated fail to meet Goro’s rigorous standards. According to Hoving, compromising on property quality would risk jeopardizing user trust and undermine the platform’s credibility.

One of Hoving’s greatest sources of satisfaction is granting local Bali residents access to properties that were previously inaccessible to them. Goro’s fractional ownership model empowers them to become partial owners of these properties, fostering a communal sense of ownership while enabling them to reap financial rewards. This is also embodied in the name “Goro”, which stands for “gotong royong,” which means getting things done together in Bahasa Indonesia. This name signifies Goro’s ethos of uniting the community for a common, greater good, a principle that guides the company’s operations and mission.

Future outlook

Moving forward, Goro’s focus remains on the Indonesian market which holds significant growth potential, primarily due to the country’s burgeoning middle class ↗. The company is actively exploring the tokenization of other property types, including hotels, shopping malls, data centers, logistics facilities, and warehouses.

Additionally, Goro has set its sights on tackling the homeownership challenges faced by Indonesian millennials, a demographic comprising over 81 million individuals who do not currently own a home ↗. The company is currently evaluating if a rent-to-own model can be a practical solution.

While fractional property investing has a longstanding history, its integration with technology is relatively recent. Having established its presence in the Indonesian market, Goro has the potential to play a pivotal role in democratizing access to property investments.

James Mackreides
James Mackreides
'Mac' is a short tempered former helicopter pilot , now a writer based in Sofia, Bulgaria. Loves dogs, the outdoors and staying far away from the ocean.

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