For all lovers of Real Estate investment!!
There is a great news. Now you can invest in extra-terrestrial real estate available in our solar system. Land on moon is available at a meagre price of Rs 3330 per acre. If moon is not your taste, you can also buy land on Mercury, Venus or Mars. For those dreaming of an entire planet, Pluto is in stock and can be bought for just USD 250,000/- .
“Lunar Embassy”, the organization making such offers, claim on their website (www.lunarembassy.com), that their list of clients has 675 celebrities of USA and three Ex-Presidents, besides several thousand regular investors. Isn’t it big!! As funny as it may sound, but it is happening in reality. Our Earth has enough of brilliance to make all these funny things happen.
The planets in solar system are all-real and someday, may be, mankind will find ways to survive on one of those planets. But, what I am going to share now is even stranger than the above. If I were to tell you that you can buy Real Estate in Digital World for a price of Rs 12000 per sqft, would you invest? Well….people are buying it. They are investing in something that is not real, non-existent legally and that can be increased in supply digitally and infinitely.
Bitcoin fad is not yet over, but the trend to invest in virtual piece of land is already catching up. Introducing to you “Genesis City”, a virtual city of the same size as Washington, D.C. where you can buy virtual RE for a big load of money. According to Bloomberg, “Digital 1,100-square-foot plots” in Genesis City are selling for as much as $200,000.
While this sounds like another iteration of the faded online world Second Life, there’s already real money behind the blockchain-based real estate. In December, an investor named Kunzmann paid $15,000 for 62 plots of about 1,100 square feet apiece, and he recouped his investment three months later by reselling a mere eight of them. Today, resellers can reliably get as much as $30,000 for a Genesis City plot. Credit network Ripio.com paid almost $150,000 for a spot next to the main square where visitors appear when they enter the city. The record is $200,000, sold by a user who’d recently bought the same plot for $13,000.
According to investors, the prices are rising due to scarcity. Unlike Second Life, or games such as SimCity, Genesis has fixed virtual dimensions, some 90,000 plots. The coders have created the city, part of a broader digital world called Decentraland, using the Ethereumblockchain.
But, besides investment, is there a real commercial purpose of owning a piece of land. The coders are not so confident. However, the investors have a different idea. One investor names Serrano, says he’ll use his prime virtual real estate to pitch cryptocurrency loans and other financial services. For now, he’s hawking mortgages for Genesis City plots on his regular website.
All this mindset is based on one plain thing that in future more & more people will spend more of their time in virtual space than in real one. This reminds me of a movie called “Ready Player One”. The film directed by Steven Spielberg, set in 2045, and has the world on the brink of chaos and collapse. But the people have grown addicted to a virtual realistic platform called OASIS. They spend most of their time living a fake life through their Avatar inside OASIS.
The highest price of this VR land so far has been close to Rs 12000 per sq. ft. At this price, you could have bought yourself a real 2 Bedroom apartment (measuring 1100 sq ft.) in many parts of Washington DC. The property that you can visit, touch or put on rent. However, if you are super techno-geek, super-rich and want to be a part of this extremely imaginative virtual world, the price, feasibility & its longevity are of no concern. This investment can be compared to people buying a piece of land that too at very low price of Rs 3,330 per Lunar Acre. When you pay the money to buy a piece of land on Moon, you get a Deed Certificate from Lunar Embassy, and you can flaunt it. In reality, you don’t expect to visit this piece of realty in reality.
So, what causes people again and again to get attracted to these types of investment? Beginning with 17th century Tulip mania, to EMU farming, Bitcoins or Plot on Moon, etc. Call it Herd Mentality, EGO, Greed or just FOMO: fear of missing out, or a heady mix of all of these. These are the under-flowing force that make us jump onto a bandwagon, that’s destined to derail, despite of having sufficient knowledge of the same. No one likes to miss out on a new investment fad, especially when they see their friends, neighbors or relatives flaunting it or making money out of it. Investors tend to project only the very recent past (good or bad) into the future and lose sight of the long view. Warren Buffett calls this the “Rearview Mirror” mode of investing and behavioral scientists call it the “Recency Bias.”
Any investment or asset grows in value on account of its demand & supply situation, and also due to its ability to add value to trade and commerce. The scarcity and desirability of virtual real estate is all in our minds. If the prices of Virtual Real Estate keep rising, there will be fresh supply coming from coders. There will be taxation issues raked up by every government around the world. Money laundering too will become rampant. The hackers will demand ransom in the form of virtual real estate. All these are genuine challenges that will one-day pop the bubble.
Just like in case of Bitcoin, Virtual Real Estate also is not a real investment comparable to a real piece of land, stock, bonds, mutual funds or other assets that produce income or are visible assets that can experience a genuine price appreciation. Any sensible investors should be vigilant of these new attractions & not follow the herd mentality. They should be mindful of these whimsical investment ideas with promises of quick riches.