By now, you’ve likely heard that blockchain technology is the future for transactions. But with a multitude of use cases, it’s unclear how it will be implemented and what that will look like. Blockchain for real estate is lighting a technology path to a bright future that is accessible, trustworthy, and fast.
Why Does Real Estate Need Blockchain?
Real estate today is muddied with centralized middlemen and inefficient fragmentation. Securing a loan requires a slow process that relies on paper-driven bank operations; searching for a property will yield five different listing services, each with different pricing and contact information; the complex management of lease agreements and property operations is absent of real-time data that would improve decision making. Though these processes may be the status quo of the moment, they’ve made it difficult to transfer ownership of property. Those difficulties have kept transaction times and costs unnecessarily high, and have made it easier to get away with legal inconsistencies and fraud. Ragnar Lifthrasir, the founder of the International Blockchain Real Estate Association, identifies the core solutions to these long-time issues as unification and decentralization.
Why Blockchain for Real Estate?
By allowing real estate transactions to take place on a unified and decentralized peer-to-peer verified protocol that cannot be edited, smart contracts can be utilized and truly enforced. Smart contracts allow money, property, and shares to be exchanged in transparent, trackable, and irreversible transactions that automatically enforce the terms of the agreed upon contract. For example, time-based transfers of funds would not depend on business operating hours as the initiation of release and other terms of the agreement are recorded and programmed into the blockchain. A particular feature like this can be used to replace typical escrow and deed processes that require middlemen title companies or attorneys. In addition, all public property records can be housed in one place, allowing any party to check prior transactions on the property.
According to Deloitte’s Blockchain In Commercial Real Estate report, blockchain creates opportunities and alleviates challenges in the existing industry. The particular use cases they identified include
- Unifying fragmented listings into an efficient and reliable property search
- Expediting pre-lease due diligence with efficiency and accuracy
- Ease leasing and subsequent property and cash flow management with transparent and efficient smart contracts
- Enable smarter decision-making with connective blockchain technology that allows real-time recording and retrieval of quality data from a shared database
- Transparent and relatively cheaper property title management that reduces fraud and simplifies the process of title records and checks
- More efficient processing of financing and payments with faster, cheaper, safer, and simpler mechanisms, especially in cross-border transactions
A particularly innovative aspect of blockchain and real estate possibilities comes to light with the tokenization of properties. Tokens are a form of cryptocurrency that can be traded as securities or provide access to utilities. In tokenizing a property, debts of the property can be sold in the form of tokens, and each token holder becomes a part-owner of that unit, for example. This process of crowdfunding not only removes bank lenders as middlemen, but allows people from all over the world to buy pieces of a property using a single tracked, verified, and secure piece of currency. As the value of the property increases, so does the token, which can then be cashed-out, traded, or held by the purchaser.
Blockchain is driving real estate crowdfunding. This HJV white paper provides vital insights into the growing crowdfunding economy as a vehicle to secure funding. Find out the positive impact real estate crowdfunding can have on communities, and the dual return that can be achieved through impact investing.