Blockchain in Real Estate: Is the Technology Taking Industry to the Next Level?
Blockchain is proven to hold the potential to revamp every business vertical. The technology has given a clear indication that it has various applications beyond cryptocurrencies and can be the right weapon to tackle the prevailing industrial challenges.
A ripple effect of which is that various industries have adopted Blockchain technology, even the most traditional ones like Real Estate.
Real Estate is witnessing a disruptive evolution with Blockchain acting as the driving force. What was historically considered as a ‘pen and pencil’ business has now begun expanding to global market with better and long-term outcomes. Something we will talk about in this article in detail.
But firstly, let’s throw some light on what problems is the current real estate economy suffering from.
Issues That Affect the Traditional Real Estate Sector
1. Lack of Transparency
The Real Estate industry is not open to everyone due to the involvement of various factors like citizenship, cash requirements, accreditation, credit score, etc. Additionally, there is no market database or a concrete way to access the information required for taking the buying and selling decision.
This, as a whole, makes the sector unclear and turbid for all.
2. Tedious Paperwork
In traditional Real Estate economy, every transaction involves a stringed set of tedious and time-consuming paperwork. Because of this, many a times real estate companies end up losing their money and potential customers, along with getting distracted from the main goal.
3. Higher Risk of Fraud
Since all the property agreements are in paper form and the trust is based on humans, there’s a higher risk of fraud in the Real estate industry. A proof of which is that around 1.48B records were found vulnerable between 1st Jan, 2005 and 31st May, 2019.
Another indication is that California, the state with 12% of the total U.S. population, creates 24% of all reported mortgage fraud cases.
4. Expensive Investment
Due to the involvement of a wider number of intermediaries, various fees like broker fees, attorney fees, exchange fees, taxes, etc. are added to the Real estate cost. Because of this, investing in Real Estate becomes expensive.
5. Large Number of Intermediaries
Another problem associated with the traditional Real Estate economy is that trust is based on human factors. Any two parties have to involve third-parties at different levels to build trust in the process.
6. Poor Transaction Speed
Last but not least, real estate processes suffer from poor transaction speed due to the involvement of multiple people.
As per a Chinese global travel survey, 44% of travelers fix an appointment with real estate agents before going abroad. Also, 74% among them meet two or more experts to be sure of their decision to purchase property in the city they’re traveling to.
Blockchain technology, with its incredible features, are solving these problems. It is entering different areas of Real estate industry and revolutionizing them efficiently and quickly.
Before we talk about the benefits of blockchain in different areas of real estate, let’s have a quick recap of basics of Blockchain – how does it work and the features it comes with.
With this attended to, it is a good time to dig deeper into the industry and see how Blockchain can improve different areas of Real Estate.
Blockchain in Real Estate: TheAreas that the Technology is Revolutionizing
1. Property Search
Currently, brokers, owners, tenants, and buyers turn towards multiple listing platforms like Zillow to search for any property information.
These platforms are subscription-based and demand high fees. Besides, the property data provided by them is often inaccurate, outdated, or partially distorted. This increases inefficiencies in the process and many a times, results into disputes.
But, all this can be prevented using a Blockchain-based real estate app.
A Blockchain-backed application can decentralize data and enable everyone to share data in a P2P network. It also facilitates brokers with an opportunity to receive additional data monitoring options and eventually, helps to cut down the associated cost.
2. Due Diligence and Financial Evaluation
In Real estate sector, a major time is spent on diligence activities before buying/renting any property. Various intermediaries are involved in the process of inspecting property documents to prevent any kind of legal, technical, or financial issues in the future.
Currently, all the property data is kept on papers which can be easily changed or corrupted by anyone.
However, with the adoption of blockchain technology in real estate apps, this subdomain can also be improved.
All the property-related papers can be kept stored digitally in blockchain-powered platforms, such that they can be accessed publicly but can’t be altered. This will make due diligence and financial evaluation process automated, quick, and less inaccurate.
3. File and Payments
Another area that can enjoy a myriad of benefits by embracing Blockchain – one that finds itself being a part of the real estate market trends is File and Payments.
At present, the extensive documentation and involvement of third party intermediaries are making the process lengthy, troublesome, and costly. And this effect is becoming more significant when international transactions or mortgage is involved.
Now here, Blockchain technology can simplify the filing process by introducing verifiable digital identities for properties.
Likewise, introduction of cryptocurrencies can lower down the barrier of different currencies used at different places. It can even minimize the involved taxes and fees, alongside streamlining payment process.
4. Property Management
In the traditional real estate economy, the process of property management is highly complex, especially when multiple stakeholders are involved.
The management of property is either done offline via manual paperwork, or some independent softwares are used. Because of this, the information remain confined to a particular database or person.
However, with the advent of Blockchain technology, the future of real estate can be changed in the field of property management.
A decentralized Blockchain based real estate app that uses smart contracts can ease the whole process – right from signing lease agreements to regulating cash flow and filing maintenance requests.
A Smart contract can automatically set up lease payments between a landlord and a tenant. When the lease terminates, the smart contract can automatically transfer security deposit back to the tenant’s account and deliver a seamless experience to both parties.
5. Deed Management
Another field where you can see the impact of Blockchain in real estate apps market is Deed management.
Currently, property titles are paper-based. Because of this, there is a higher risk of errors and fraud cases. In fact, it has been revealed by American Land Title Association that 25% of all the titles are found to be defective during the transaction process.
The presence of any defect makes it illegal to proceed with deed management process unless the issue has been resolved. This makes it imperative for property owners to pay high legal fees to ensure accuracy and authenticity of their property titles.
This issue can be easily resolved using immutable digital records – making the whole process transparent and secure.
6. Real Estate Investing
Last but not least, real estate apps using blockchain can also streamline investing process – using the concept of tokenization and fractional ownership.
Tokenization is termed as a process in which the owner can give digital tokens to those having a share in property. They all can track their investment using blockchain, with each transaction being immutable and time-stamped.
This concept of tokenized real estate can make it possible to reduce the risk of fraud associated with the industry. An impact of this is that soon 66M buildings will be tokenized on Ethereum Blockchain in record deal.
Whereas, Fractional Ownership will give a boost to the traditional real estate economy. The process of making unrelated parties come together to share and eradicate the risks associated with the ownership of a high-value tangible asset can help small investors enjoy ROI without waiting for months or years. And eventually, make trading of real estate properties possible beyond the geographical boundaries.
While this would have given you an idea of the scope of Blockchain in Real Estate, let’s go through some real-life examples to understand it better.
Blockchain-based Real Estate Companies Turning Hype into Reality
UBITQUITY is a SaaS (Software-as-a-Service) blockchain platform that helps track the lifecycle of any property. The platform provides title companies, government, and value added resellers a clean record of ownership. And in this way, leverage benefits like lower future title search time and enhanced transparency.
Found in 2016, ATLANT is a blockchain-backed ICO that enables tokenization of real estate ownership and P2P rentals.
Another brand exploring the potential of Blockchain in real estate is Propy.
It provides a global real estate marketplace that empowers buyers, brokers, sellers, and notaries to come together and ensure better transactions by utilizing the power of Smart Contracts.
PropertyClub is another real estate platform that refines the way the industry operates using blockchain technology. It relies on smart contracts to perform transactions digitally using cryptocurrencies like Bitcoin or PCC (PropertyClub Coin) and thus, enhance customer experience.
Harbor is a digital platform that employs blockchain to create a series of tokenized securities powered by real-world assets. Founded in 2017, this platform certains that tokenized security go with existing security laws on trades depending on the regions they are working in.
RealtyBits is also a blockchain-powered Y-Combinator-backed finance platform to invest in American commercial real estate. Founded in 2018, it aids real estate investment funds to raise capital via verified and authorized investors in a streamlined, compliant, and cost-effective manner.
Brickschain is a data management platform that digitizes the main overview of construction supply chain. Also known as briq, it facilitates introduction of protocol layers to easily manage the flow of building materials and eventually, streamline real-estate development.
SelterZoom is also a real-time real estate platform that embraces blockchain technology to simplify transactions and management process. It enables users to track their offers, get rid of manual documentation, and perform any transaction in real-time via mobile app.
8. The LendingCoin
Founded in 2017, this Blockchain-based startup focuses on creating a more P2P-driven funding model for real-estate economy.
The LendingCoin offers the facility to make payments using its token and also encourages the resulting monthly payments through any refinancing conducted on the platform.
[While we talked about Blockchain-based funding model in general here, you can get detailed information about it from this article: An Introduction to Blockchain Funding Models Beyond ICOs]
As we have seen so far, blockchain in real estate is offering ample of benefits, including transparency, simplification, and security. Various companies have already integrated the technology into the business model and many more will be joining them in the future.
This makes it obvious to conclude that blockchain is the future of real estate and thus, it won’t be affordable to exist in the market by overlooking it. Something that proves that it is high time for real estate companies to hire a blockchain app developer and upgrade their business model.
So, let’s move towards how to add blockchain in your existing real estate business model.
How to Incorporate Blockchain in Real Estate App?
When it comes to investing in Blockchain app development for real estate, there are basically two approaches you can go with:-
1. Build a Smart Contract using LISK
LISK is a platform for Blockchain application development that acts as a PaaS (Platform-as-a-Service). It offers operating system, database, cloud infrastructure, programming language runtime environment. This helps in bringing your own code to create a side chain or a crypto token.
2. Develop an Ethereum-backed Real Estate Platform
In this approach, Ethereum platform, which has reached to Ethereum 2.0 level, can be employed for building a blockchain app for Real estate.
While both approaches are profitable in terms of how to build a Real Estate app on Blockchain, it is best to contact reputed Blockchain app development service providers to enjoy a better ROI.
Now while Blockchain in real estate has proven to be a great asset, the technology has also solved various problems and is highly welcomed by the real estate companies. However, there are still some challenges that they are encountering. Something we will end our article with.
Challenges Real Estate Companies Might Face While Adopting Blockchain
1. Widespread Adoption
Since blockchain technology is still evolving, many Entrepreneurs are finding it tough to understand the technology completely. Because of this the wider adoption of technology in the marketplace is still off by some points. This is acting as a barrier in the process of integrating Blockchain technology in real estate business.
[Bonus Read: An Entrepreneur’s Handbook to Blockchain]
In real estate economy, billions of global transactions are made annually. This demands a network that can handle large transactions volume. However, there are still not many options available in the Blockchain space to meet this need.
While Bitcoin is able to handle 5 transactions per second, Ethereum is offering the opportunity to manage 15 transactions every second. Likewise, Ripple’s XRP – which is one the cryptocurrencies trends, is hoping to perform 1,500 transactions per second.
However, this is still not close to the need of large-scale companies that requires ultra-speed processing in real-time.
3. Chain Interoperability
Another challenge that real estate companies are facing while embracing Blockchain is chain interoperability.
There are various blockchains existing in the digital market, many of which are not able to connect or work together. This lack of interoperability is making it tough for real estate companies to use different data available on public and private Ethereum blockchain simultaneously and streamline their processes.
Frequently Asked Questions about Scope of Blockchain in Real Estate Sector
1. How will Blockchain change Real Estate?
Blockchain will change Real Estate industry by providing advantages like:
- Higher Transparency and traceability,
- Elimination of third-parties,
- Faster transactions, and
- Lowered cost of every transaction.
2. How Blockchain can be used in real estate?
Blockchain can be used in different areas of real estate in different forms, such as:-
- a smart contract,
- a decentralized and immutable ledger, and
- in the form of cryptocurrencies.
3. How will blockchain technology affect the real estate industry?
Blockchain in real estate economy will help overcome the existing challenges and bring better opportunities. It will:
- make the real estate process transparent,
- reduce the cost involved,
- simplify the process of property and deed management,
- enhance security level, and much more.
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