Blockchain technology has disrupted the finance sector and subsequently many businesses in different industries around the world are now also being influenced by this revolutionary technology. It is worth noting that the real estate market is no exception.
Blockchain is famously known as the technology behind well known cryptocurrencies including Bitcoin, and we can all agree that Bitcoin and other major cryptocurrencies have been in the spotlight now for quite some time.
Cryptocurrencies and Blockchain technology have made a strong impact on record keeping and financial services. Initial Coin Offering (ICO) and Security Token Offering (STO) is transforming the way people invest. Even the healthcare sector and food supply chain industry has been lifted with the help of Blockchain technology.
Traditionally, selling or buying high value assets like real estate would mean meeting all the parties involved face-to-face and the process would also include a number of third party intermediaries. However, Blockchain technology in real estate could change all of this.
Blockchain has introduced the concept of smart contracts which would allow assets like real estate to be tokenized so these assets can be traded on the Blockchain platform like crypto tokens. Trading real estate this way brings with it a lot of advantages. We will now move on to discuss some of these benefits of Blockchain technology in real estate.
While there have been some technological advancements in real estate, they are mainly concerned with listings or connecting the sellers with the buyers. On the other hand, Blockchain technology could introduce new ways to trade real estate and allow users access to online marketplace platforms which support and facilitate real estate trading.
There are already a number of real estate companies around the world that are making use of Blockchain technology, especially because of its many benefits in real estate and rental property transactions. Think about it, tokenizing real estate allows users to trade real property on an online exchange platform where everything can be done from the comfort of our homes.
Lawyers, brokers, and financial institutions like banks have always played an important role in the real estate ecosystem. However, Blockchain could very soon eliminate the need for their participation in real estate transactions.
Marketplace platforms and the Blockchain network will take care of the functions of all of these intermediaries and allow users to only have to deal with each other in a P2P (peer-to-peer) transaction.
Eliminated intermediaries will help reduce costs as the parties involved in the transaction will no longer be required to pay commissions or fees that are usually charged by such intermediaries. Moreover, this will make the process much quicker as the parties will no longer have to wait for the intermediaries to confirm or process the transaction.
As you may know, real estate is considered an illiquid asset simply because of the time it takes for real estate sales to complete. This could all change with the help of asset tokenization which would allow real estate to be traded like crypto tokens. Crypto tokens can be readily traded for fiat currencies on marketplace platforms.
Blockchain technology could lower the barriers to real estate investing as it allows shared or fractional ownership. Usually, real estate investments require a huge amount of money upfront in order for the party to buy a property. While investors are allowed to pool their money to acquire properties, this creates complexities and often leads to conflicts.
Moreover, real estate brings with it a number of challenges. For instance, dealing with tenants could prove to be a difficult task. Shared ownership usually leads to problems where the property owners want to put their properties as collateral for loans.
However, with Blockchain technology in real estate, investors can simply buy and sell fractions of tokenized assets through a Blockchain-powered. Moreover, the shared owners will not have to manage the properties themselves and can avoid costs of maintenance. The processes involved with leasing or mortgaging the property would become much simpler too.
Blockchain is also known as a decentralized distributed ledger, because there is no central authority figure in the Blockchain network that has complete control. This is why Blockchain offers a level of trust and security that is unmatched.
The Blockchain network is distributed between a number of peers that can assess the data, this is why Blockchain offers complete transparency. Real estate investors should know how lack of transparency can lead to fraudulent activities.
Moreover, the data recorded on a Blockchain network is immutable, which means no one can alter or modify the data in any way. What this means is that Blockchain technology will not only help reduce the chances of fraud attempts but also provide authentic information to the buyers who can then be more confident when conducting transactions.
As mentioned above, eliminating intermediaries means saving costs associated with real estate transactions, these include commissions and professional fees. Moreover, other costs like registration fees, taxes and inspection costs could also be reduced or even completely removed from the equation. This is because a Blockchain powered marketplace platform will make these processes a part of the system.
The real estate industry experiences transactions worth hundreds of trillions of dollars every year. Blockchain technology could streamline all the processes involved, allow access to online marketplaces where real estate transactions can be made more cost effective, quick, transparent and secure.
We could soon see real estate transactions become truly peer-to-peer activities, where Blockchain based platforms will be taking care of most of the work.