Not long ago, a Ukraine property was sold and bought absolutely online. It was with the help of Blockchain technology. And as bizarre as this news sound, the time is not far away when this will become a norm around the world. But, Backing up a little.
Last year’s end brought into the world, a new buzzword which instantly became the talk of the town and has managed to remain there – Blockchain.
Blockchain was the technology used behind Bitcoin – the first cryptocurrency. Although, the craze of cryptocurrencies has subsided a little, Blockchain, on the other hand, has found its way into every possible industry, proving its mettle and being the most reliable technologies for its ideal security providing capabilities. But what is Blockchain? Blockchain, simply put, is a distributed database that holds the data records in a tamper-resistant, immutable manner.
Be it Healthcare, Cybersecurity, Banking or Government facilities, Blockchain use cases have made their space everywhere and by far blockchain technology has been irreplaceable. In fact, according to Forbes,
- IBM has introduced Blockchain technology in its Supply Chain, which has made the operations and processes of their supply chain transparent.
- Accenture has been building a blockchain solution in order to boost their productivity and efficiency for their insurance clients.
- MedicalChain became the first Healthcare company this year to integrate Blockchain technology for the facilitation of storage and utilization of electronic health records.
Apart from all of these real-life examples, another major industry that Blockchain is disrupting is Real-estate and it is proving out to be a real game changer, let us see how?
Blockchain in Real-Estate
According to a 2016 report by Cityam, the total aggregate value of all world’s combined Real-estate property is close to $217 trillion. That equates to approximately 2.7 times of the world’s GDP. These means that the Blockchain technology has a massive opportunity to provide privacy, security, and decentralization to one of the biggest industries of the world.
This is not even a future possibility, rather, The commercial real estate (CRE) has declared blockchain as the new technology on the “block”. But to understand how Blockchain will fit into the structure of the Real estate Industry, we have to understand the crevices of this industry, where Blockchain technology can make a difference.
Gaps in Real-Estate
Keeping in mind the high amounts of capital investments required in real-estate, this industry has always been somewhat secretive about its operations. This include, lease rates, property valuations, etc, understandably in order to create a competitive edge.
However, as the world continues to grow digitally in a hyperconnected way, secrets become more difficult to keep for any industry, including real-estate.
So in response to the growing demand for transparency from the general public, CRE sure made some information public but still, a big chunk of digital information remains stored over diverse systems. Which, in turn, results in chaos and lack of transparency and accuracy and an overall threat of frauds.
Blockchain to fill the gaps
As mentioned earlier, Blockchain is a distributed ledger that digitizes and stores data and assets in an immutable manner. This technology can efficiently allow commercial and even residential real estate to address the above-mentioned inaccuracies.
To look at the possibilities of Blockchain technology in real-estate, let us move over the details about why blockchain technology should be considered for real estate deals:
- A Common Database: Real estate is the most privileged way to achieve high returns. There is a critical need for a common database, since, shared databases are an important aspect of purchasing or leasing. For instance, multiple listing services integrate information related to property from the databases of different agents and brokers.
- Need for building trust among different entities: Most of the times, the people participating in the leasing or purchasing of a property are all strangers to each other. And since the property deals are big on capital investment, people are skeptical of each other and do not easily trust the data and paperwork either. However, the introduction of Blockchain technology in this equation can help in reducing the risk of fraud for both, sellers and buyers. It can help in making the record keeping and data sharing process much more transparent through the consensus process.
- A consensus-based system: Transactions and management of real estate properties involve the participation of various independent entities such as tenants, owners, brokers, investors etc. Therefore, it becomes necessary that the authority of the main database works on a consensus system, much like Blockchain technology.
- Disintermediation: Disintermediation refers to the removal of an intermediary or a third party from an equation where it is seen as redundant. In fact, with the help of Blockchain technology, even the most trusted intermediaries can be removed. This is because Blockchain increases security and transparency and facilitates auto-confirmation of registries.
- Dependence of transactions: The use of smart contracts can be easily brought into real-estate management. And many deals can only be executed only through smart contracts due to conditional clauses. The blockchain technology is the only way this can be done effortlessly.
As shown in above-mentioned points, there are many gaps in the real-estate business which can be filled by the blockchain technology. Now, let us take a look at what are the different opportunities which can be theoretically fulfilled by Blockchain in Real-estate.
Opportunities for Blockchain integration
Like any new technology, there is always a need to convert the properties of that technology into workable models that can be integrated with existing systems.
Similarly, Blockchain is the technology which needs to be defined by its specialties to perfectly fit into the crevices of Real Estate. Let us take a look at how this can be accomplished:
- Searching the Property – The lessee, the lessor or the broker will enlist their requirements with the help of a Blockchain-enabled MLS (multiple listing services). This will allow all the participants to view the listings transparently.
- Property Inspection and letter of intent –The brokers will arrange the visitations accordingly and when both sides agree on common terms after negotiation, an LOI will be signed.
- Using Smart identities pre-lease – By making digital identities of individuals and assets using Blockchain, the lesson can conduct a background check on the lessee and the lessee can check the prior liens on the property.
- Smart contracts to make lease agreements –All the terms and conditions of the agreement can be recorded digitally on Blockchain and this digital database will act as a smart contract. This smart contract can be used to initiate payments, rent, advance, security deposits etc. And the payment interface can be Cryptocurrency wallets or normal bank accounts.
- Automated payments and data analysis –Depending upon the agreed terms, automated regular payments will be generated through the preferred mode of payment.
And as multiple transactions take place, this data is permanently recorded on Blockchain with the pre-set digital identities.
As it is clearly visible that blockchain technology has been versatile enough to fit into any kind of settlement. Real estate, which is one of the biggest industries, can be simplified through Blockchain to a great extent. And that time is not very far away when Blockchain app development companies will be breaking set records of any other technology in terms of customer ease and transparency.