The boom in technology is pushing the world into ushering a new era dominated by technology. Blockchain is one such technology that is known to shift the reliance of industries from their inefficient archaic methods to a more sophisticated and highly efficient manner.
The real estate industry historically has been more of a ‘pen and paper’ kind of business. Every record earlier had been meticulously kept by writing them down on a piece of paper. Blockchain aims to reshape this very nature and has plans to lead a revolution that would be discussed in great detail here.
Why can real estate be benefited from blockchain technology?
Blockchain technology is said to offer an alternative means of record-keeping designed to make the data difficult to be tampered with. Blockchain also operates through a decentralized peer-to-peer platform, which further boosts the resilience of the system against oncoming attacks and frauds. Record keeping and data security form a massive part of the entire real estate scene, and hence blockchain could prove to be a real gamechanger.
1. Trust and transparency issues: Blockchain offers an option to verify and censor the information instantly while sharing.
2. Reducing the number of defective datasets: Having a secured and tamper-resistant database would help out the real estate industry a lot. And, blockchain aims to provide just that.
3. Improving the efficiency of transactions: Most of the real estate sales still use the costly and time consuming over the wire money transfer process. Blockchain could provide a more streamlined process to reduce costs and improve efficiency.
Blockchain Applications in Real Estate
There are several areas in which blockchain technology could be applied to the real estate industry. Several of them are listed below:
1. Property search process
Currently, there is no streamlined way in which people look for real estate to purchase. Usually, third-party websites like Zillow are employed to provide users with the necessary information. These third-party websites generally have inconsistencies in the report that they have listed. Usually, the data is missing, dated or spread across multiple sites, making it difficult to put it to use.
Blockchain could eliminate all that by providing a single decentralized database to house all the information. Since the data will be distributed in a peer-to-peer network, this will allow brokers to have a certain degree of control over the data, making data tampering much more difficult for third parties.
2. Helping in the process of due diligence and final evaluation
Written documents are still a norm for the real estate world today. Having everything written and verified by a human not only decreases the efficiency and increases the time taken in the entire process but also enhances the overall cost of the process. The likelihood of occurrence of an error is even more on the pen and paper side of things.
Making the use of identities made online on a blockchain network increases the security of the transaction, lowers the cost, and also reduces the chances of manual errors.
3. Management of properties
The management of all the properties is a very cumbersome and very complicated task to perform, mainly because of the number of parties, such as landlords, tenants and vendors, involved. Many realtors are still seen to make use of pen and paper (manual paperwork) to keep track of properties or they use different software that has integration problems with one and another.
Making use of a single decentralized application that employs blockchain technology would help smoothen this entire process. Blockchain technology would enable the use of smart contracts. Also, the whole property management process, including the signing of the lease, managing cash flow and filling the maintenance request would become more streamlined and transparent.
4. Management of title
In the present day, property titles are often based on paper. This opens it up to a world of frauds. Title professionals have found that around 25% of all the titles have some errors in them. Now, errors in the title make it illegal for that property to be brought or sold till the time that error is rectified. The legal fees to ensure the authenticity of the title skyrocket because of title frauds.
These issues related to the title could potentially be mitigated by employing the use of blockchain technology to create and build immutable digital records that contain all the land titles. Making use of blockchain-enabled databases would increase transparency, simplify the entire process, and remove the need to have additional insurance on the land title.
5. System of handling finances and payments
The current modes of financing and payments involve the use of many intermediaries making the entire process slow, expensive, and opaque. Mortgages are a different story altogether because all of these issues become more pronounced when they come into the picture.
The approval of the mortgage itself on any of the residential properties can take anywhere from 30-60 days, on average, to complete. Commercial sides of things have it far worse. When the real estate is bought for commercial purposes, the entire process becomes more complex, and hence the time is taken for the mortgage to complete also takes longer. It is usually seen that leases on commercial properties take around 90 days to complete.
Making use of digital identities on blockchain and smart loan contracts based on the technology could not only save everyone a lot of money but also save time and make the entire process more transparent.
Know more: Blockchain applications in finance sector
6. Investing in real estate
Essentially, in the world of real estate, the person with the most significant sum of money takes away the property. This case becomes more pronounced in the purchase of commercial properties and multifamily housing. Moreover, the real estate industry usually involves the use of costly intermediaries, such as someone to manage the fund, which makes it more difficult for an average person to enter the world of real estate.
Blockchain aims to disrupt this existing notion of investing in real estate by providing a way for everyone to decentralize the process by making the use of crowdfunding and tokenization.
There is a perilous and long journey ahead before the technology of blockchain matures. There are many blockchain applications in the industry, but they still are in very nascent stages. Companies are still in the experimenting stage.
Many issues remain to be addressed, and the general public needs to learn more about this technology as this will be the norm of the future. Blockchain also has to fight the negative image that it has received from speculative cryptocurrency bubbles and frauds. With that being said, it is evident that this upcoming technology has the potential to benefit many industries, including real estate.
There is a rise in careers in blockchain technology and blockchain has tremendously changed the very face of the technology industry forever. If you’re interested to become a blockchain developer and build smart contracts and chaincodes, checkout IIIT-B & upGrad’s PG Certification in Blockchain Technology.