Implementation of Blockchain technology in real estate can prevent fraud, increase privacy, speed up the process, and internationalize markets.
Some of the problems that the real estate industry is currently dealing with:
-inaccurate data - there is no reliable source of information for buyers and professionals that is consistently updated
-time intensive process - completing all the necessary paperwork can take months
-protecting client data - clients are vulnerable to identity theft
-financing - the barrier of entering the real estate market is high, such as citizenship, international bank accounts and Credit Score
-high fees - because of the number of middlemen involved, such as lawyers and accountants
-lack of liquidity
Main properties of the blockchain
-Decentralization: the data is not owned by a single entity.
-Transparency: the data can be seen by all participants in the network
-Immutable: the data cannot be tampered with
Two main utilities of the blockchain in real estate are:
Smart Contracts are a set of instructions. If the first set is done then execute the next set and after that the next one until the end of the contract.
-it will cut off all the middlemen, including brokers, banks, and lawyers
-smart contracts will speed up real estate transactions
-smart contracts can protect owners from fraud
Advantages of tokenizing:
-increased liquidity - blockchain technology makes the tokenization of real-world assets possible, which will increase the liquidity and make trade without a third-party possible. Instead of waiting for a long time to sell the property, you can go to an exchange and liquidate the tokens. Thanks to smart contracts, assets like real estate can be tokenized and traded like cryptocurrencies.
-fractional ownership - decreases entry barriers
-greater portfolio diversification and risk reduction
Benefits of blockchain technology in real estate
-more trust and transparency
-minimizing human error
-increased data accessibility
-.more efficient transactions
-removing the need for third parties, which would reduce costs and save time
Areas of real estate that benefit from blockchain technology:
-Property search - property listings would exist on a single decentralized database, meaning more reliable data would be available at a lower cost
-Financial evaluation - paper documents are still proof of identity today, which increases the chance of errors and can involve multiple intermediaries. With blockchain, this process can be taken online - meaning better efficiency, lower costs, security, and reducing the likelihood of errors
-Property management - through the use of smart contracts, the whole process, from signing the lease to maintenance requests, can be executed in a secure and transparent way.
-Financing - especially if a property is financed through a mortgage or for international transactions
-Investing - tokenizing real estate means the owner can offer tokens that represent a share of the property. This would establish a market for “micro-shares,” meaning a property could have multiple co-owners
-Regulation - navigating regional regulations
-Scaling - it will require huge efforts to transfer real estate data into a blockchain.
-Interoperability - we will have to find ways for different blockchains to communicate with each other and to keep information in one central platform