With every business getting involved with Blockchain, land management and real estate are not behind either.
Either I can say that Blockchain all set to have the most significant impact on the Real Estate Industry.
Looking at the problems faced by the traditional real estate industry, it’s no wrong to say Blockchain is a major step for business evolution here.
In this article, I’ll take you through the complete tour of the blockchain process in the real estate industry.
But, before going to the Blockchain, let me first take you to the problems faced by the traditional real estate industry.
Problems Faced by Traditional Real Estate
Despite being the oldest legacy business, Real Estate faces some major issues. Let’s go through it step by step.
Lack of Transparency
Every intermediary in the market aims to make a profit, and it makes them biased to be loyal to their properties. Thus, decisions are not always in favor of the sellers or buyers.
There are high chances that the intermediaries will restrict everything, and they prefer to have a deal with lucrative customers.
According to the United Nations, approximately $2 trillion gets laundered by the intermediaries globally in a single year.
Extra Costs are High
The process seems more straightforward where an owner wishes to sell a property, and a buyer wants to buy it, yet they both need to pay extra to the third party.
The intermediaries sometimes charge more in comparison to the service provided. And in many cases, the broker would make a deal with the seller to sell property on higher rates than that of the market standard.
Secondly, if you’re planning for international real estate, you need to pay various taxes, investments, broker fees, transfer fees, etc.
It can be an expensive process as more and more intermediaries get involved.
Low Transaction Speed
Real Estate transactions are extremely slow. Here it takes approximately six months to confirm property and a few more months to complete the whole deal.
Henceforth, you need both time and money for traditional real estate investment. According to the reports, 56% of the Chinese Investors spent a minimum of one year to finalize a property in the US.
Lack of Liquidity
Liquidation is a major problem faced by the real estate industry. The term liquidity means how rapidly your investment gets converted into cash.
As intermediaries get involved, it takes a long time for the transactions, which in turn sometimes discourage the buyers. Due to the lengthy process, there are high chances that deals fail.
So, do you feel all this is leading to the disruption of the real estate industry?
Yes, so I do.
When all these issues were growing out of hand, Blockchain came to the picture. It is the ultimate solution to the problems mentioned above.
5 Major Blockchain Real Estate Utilities
Blockchain is basically a row of blocks, where each block is a change made by anyone concerned. These blocks are connected with cryptographic principles. The data record gets managed by the cluster of computers rather than a single entity. To understand better, let me take you to the three major utilities of Blockchain in real estate.
Tokenization means a digital representation for values and assets. It is one of the most compelling use cases of the Blockchain for real estate. Tokenization makes it possible to trade without any third party involvement.
The best outcome of the tokenization is fractional ownership. Tokenization makes it possible to co-own a single property by buying the tokens. Multiple people can own a unique property with the help of tokens.
For instance, take a luxurious flat that costs $650,000, and it is costly for most of the buyers. Hence, the buyer agrees to tokenize this flat. Now, this flat is tokenized by five people, buying a token of $ 130,000 each and own the flat in partnership.
To get ownership of the flat, they need to sign a smart contract(will explain it in the next topic). The smart contract does not require any supervision, and it ensures the honesty of the co-owners.
Tokenization increases the liquidity as a seller can sell their property quickly. Blockchain’s real estate app development approach completely changes the way of working.
Smart contracts are self-executing contracts build with the help of coding languages. They are automated contracts with a series of special instructions. Smart contracts work on the IFTTT (if-this-then-that) logic.
The best advantage of a smart contract is it cuts the middleman costs. Everything in a real estate app development is on your fingertips. Henceforth, you don’t need any third party for the processes.
Smart contracts will speed up the overall real estate process. Above all, it protects the buyers as well as sellers from any type of fraud. Anything inside the Blockchain never gets tampered. Many countries are coming up with the real estate app development with Blockchain to avoid scams.
The revenue for property title grows to $15 billion per year. It is to make sure that buyers are safe with their property. Putting all the records online makes a huge difference. Further, there will be no need for title insurance.
Blockchain real estate plays a significant role, as the data, once updated, will remain as it is. Inputting data with Blockchain will be great for the buyers as there will be no chance of committing fraud in the future.
By decentralizing all the property titles in Blockchain, we can save a massive amount of time and money.
Prevention of Fraud
In real estate, wire fraud are increasing at the rate of 480% percent per year. 2017 reports the highest complaints from around 9,600 victims with a loss of more than $1.4 billion. Including Blockchain in real estate will drastically reduce these frauds.
It is the more secure way of making a transaction in real estate. As every single thing goes digital with securities. Henceforth, Blockchain will reduce the number of frauds occurring across the world.
Investment through Crowdfunding
In real estate, crowdfunding is considered as the fastest growing sector. It is one of the most popular use cases of blockchain real estate, where new forms crowdfunding will be created.
Blockchain will increase the speed of decision-making, improve the records shared, and much more. The future prediction says that crowdfunding in blockchain real estate will increase by 55%. New opportunities would raise when investing through blockchain crowdfunding in real estate.
Characteristics of Blockchain for Real Estate
Now you agree to the fact that Blockchain technology will play a valuable role in real estate.
Thus, let us go through some of the characteristics of the blockchain real estate.
Peer-to-Peer: There will be no need for any intermediaries as any type of transaction will be directly done between the two parties.
Transparency: All data is directly available to the involved parties to maintain transparency.
Traceability: Any data published on a blockchain cannot be removed or updated without making a record; this feature helps in avoiding fraud activities. And, uploaded data gets tracked every time to maintain the standards.
Decentralization: To ensure that data isn’t lost, Blockchain works on a decentralized framework.
Real-Time Efforts: It is the key advantage of Blockchain. If any stakeholder updates the data, every other stakeholder will see this update information.
Are You Ready For Blockchain in Real Estate?
With the help of blockchain technology, you will see much evolution in the various fields.
In the future, you will find the use of Blockchain Technology as common as the use of the internet.
Do you agree with the points mentioned above? Or did we miss out on something?
Let us know in the comment section below.
Paresh Sagar is the CEO of ExcellentWebworld, IoT, web, and mobile app development company that helps startups and enterprises to enable mobility solution. He’s an avid blogger and writes mainly about the latest technology trends.