How blockchain could transform real estate
The real estate industry has a poor reputation when it comes to embracing technology and innovation. But ignoring the need to remove the pain points experienced by its customers is no longer an option. There is an increasing number of blockchain startups arriving on the scene that believe the industry is ripe for disruption.
Brokers must increase competitiveness by streamlining draconian processes and cutting costs. In doing so, they are paving the way for property-based fintech that even has its own buzzword called PropTech. The mention of the word Blockchain often conjures up images of a volatile cryptocurrency market, but it’s essential to separate the two.
In the Deloitte study, Blockchain and Commercial Real Estate, it described blockchain technology as “a decentralized, distributed, and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.”
Try to imagine a super secure general ledger that provides all parties in a process with an ability to verify transactions with unprecedented transparency, efficiency, and accuracy. By introducing a much-needed additional layer of trust and removing risks, costs, and intermediaries from the equation, we could finally have a real estate industry fit for a digital age.
Digital land titles
We now live in a digital era where almost everything our heart desires can be secured with a swipe on our smartphone. By contrast, real estate transactions stand out for being too slow. The slow speed is often responsible for abandoned transactions, which result in significant costs for everyone in the chain.
In 1862, the UK government created the HM Land Registry department to guarantee and protect property rights across England and Wales. Here in 2019, the land register contains 25 million titles showing evidence of ownership for 86 percent of land mass across the country. But, it’s now on a mission to leverage blockchain technology to make the dream of an end-to-end paperless process a reality.
The race to become the world’s leading land registry for speed, simplicity, and an open approach to data is officially on. The wind of change is in the air as more and more national governments sign up to use blockchain technology to secure records. Ukraine, Georgia, and Sweden are all transforming real estate transactions and land registry using blockchain.
Will technology finally unite solicitors, buyers, sellers, mortgage providers, and estate agents? Having passed the proof of concept stage, we are now entering a period of trials before we can truly unlock the potential of distributed ledger technology.
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The tokenization of real estate and the rise of fractional ownership
Commercial real estate (CRE) tokenization is another topic that is now being taken much more seriously. Blockchain-based transactions completely remove the need for intermediaries and are proving to be a perfect fit for a private market like real estate. Property is one of the oldest investment classes, but it suffers from the high cost of entry and problems around low liquidity. However, new methods of property verification and payment to buyers will also help deliver new models too.
A lack of affordability to buy a whole property shouldn’t lock people out of the real estate market. Crowd ownership and fractional sales of properties will also open up a new global market. As a result, there is now a long line of blockchain real estate startups lining up to fill the niche with new innovative solutions.
Last year, Templum Markets sold a security token representing shares in a Colorado ski resort. Investors could pay through the traditional US dollars or the cryptocurrencies Bitcoin and Ethereum. Meanwhile, in Miami, a record-breaking US$ 66 Million deal was reached on a tokenized building on the Ethereum Blockchain.
The future of real estate could see properties of all types being liquified, tokenized, and traded much like stocks as an alternative to searching for a single buyer. Blockchain has the potential not only to transform real estate but to reinvent it. How we define property ownership is starting to change, and everyone will be able to enjoy a slice of the pie.
Earlier this year, the sale of a semi-detached house in Gillingham took 22 weeks to complete. Unfortunately, as any home mover will tell you, this is not an isolated story. Eventually, blockchain will turn the dream of an ‘almost instant’ secure transfer of property ownership into a reality. But we are not there yet.
The removal of expensive middlemen and streamlining of financing makes it easy to see the advantages of blockchain. These are just a few examples of how emerging technologies such as blockchain are transforming an industry in dire need of a digital makeover.