The use of blockchain technology has now reached a peak as more and more sectors, including supply chain management, banking, financial services, government, insurance, and media, are becoming aware of its potential.
It is no ordinary event that blockchain technologies are now being widely used in some of the most valuable businesses in the world.
Following the creation of blockchain by a person or group using the alias Satoshi Nakamoto in late 2008 or early 2009, it began to gain traction. Even while this could be the case, Nakamoto and Bitcoin existed long before the blockchain we use today.
In his dissertation, "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups," David Chaum, a PhD candidate at the University of California in Berkeley at the time, described the first blockchain database.
Whether you side with team Chaum or team Nakamoto, there is no denying that the use and implementation of blockchain technology have advanced significantly over the past several years, with widespread acceptance among corporations and, more lately, consumers.
Although blockchain is already used in a variety of sectors, including retail, telecommunications, mining, and manufacturing, the real estate and property management industries represent the next stage of its evolution within the larger global economy.
Blockchain in real estate
For many years, real estate and property management had been run using a laboriously antiquated system that necessitated a never-ending list of middlemen and was very expensive for buyers, sellers, and investors to complete their transactions.
The professionally managed global real estate investment market is expected to reach more than $11.4 trillion in 2021, up from the anticipated $10.5 trillion in 2020, according to a recent MSCI Report.
You'd think a sector of this scale, which accounts for a large amount of global asset and transaction activity, would have adopted blockchain technology more quickly.
Though their implementation has been rather sluggish, recent research has turned up several exciting and doable ideas that might revolutionise the real estate sector's ability to provide buyers, sellers, and stakeholders with enhanced accessibility and transparency.
Increased transaction security
Real estate deals are notorious for moving painfully slowly and requiring a lot of money and effort to complete. From finding a property to removing any fraudulent actions that may put the purchase in jeopardy, blockchain-based property platforms can assist to streamline the entire process.
Real estate and investment enterprises may easily check papers for errors within an application using blockchain technology. To assist establish whether any information has been fabricated or wrongly supplied, historical data may be identified and used upon current application.
Approximately 1 out of every 120 mortgage applications will, according to estimates, involve fraud in the second half of 2021. Real estate agents and other parties will be able to eliminate the risk element and provide safer, simpler, and more inexpensive alternatives by allowing data and transaction information to be maintained on a digital ledger.
The use of smart contracts
Realtors, buyers, and sellers can use smart contracts on the blockchain to hasten the selling or purchasing process as part of providing a secure and transparent environment for all parties during the transaction process.
Having knowledgeable relationships removes middlemen, which helps to save time and money. Blockchain technology will make it possible to automate escrow services, title checks, and real estate transactions with smart contracts. In addition, prospective purchasers and investors will have access to historical information about the property, including information about prior owners, renters, and structural alterations.
In order to make sure applicants meet the standards, rental property management companies will also be allowed to back-check tenant information such financial documents, employment history, and prior lease contracts.
Smart contracts are a streamlined method of storing crucial data in a single secure digital ledger, limiting access to the data to stakeholders and making it simpler for parties involved to complete real estate transactions.
Tokenizing property and real estate
The digitalization of securities, in this context sometimes referred to as tokenization, is a vital component of blockchain technology. This allows for the digitalization of specific real-world assets and securities, which may subsequently be distributed to investors and transferred to specific counterparties.
By enabling the tokenization of real estate and property, the market not only makes digital assets more specialised to satisfy investor and stakeholder demands, but also more democratised and available to a greater pool of potential purchasers.
When real estate is tokenized, it is simpler to distribute the assets among various investor pools and take advantage of secondary market possibilities. This means that issuance may be finished more quickly, aiding in the expediting of the exchange procedure and the distribution of financial elements like pays or dividends to engaged stakeholders.
Increases real estate liquidity
There aren't always buyers or sellers in the market due to the present market instability, which is mostly caused by rising interest rates and listing prices that are increasing at an inflationary rate.
Although many people often sell cash to the bank during difficult economic times, the adoption of blockchain may allow people to sell a portion of the equity in their homes as tokens. The tokenization of real estate, as we previously described, in this situation offers a different option for investment among a pool of investors.
Due to the development of Web 3.0 capabilities, we can already witness how blockchain is transforming real-world real estate into something more digital and tokenized. Recently, a non-fungible token (NFT) through a subsidiary Roofstock Chain allowed the sale of a residence in Columbia, South Carolina, for $175,000 to a real estate investor.
The transaction, which needed participation from several layers of blockchain participants to be completed, represented the first NFT-based residential house sale in the United States.
This is a straightforward illustration of how real estate, whether it be residential or commercial, can be digitised and made more efficient in order to boost its equity value and draw in a bigger group of investors.
Final thoughts
The real estate sector has found blockchain technology to be a versatile, multifaceted innovation that has the ability to increase real estate's security, transparency, and accessibility to a wider range of buyers, sellers, and investors.
It has already been demonstrated to be a successful addition to a global business that sees billions of dollars in annual asset transactions being transported across the globe, even if there is still more development needed for more practical and logical integration within the wider real estate market.
Realtors and real estate firms should use alternate methods that contribute to more durable solutions on a smaller scale. This would make the transaction process better and enable a safer, more organised business.
