Understanding Blockchain and Its Relevance to Real Estate

The blockchain technology is popular because it’s decentralized, meaning all the data is not stored on a single computer, rather the data is spread out on various blocks making it very secure.

In real estate, all the information of any property like the transactions happening for it, the ownership records, its contracts, loan and mortgage details, any outstanding dues and lawsuits are all stored on the blockchain and can be easily accessed. 

Key Benefits of Blockchain in Real Estate

1. Increased Transparency

One significant advantage of blockchain technology is it eliminates the long paper trail associated with properties. Generally each and every information about a property is stored on a different system and blockchain can bring it all together whenever required. With blockchain, every transaction detail of the property is easily accessible to the buyer, seller and the agent making it a fairly transparent system. This helps them verify the details which in turn helps in preventing property fraud and reduces claims of false ownership etc.

2. Smart Contracts and Automation

Blockchain uses something called smart contracts. These are basically contracts written in code which are executed the moment the terms in the contracts are fulfilled by the parties involved with the contract. For example, the moment the buyer and seller submit the properties and financial documents and they agree on payment terms, the smart contract is executed, ensuring a smooth and fast transaction of properties. This eliminates human errors and the need for real estate agents, the negotiations are done person to person and the transaction is carried out via blockchain.

3. Cost Efficiency and Reduced Transaction Costs

Blockchain eliminates the need of a third party, which immensely reduces the time taken for such transactions to happen. It even eliminates the need of international regulators as long as the terms in the smart contracts are fulfilled,  if you are purchasing property in another country.

4. Tokenization of Real Estate Assets

Blockchain enables the tokenization of property assets. It is the process of converting ownership rights of any property into a digital token, this enables multiple people to own a single property. It’s like the stock market where people own some percentage of a company, also known as fractional ownership. This allows small scale investors with minimal capital to enter the market and also ensures the whole property can be bought and sold at all times and the seller is not dependent on one single buyer.

5. Elimination of Title Fraud and Improved Record Keeping

The real estate industry has faced fraud particularly title and tax fraud for a very long time. Blockchain technology eliminates this problem altogether. It solves this problem by storing the ownership and financial data on an unbreakable system which would take years to break into with normal computing power. It improves the due diligence process for authorities,insurers,  buyers and sellers. This leads to elimination of disputes based on property papers

Real-World Use Cases of Blockchain in Real Estate

1. Propy: Streamlined International Property Transactions

Propy is a blockchain based real estate company whose main service is facilitating buying and selling of real estate properties across borders. It brings the whole process online, doing payments, ownership transfer, contracts and payments through blockchain.

2. RealT: Tokenized Real Estate

RealIT is a real estate platform which tokenizes the properties. Through this platform people can acquire fractional ownership of real estate assets in the forms of tokens and they can even trade on it. The owners even get a share of the rent received on the properties. This is an amazing opportunity for young investors with limited capital, who don’t have the finances to buy full ownership of properties.

3. Ubitquity: Blockchain-Powered Title Management

Ubiquity is another platform whose main service is title management, they offer a solution for keeping records and ownership transfers of title deeds through blockchain. They help reduce title fraud making the whole property ownership process clean and transparent.

Challenges and Limitations of Blockchain in Real Estate

Despite its immense potential, blockchain in real estate faces a lot of challenges:

• Regulatory Issues: Many countries in the world have not fully accepted blockchain as a mode of financial transactions. This has led to creation of many rules by different countries, which these blockchain companies have to adhere to.

• Mass Adoption: The real estate market is dominated by mostly senior professionals who may not be a huge advocate for implementing blockchain in their companies.

Technological Issues: Although blockchain is extremely secure and reliable, it still needs huge technological expertise and funds to operate, which may pose a problem for young companies.