The real estate industry has shown slowness in employing new technologies for transformations. Heavy reliance on manual work and personal relationship building is its fundamental tool for driving operational value. However, when it comes to real estate blockchain solutions, the industry is surprisingly quick to adapt. It is because blockchain and its applications are capable of addressing challenges in the real estate industry operations that other digital technologies can’t.
Blockchain based real-estate and smart contracts solutions are providing real value generation opportunities for the real estate industry. In an industry that involves large scale transactions involving complex business agreements and contracts, their use is proving perfect. The advantages like automation, digitization, security, and efficiency are accelerating the transformation of a business sector that has always been reliant on inefficient and archaic operations of business and record keeping.
Blockchain is a decentralized and immutable record-keeping technology distributed across a network of nodes. Its design uses cryptographic and timestamping mechanisms to ensure trust in each digital transaction, while smart contracts that run on top of it facilitate automation execution.
Blockchain technology can prove viable for both commercial and residential real estate development solutions.
Blockchain real estate solutions ensure the security and efficiency of transactions among stakeholders while reducing or even eliminating any intermediary requirement.
They can range from property purchasing to due diligence management to facilitating crowd-sourced investments, and more.
Also, Read | What is Blockchain Technology and How Does it work
Acts as an alternative means of exchanging information (such as real estate transaction details) securely by providing verifiability and censorship-resistance to data.
With a shared tamper-resistant database that gathers data from a variety of stakeholders and documents in one place data, real estate processes experience enormous efficiency.
Eliminates the dependency of most real estate transactions on wire transfers and costly verification processes that take days to complete. Facilitates a streamlined transaction process providing speed with reduced costs.
Blockchain applications can render many intermediaries, including brokers and escrow companies, obsolete by providing a single source of truth. It provides a secure mechanism to store, verify, and transfer digital records. Thereby, it removes the need for intermediaries and dramatically reducing costs and time.
The standard today is still physical paper certificates for proof of identification. It necessitates critical attention to processes of due diligence and financial verification, which requires considerable time and effort.
This whole procedure can run digitally and securely with digital identity on the blockchain. It results in increasing performance, lowering costs, strengthening data protection, and reducing the risk of human errors.
For instance, the digital identity of a real estate property might comprise data such as occupancy, occupant profile, financial and legal status, and performance metrics.
This approach streamlines the land title transfer process while incorporating several layers of protection as well. It provides all involved stakeholders in the process with their own digital identity, including from buyers, sellers, and brokers, to associated banks and land registry.
Each may use a single application, powered by blockchain-verified smart contracts, to submit and sign relevant documentation. The related documentation and records are open to access by all permissioned actors, including verification of the measures that took place in the process.
Property management is complicated, involving multiple stakeholders like landlords, occupants, brokers, property managers, and more.
The overall property management method, from authorizing rental contracts to handling profitability to requesting repair demands, can be performed securely with the use of a single decentralized framework that employs blockchain-backed smart contracts.
For example, in residential property, a tenant and homeowner may execute a smart contract digitally that contains data like selling price, payment frequency, and all the tenant and property specifics.
The smart contract will immediately trigger financial obligations from the occupant to the landlord, as well as to any contractors who perform routine maintenance, depending on the negotiated terms. It can also immediately send the payment of the security deposit back to the occupant upon expiration of the deal.
Land titles are mostly paper-based at present, providing possibilities for mistakes and theft. As per the American Land Title Association, title practitioners find 25 percent of titles faulty during settlement.
A fault found makes it difficult to move a land title to a buyer unless its rectification.
Also, title theft presents a risk to homeowners worldwide, prompting many purchasers of land to buy title insurance.
Blockchain technologies create permanent digital archives of land titles, thus, mitigating title management challenges. This strategy will streamline the management of property titles, make them more transparent, and help reduce the risk of title theft and the need for extra insurance.
Established forms of funding and payments for land purchases are currently sluggish, costly, and ambiguous. They involve lengthy paperwork and multiple intermediaries across processes.
As per the National Association of Realtors, it averages between thirty to sixty days for the current procedure to complete for mortgage acceptance. The time can be much longer, often taking about 90 days, for commercial property, which is more complex to handle than residential property.
With blockchain technology, this method will be streamlined and made more transparent. Verifiable digital identities for homes, for example, may enable a decrease in both risk assessment and loan paperwork period. It thus expedites the process of mortgage acceptance.
The parties can conduct an irreversible blockchain smart contract-based loan document, accessible to all legal parties concerned.
Historically, real estate investment has only been accessible to those willing to invest significant capital, particularly in terms of commercial property. Besides, investing in real estate also requires costly intermediaries such as investment managers, further increasing the entry barrier.
However, by offering a means to decentralize the transaction by fundraising and tokenization, blockchain technology aims to challenge real estate investment.
Tokenizing real estate properties serve as a mechanism in which digital tokens reflect shares of properties offered by property owners. With each timestamped and permanent contract, tracking these investments makes it easier to limit the possibility of fraud.
It makes it possible to create a micro-share market for land, creating the opportunity for a property to provide multiple co-owners with interest in potential returns efficiently.
Several projects are working on related ideas, such as Propy, Harbor, Averspace, Atlant, Blocksquare, BrikBit, SMARTRealty, and more.
We are here to assist you with the adoption of blockchain technology in the real estate industry. Talk to our experts at Oodles Blockchain to assess the viability of a proposal.