How Blockchain in Real Estate Changes the Industry
Real Estate is an industry that started using IT technologies actively within the last 10 years. The industry’s market revenue as of September 2021 was different in various global markets.
For instance, the largest Real Estate market growth was observed in North America — $1.59 trillion. The second place belongs to the Asia Pacific — $1,50 trillion. In Europe, the Middle East, and Africa, Real Estate counted for $797 billion. And the lowest market revenue appeared to be in Latin America — $51.5 billion.
With the evolution of the Real Estate industry and the trendy advancements, it became essential to use software development technology in the domain as well. What is the industry implementing to stay competitive in the market? Mainly, automation of Real Estate processes, personalization, customization, and security. Here the latter shifted towards blockchain. What does blockchain in Real Estate do? What are the benefits of blockchain technology in Real Estate? Let’s explore!
What is Blockchain in Real Estate?
Have you heard about blockchain? Where did blockchain come from?
The first to introduce blockchain technology was Satoshi Nakamoto in 2008. It aimed to transfer cryptocurrencies (bitcoin, ether, etc.) among the public. Using blockchain in Real Estate became possible starting from 2016. Blockchain started initial coin offerings (ICOs) and security token offerings (STOs), also sometimes called digital security offerings (DSOs). So,
Blockchain is the system that works with transmitting digital information. It records data to make it impossible to hack it, change it or compromise the system itself. So, most of the global transactions are made using blockchain technology. Especially, the ones involving finances (cryptocurrencies). Most of the Real Estate transactions have always been made offline, i.e. face-to-face. But, recently, and with all the Covid-19 pandemic, online transactions became a priority. So, the industry was introduced with smart contracts. What did these contracts change? Perhaps, Real Estate became a token that is now transferred online like cryptocurrencies. And, on top of it, these transactions are extremely secure.
Traditionally, Real Estate has been all about making buyers and sellers connect via listings. But, with the introduction of blockchain platforms, this aim became easier to achieve. Also, brokers, lawyers, and banks that belong to the industry can soon be gone. But would they? Can humanity experience listings, payments, and legal documents on a blockchain platform? So, there is a possibility intermediary might no longer exist. What does that make the Real Estate transaction like? No fees, commissions, and a faster process in the end. Is it our Real Estate future?
Where does blockchain in Real Estate sector change the industry?
- In money transfers
- In property, transaction, and title ledgers
- In smart contracts
- In voting
The way any transaction is being carried out is precisely explained below:
Users request transactions, which are later sent to a peer-to-peer network of nods. The nods validate transactions and encrypt them. Then these transactions combine with the other ones in the new block of data. And this newly created block forms the blockchain system by adding it. Sounds easy and innovative!
What are the benefits of blockchain in Real Estate?
Giving extra security, the easiness of digital asset transfer, and many other features are not the only benefits of blockchain in Real Estate. There are also the following advantages:
1. Easier search of property
With blockchain, you can say no to third-party property listing platforms! Some of the platforms require a subscription fee on a monthly basis. Also, the platforms poorly update each other on the availability of property and can disinform users. Which extremely undermines property values.
Blockchain has a single decentralized database with property listings. And, this data is accessible to brokers, more efficient and reliable. Of course, there is a fee, but a lot lower than the one on the third-party platforms.
2. Faster pre-purchase
Automation of transactions reduces the risks of any digital fraud completely. How? By promoting the speed and safety of transactions. And it sounds perfect. The simplicity of data transmission and time reduction between signing the pre-purchase contract and the deed of sale before the notary is a perfect innovation.
For those, who think that brokers, lawyers, and banks will soon be out of the Real Estate selling and buying process — stay calm! These intermediaries will last as there is still demand on the market. Besides, some of the users trust brokers and banks more. But, it should be noted that blockchain applications in Real Estate allow buying and selling property directly. This makes the process faster and reduces lots of human factor-based risks.
4. Provision of smart contracts
Smart contracts are recorded and verified contracts with the smart code embedded in the blockchain. This allows you to automatically withdraw payments. These contracts can be signed with the buyers/sellers directly. The process looks like this:
Smart contracts require fewer steps to take and are considered to be really innovative in Real Estate.
5. Safe property transactions
Safety is always a priority when it comes to transactions. Blockchain in Real Estate industry aims primarily at transaction encryption, so nobody could alter it, change it and commit fraud. When the record is being made in blockchain, there is no way you can manage to change something.
6. Low entrance to Real Estate investing
Blockchain increases transparency due to the fact that there is a record of the public ledger nobody can alter. This is a transparent transaction seen by the two parties. It promotes secure contract signs and allows to see the benefits of decentralization. You can verify it at any time.
7. Real Estate becomes a liquid asset
It is easier and faster to sell and buy securities representing physical assets as compared to the traditional buying and selling processes in Real Estate. The industry market becomes “liquid” when the process of selling is quick and at its market value or close to it.
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Blockchain use in Real Estate today
There are different and amazing use cases of blockchain for Real Estate, eCommerce, and Retail sector. For example,
Startups carrying out new Real Estate projects might find difficulties asking for investments and financing. And it is important for new ideas to evolve and get financial support.
So, what kinds of difficulties do they face?
- Little interest rate by banking institutions (29%)
- Difficulties administering crowd financing
With blockchain technology, it becomes easier to get the needed money to grow. Blockchain is transparent, it increases ROI for investors, and the process of investing itself becomes easier. This may be a great opportunity to increase the number of investors willing to support the business. Smart entrepreneurs will evaluate all the plusses and minuses. But, fortunately for everyone, blockchain is perspective!
If you are an enterprise the best way to enhance your property management is to go for blockchain technology.
Blockchain makes it easier to
- secure data sharing
- streamline rental collections to property owners
- carry out payments to property owners
- provide premium due diligence everywhere
The company gets an increased operational efficiency, which leads to fewer risks, less time spent on property management ( property inspection), and lots of saved costs.
The public almost never takes part in urban planning. So, it is up to blockchain to change that. The planning platform might include:
- educational resources
- token-based participation incentives
- a feedback loop between stakeholders
This would engage the community 100% and allow local communities to participate in the property development value chain. Communities like to take part in discussions about their land.
Payments and leasing
The technology of distributed ledger makes it possible for leases to be signed/paid on-chain. This allows
- decreasing manual work
- automating rental and other payments to owners
Using smart contracts allows to automate different payments and promote cooperation between tenants, landlords, and service providers.
The impact of blockchain and Real Estate investing in the USA
The United States of America has one of the biggest Real Estate markets in the world.
According to Statista, US cities expect to have the highest demand in 2022. There are 15 cities expecting investments, but Nashville, Austin, and Boston are on the top. This means, new ideas are being developed and launched.
A survey has been conducted among 1,240 Real Estate investors. These investors claimed that they planned at least one blockchain in commercial Real Estate property investment in 2021. This may also be the issue in 2022. But, you can surely predict that there will be more than one property investment this year. The market experiences growth, there is a great demand for property. Especially, in America, where most of the citizens enjoy rent/leasing. Back in 2021, the largest share of investors was to make between 1 or 3 deals, which is 67.6%. So, every investor was going to have lots of advantages in the Real Estate market. With the ongoing tendency, this year expects a better investor engagement and more money spent on the Real Estate businesses. More than 3 deals made by a single investor are a complete reality.
Is the industry going to change while using blockchain in Real Estate and in the future?
Global Real Estate is in the middle of growth in 2022. But, right now, it is more accessible by enterprises like it was before. With blockchain use in Real Estate, more people will receive access to transactions. And not just simple transactions, but peer-to-peer ones without an intermediary. And, they can count on transparency, security, and equitability here. Real Estate transactions are actively shifting towards peer-to-peer activity. And, blockchain platforms are the means allowing this to happen. The blockchain platform is a breakthrough for simple people to be involved directly. How great is that?
Look at how quickly NFT became the top trend on the market? And, it is also blockchain. Inoxoft is happy to partner with Sandmilk, who creates brilliant NFT collections using blockchain and token technology. The same will surely happen to blockchain development in Real Estate. The market is ready and the future is promising! It’s time for blockchain in Real Estate startups to come forward with new ideas. With their innovative decisions, the Real Estate industry will have a bright future ahead.
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Originally published at https://inoxoft.com on March 11, 2022.