Blockchain has been pushing for recognition as a significant emerging technology for years, and it’s finally starting to get there. There are already many industries using the technology, and there are always new and interesting applications for it. Given that the original purpose of blockchain technology was to offer a better alternative to the existing financial system, it is not surprising that many people think the financial services sector will be where the technology has the biggest impact. Another sign of the growing popularity of blockchain technology is decentralised finance (DeFi), which is currently the hottest trend in the space.
Despite blockchain, perhaps understandably, taking centre stage with its financial features, the technology has been quietly making headway in a number of other industries, including supply chain management, healthcare, entertainment, and retail.
In this article we’ll talk about how Blockchain is used in real estate and the benefits of implementing blockchain in real estate.
How is blockchain used in the real estate industry?
Here are a few specific applications of blockchain in the real estate industry
1. Managing finances and assets: Keeping track of everything can be challenging, especially for real estate investors with large portfolios or intricate ownership structures. Just as important as keeping an accurate balance sheet is keeping an accurate ledger of the money coming into and leaving the system. The blockchain could have a ledger for these kinds of particular uses. Transparency and real-time auditing are offered. It is also immutable, meaning that no one entity can alter it unilaterally.Furthermore, the same ledger can record a native digital currency that is used as payment in asset leases.In addition, utility bills can be paid with the digital currency; smart contracts can automate this process.
Indeed, lease negotiations and rent payments can be automated using smart contracts on the blockchain. Additionally, real-time data from the blockchain can be utilised to inform important decisions about asset management.
2.Funding for projects: Large-scale real estate developments are common. Very few organisations are able to finance their own development. Under such circumstances, the required funding may come from multiple sources, creating a management challenge.
The blockchain allows for the management, security, and automation of financing agreements. In addition to providing a shared ledger for stakeholder monitoring, the blockchain makes smart contract-based tools available for stakeholders to actively engage in the project’s management, such as through Decentralised Anonymous Organisations (DAOs).
3.Land registries and property: Democratic societies are predicated on the idea of property ownership. That specifically refers to having easy and certain proof and security. This is accomplished through titling systems, also referred to as the property registry.
Nonetheless, real estate ownership is just as safe as registration on the land register. If there is no system in place or if it is easily manipulated, people in positions of authority have the ability to evict people without it. Furthermore, weak land registers allow for the free modification of property ownership. Because of this, real estate investing can be both highly risky and alluring. A blockchain-based land register has the benefits of cryptography, immutability, and decentralisation, which makes it difficult to implement arbitrary changes. Titles might be present on the blockchain as non-fungible tokens (NFTs).
4.Identification of investors and tenants: In real estate deals, identity is crucial. The owner of the asset must be verified before renting to or purchasing it, therefore the tenant or buyer must be informed. It’s critical that a landlord is aware of the tenant’s real name.Centralised databases provide access to this knowledge. The data, however, can be more precise if it is saved in a way that guards against potential tampering.
5. Tracking and confirmation of real estate transactions: To start and complete a transaction, investors, agents, brokers, and other real estate experts frequently employ many siloed systems. Due to the fact that the due diligence procedure is largely manual and paper-based, each step might take a long time. Beginning with the property search process, the blockchain has the potential to enhance the current methods. A property owner can use a private key to prove ownership of a record on the blockchain.
Anyone who is considering purchasing, leasing, financing, or engaging in any other activity can quickly check the immutable ledger to confirm ownership and to look up previous transactions, including whether the property has any liens.
Benefits of Blockchain Technology Application in Real Estate
1. Data availability and transparency: The purchase, sale, and management of residential or commercial real estate typically involve a large number of parties. The list may include agents, landlords, tenants, property managers, lenders, and investors.Blockchain technology has made it possible for these stakeholders to audit transactions in real time. Information that can direct their actions is readily available to all. Owners can create financial models, for example, based on rentals, occupancy, and expenses. Data security and integrity are strengthened by the blockchain’s decentralisation, cryptography, and immutability.
2.Blockchain makes fractional ownership possible: On the blockchain, assets can be tokenized and their ownership split among numerous parties. Depending on what portion of the asset they own, these co-owners may get proceeds or pay a portion of any overhead. Processes are currently controlled by blockchain smart contracts.
3.Investments in commercial real estate: Small investors can now easily purchase tokens on the blockchain that represent a portion of real estate, allowing them to participate in significant real estate projects.
4. Real estate assets are tokenized: Tokenizing assets could make them more accessible to a larger audience. It is possible, for example, to tokenize such a project in order to give stakeholders a portion of it in the accounting records based on their capital contributions, even though it remains a single entity physically.
In conclusion, the power of blockchain in real estate may be used in a variety of ways to the advantage of the real estate sector, as we have shown so far.Because real estate plays such a large part in the economy as a whole, it needs reliable systems to guarantee that the sector is in excellent condition. Meanwhile, novel ideas and approaches can play a big role in bringing a sector that seems to have reached its peak of development back to life.