Blockchain is proven to hold the potential to revamp every business vertical. For instance, blockchain in real estate has given a clear indication that it has various applications beyond cryptocurrencies and can be the right weapon to tackle the prevailing industrial challenges.
A ripple effect of this is that various industries have adopted blockchain technology, even the most traditional ones like real estate.
Real estate is witnessing a disruptive evolution with the blockchain acting as the driving force. What was historically considered as a ‘pen and pencil’ business has now begun expanding to the global market with better and long-term outcomes. This has made numerous entrepreneurs and traditional investors interested in understanding the use of blockchain for real estate. Something we will talk about in this article in detail about custom blockchain development company.
Challenges Faced by the Real Estate Industry
The fluctuation in the economy and growing trends introduce new challenges in the real estate industry every now and then. Realtors keep a check on the hurdles hampering the revenue while staying in business. In real estate, various factors impact the revenue like property listings, contact information management, dealing with stakeholders, and more. A few of the common challenges faced by the realtors are stated below:
1. Lack of Transparency
The real estate industry is not open to everyone due to the involvement of various factors like citizenship, cash requirements, accreditation, credit score, etc. Additionally, there is no market database or a concrete way to access the information required for making buying and selling decisions.
This, as a whole, makes the sector unclear and turbid for all.
2. Tedious Paperwork
In the traditional real estate economy, every transaction involves a stringed set of tedious and time-consuming paperwork. Because of this, many times real estate companies end up losing their money and potential customers, along with getting distracted from the main goal.
3. Higher Risk of Fraud
Since all the property agreements are in paper form and the trust is based on humans, there’s a higher risk of fraud in the Real estate industry. A proof of this is that 404 publicly-reported data compromises in the U.S. represent a 14 percent increase compared to Q1 2021. Q1 2022 is the third consecutive year when breaches have increased compared to Q1 of the previous year.
4. Expensive Investment
Due to the involvement of a wider number of intermediaries, various fees like broker fees, attorney fees, exchange fees, taxes, etc., are added to the real estate cost, which ultimately makes real estate investments expensive.
5. Large Number of Intermediaries
Another problem associated with the traditional real estate economy is that trust is based on human factors. Any two parties have to involve third parties at different levels to build trust in the process. This is again one of the challenges in real estate solved by blockchain.
6. Poor Transaction Speed
Last but not least, real estate processes suffer from poor transaction speed due to the involvement of multiple people.
As per a Chinese global travel survey, 44% of travelers fix an appointment with real estate agents before going abroad. Also, 74% of them meet two or more experts to be sure of their decision to purchase property in the city they’re traveling to.
However, blockchain technology, with its incredible features, is entering different areas and processes of the real estate industry and solving these problems.
Before we talk about the benefits of blockchain in real estate, let’s have a quick recap of the basics of Blockchain – how it works and the features it comes with.
With this attended to, it is a good time to dig deeper into the industry and see how blockchain is one of the key technology in real estate helping the industry thrive during the pandemic.
Areas Revamping with the Adoption of Blockchain in Real Estate
Blockchain in real estate can benefit several areas in the industry. A few of the common areas that are revamping with blockchain implementation are mentioned below.
1. Property Search
Currently, brokers, owners, tenants, and buyers turn towards multiple listing platforms like Zillow to search for any property information.
These platforms are subscription-based and demand high fees. Besides, the property data provided by them is often inaccurate, outdated, or partially distorted. This increases inefficiencies in the process and many times, results in disputes.
But, all of this can be prevented using a Blockchain-based real estate app.
A blockchain-backed application can decentralize data and enable everyone to share data in a P2P network. It also facilitates brokers with an opportunity to receive additional data monitoring options and eventually helps to cut down the associated costs.
2. Due Diligence and Financial Evaluation
In the real estate sector, major time is spent on diligence activities before buying/renting any property. Various intermediaries are involved in the process of inspecting property documents to prevent any kind of legal, technical, or financial issues in the future.
Currently, all the property data is kept on papers that can be easily changed or corrupted by anyone.
However, with the adoption of blockchain in real estate app development, this subdomain can also be improved.
All the property-related papers can be stored digitally in blockchain-powered platforms, such that they can be accessed publicly but can’t be altered. This will make the due diligence and financial evaluation process automated, quick, and less inaccurate.
3. File and Payments
A significant impact of blockchain on real estate is also experienced in the field of file and payments.
At present, the extensive documentation and involvement of third-party intermediaries are making the process lengthy, troublesome, and costly. And this effect is becoming more significant when international transactions or mortgages are involved.
Now here, blockchain, the new technology in real estate can simplify the filing process and bring innovation in real estate processes by introducing verifiable digital identities for properties.
Likewise, the introduction of cryptocurrencies can lower the barrier of different currencies used in different places. It can even minimize the involved taxes and fees, alongside streamlining the payment process.
4. Property Management
In the traditional real estate economy, the process of property management is highly complex, especially when multiple stakeholders are involved.
The management of the property is either done offline via manual paperwork, or some independent softwares is used. Because of this, the information remains confined to a particular database or person.
However, with the increasing role of blockchain for property transactions, the future of real estate can be changed.
A blockchain-based property management system that uses smart contracts for real estate can ease the whole process – right from signing lease agreements to regulating cash flow and filing maintenance requests.
A smart contract can automatically set up lease payments between a landlord and a tenant. When the lease terminates, the smart contract can automatically transfer the security deposit back to the tenant’s account and deliver a seamless experience to both parties.
5. Deed Management
Another field where you can see the impact of blockchain on the real estate apps market is deed management.
Currently, property titles are paper-based. Because of this, there is a higher risk of errors and fraud cases. In fact, it has been revealed by American Land Title Association that 25% of all the titles are found to be defective during the transaction process.
The presence of any defect makes it illegal to proceed with the deed management process unless the issue has been resolved. This makes it imperative for property owners to pay high legal fees to ensure the accuracy and authenticity of their property titles.
This issue can be easily resolved with the use of blockchain technology in the real estate industry as immutable digital records – making the whole process transparent and secure.
6. Real Estate Investing
Last but not least, a blockchain-based real estate platform can also streamline the investing process using the concept of tokenization and fractional ownership. Well, most organizations aren’t sure how to tokenize real estate whereas others are implementing it on a larger scale.
Tokenization is termed as a process in which the owner can give digital tokens to those having a share in the property. They all can track their investment using blockchain, with each transaction being immutable and time-stamped.
This concept of tokenization of real estate using blockchain technology can make it possible to reduce the risk of fraud associated with the industry.
Fractional ownership will reshape the future of the traditional real estate economy. The process of making unrelated parties come together to share and eradicate the risks associated with the ownership of a high-value tangible asset can help small investors enjoy ROI without waiting for months or years. And eventually, make trading of real estate properties possible beyond the geographical boundaries.
While this would have given you an idea of the endless opportunities of blockchain technology in the real estate industry, let’s go through some real-life examples to understand it better.
Blockchain-based Real Estate Companies Turning Hype into Reality
A few big incumbents are betting on the growing tech and are entering into several partnerships to enable high-grade systems for better real estate transactions. Here are some blockchain real estate companies that are turning the hype into reality.
Read more about blockchain in real estate
Comments