Blockchain Technology Use Cases In Real Estate
Have you ever heard of the advantages of using blockchain in the real estate industry? Or are you still thinking that traditional business cannot benefit from this technology in any way?
Indeed, during the last years, blockchain development trends have come in the real estate industry too and are on the rise for now. It’s because this technology brings with it all kinds of innovations and benefits starting from improving the safety of purchase or sale transactions, automation of property management, till implementing smarter decision making.
Hence, blockchain can transform totally the commercial real estate market making it more advanced and innovative. In this article we reveal how your business in real estate can benefit from blockchain adoption before your competitors will do that.
What is Blockchain?
Before we proceed any further, let’s make sure that you understand precisely what we mean when we use this term.
In a nutshell, blockchain refers to an ever-growing list of records that are called blocks. Each block contains secured cryptography data that is almost impossible to change, even if you are a highly skilled hacker. Each block includes a timestamp and a wealth of transactional data and has as a part of it a cryptographic hash of the previous block in the line. So all blocks are linked together through the use of cryptography .
Blockchains are so useful because they are highly resistant to anyone tampering with the data. Because of their security possibilities, they have become a favorite for many industries, real estate is just one of those.
Why You Should Care About Using Blockchain In Real Estate
If you are still hesitating on what will be the true impact of blockchain on the real estate industry for the next few years, it’s better to look at some statistics on blockchain development for the next few years. That way, you can fully understand the capabilities of the technology.
As you can see from the chart, under the Worldwide Semiannual Blockchain Spending report , during the previous year global blockchain spending reached $1.5BN while it’s predicted to be doubled this year and reach around $2.9BN with 88.7% CAGR e.g. growth rate.
However, the forecast spending on blockchain over the next three years will increase even more and achieve $12.4BN with 76% CAGR. These numbers indicate a quite robust pace of growth for blockchain adoption globally.
By the way, a bigger number of different industries have started to apply this technology with purposes to improve the effectiveness of their services and save costs. For example, for the last years, a lot of the healthcare providers have shifted to blockchain development for healthcare as well as some other industries companies. So, let’s look at how blockchain distribution varies across specific industries:
Banking & Insurance Industries - $1BN
Finance Industry - over $700M
Manufacturing & Resources industries - $653M
Retail and Professional Services including Real Estate - $642M
Hence, the real estate is among these industries that can benefit from blockchain implementation for the sake of company growth.
What Main Problems Blockchain Application Solves In Real Estate
As you know, for the last few years, the commercial real estate industry has experienced some drop in growth. It’s because it has been faced with some main problems that actually stay as objections for this market development. While the blockchain development helps to create solutions that can resolve these issues. So, let’s reveal what are the critical real estate industry problems and how blockchain application can help to overcome them:
Lack of Transparency & Slow Operations
One of the biggest problems of real estate is the total lack of transparency between the contractors that causes corruption, fraud and money laundering and prevents the industry growth.
While one of the main benefits of blockchain used in real estate is in the area of shared secure databases.
Leasing, purchasing, and sale transaction records become common knowledge, so realtors don’t end up stepping on each other’s toes. Multiple listing services, which collate property-level information from the private databases of brokers and agents, are a prime example of why this new tech is so critical.
Simultaneously, many independent parties can also use the blockchain-enabled database, but only the ones that should legitimately have access to it. Hence, only contractors involved with real estate management as the owners, tenants, lenders, investors, operators, and all kinds of other service providers can have always stable and fast access and abilities to modify or add needed information.
With blockchain, though, real estate participants have common access to and are sharing the same blockchain tech, they don’t need to have the data integrity fears that they once did.
Therefore, blockchain allows building a platform for all parties for a secure, transparent and faster communication, automation, tokenization, and access to real-time information, all of which are highly valued when it comes to real estate.
Unsecure Titles or Data Management
Another problem for real estate is improper record-keeping that is critical for having fast business processes.
With blockchain, all entities get digital identities that cannot be mistaken or appropriated. This leads to more transparent recordkeeping with things like property titles, liens, or financing. Now, this technology allows making titles companies disintermediated through blockchain.
Slow and Unsafe Transactions
Many real estate transactions come with conditional clauses, need long-time to proceed and have to be transferred safely. Thus, transaction can be more efficiently executed through blockchain. For example, a purchase-sale transaction could be dependent on title clearances or loan approvals. With blockchain, real estate entities can check on whether those transactions have been enacted and conditions have been met.
Another problem of real estate that it needs to be more secure and protected against malware. While blockchain solves that providing a higher security standard of data encryption. For example, it allows encrypting all transactions of data in the database to prevent any data breach as we have implemented for Extobit cryptocurrency exchanger project.
Here is one more example that blockchain is really worth to be used is a Swedish tax agency that uses this technology as a solution in real estate transactions with an explanation of how it operates.
So, using blockchain technology real estate businesses can be sure in safety and high speed of transactions.
Real-life Examples of Blockchain Technology Use Cases in the Real Estate Industry
Well, keeping in mind the main real estate industry problems we have already known that blockchain development overcomes that making the level of connectedness and security among real estate companies that were never before possible.
But let’s look at more details at real-life examples of blockchain application in real estate businesses and what business results it brings:
1. The Real Estate Tokenization ➜ Increasing Real Estate Liquidity & Reducing Barriers to Crowdfunding
There is another area where blockchain tech in real estate is making an impact. Tokens represent a particular number of shares for some real estate assets that can be issued, bought, and sold through blockchain platforms with cryptocurrency. This makes for a much faster property sales process.
What is worth mentioning is that through this system, the barrier is reduced for ordinary property investors. Overseas investment in commercial properties also becomes more manageable. Simply put, properties can now be traded like a stock on exchanges.
Generally, blockchain can revolutionize the entire commercial property market thanks to the ability to increase real estate liquidity.
For instance, look at Imbrex . Imbrex is a blockchain startup in real estate that is using the Ethereum blockchain. Through it, sellers, buyers, and agents can have free access to an extensive, rotating market of properties. They even earn rewards by contributing the data that keeps the whole thing running.
For example, within this platform, you are able to invest in any listed property overseas without the need to be physically presented here.
Soon, thanks to commercial real estate technology companies, ordinary investors may be able to stake a claim to assets that they would not be able to purchase through means that exist today.
2. Smart Contracts ➜ The Digitization of Contracts and Reduced Fees
One of the most profitable inventions of blockchain is smart contracts that are very useful for the finance and banking industries. However, the real estate industry that needs to proceed with a lot of transactions, can benefit from this technology also incrementally.
With this sort of tech in place, a property transaction that once involved nearly endless paperwork can now take place digitally between the buyer and seller. The transparency and security of that transaction are on a higher level than was previously possible.
The transactions are all automated, requiring hardly any human involvement. Anything that is based on the blockchain becomes self-executed once it is set in motion. There is less time and effort by the principals involved, not to mention reduced costs and no chance of fraud.
It is also worth considering that, according to one of the surveys among tenants, more than 55% of renters are confused about the security of their rental agreement. In most jurisdictions, the process of agreeing on a rental contract can also take a lot of time and legal support. With blockchain technologies in place, a smart contract can be drawn up and executed. This increases the trust of all involved parties and reduces the requirement of costly legal counsel.
An example, of a blockchain realty company that uses this blockchain technology, is Chromaway , which has partnered with Telia, a Swedish telecommunications giant. Their goal is to digitize contracts for sale and property mortgages without barriers. When the tech is in place, these sorts of documents can be authenticated beyond any doubt because of blockchain security measures.
Blockchain technology makes it possible for everyone to create a smart contract, even if they had no previous experience in this area. They can e-sign the agreements that obligate both sides to follow the terms set in the contract, and what was once a messy and time-consuming process is considerably streamlined.
3. Security and Control Over Transactions ➜ Secured & Faster Payments & Reduced Fraud
Blockchain applications in real estate can also lead to a reduced risk of fraud. You might be dealing with a person who is trying to buy property from you, or you are attempting to buy it from them. You don’t know them, and therefore there is no reason for you to trust them implicitly. With blockchain tech in place, you don’t have to. Property transactions no longer have to go through third parties because blockchain eliminates the possibility of anything underhanded happening.
Extensive documentation and the involvement of various intermediaries have had to exist in the real estate industry up till now. That has led to modes of financing and payments for property transactions being slow, expensive, and opaque.
If you think about how can blockchain be used in real estate, the way you can leverage it to streamline payments and improve the security of real estate transactions has to be one of the first things on the list. Blockchain can be used to prove that parties have the funds needed for the transaction in both rental and purchase scenarios.
Soon, by integrating blockchain technology globally, financial and payment systems will be secured and transparent. They will be stored so that either party can go back and reference them whenever they wish to do so.
4. Property Management Automation ➜ Reduced Costs & Time Spent on Administrative Tasks
The use of blockchain technology in real estate will eliminate manual paperwork and the need to use multiple software programs. All of that will be replaced by blockchain tech for betterment and up-gradation. Through the use of a single decentralized application with blockchain-backed smart contracts, the whole property management process will be effective and efficient.
5. Transparent Data Tracking & Analysis ➜ Better Decision-Making
Blockchain applies ledger technology that lasts as long as the network is running. Because of this, all data on the property or the history of the building is recorded, readily available, and transparent to all future owners and investors. Blockchain can help make real estate investing fairer for all parties involved.
Moreover, blockchain technology combined with Bid Data provides a better opportunity for more accurate tracking of customers and owner histories across borders and banks. This reduces the risk of default taking place. Big-data real estate players can now analyze data more accurately and make real-time decisions based on that research.
Existing Challenges to Blockchain in Real Estate
The most significant challenges to blockchain in real estate at this point are technical and legal objections. Blockchain real estate projects can’t get completely off the ground until this tech is completely studied and perfected. As there is still a lack of professionals with expertise in blockchain development this is still a problem for the market.
Another objection is legal as blockchain isn’t still adopted by legal regulations and by all states. While some of the blockchain technologies are already in use across various apps, some consumers don’t completely trust it yet, as is not approved legally. Once the blockchain is more widely accepted and understood, expect it to become a true staple of the real estate industry.
It could be even estimated that blockchain will not be an industry-standard in real estate for 10-15 years. However, it is coming, and once the pieces begin to fall in place more rapidly, expect a complete overhaul of the industry that will be beneficial for everyone involved.
Moreover, there are still a lot of undiscovered things on using blockchain in combination with AI, Ml, Big Data, and IoT technologies, that can allow building solutions to various problems that exist in the real estate industry today.
Blockchain real estate transactions may seem a bit unfamiliar at the moment. However, they have so many practical applications in the areas of security, ease of data access, and the various other points previously mentioned. Because of that, you can look for this tech to disrupt the real estate or other business landscape for good in the coming years.
At Softermii, we have strong expertise in real estate software and apps development of different types and levels of complexity. While combining it with our experience in custom blockchain development we can help you to figure out the best set of functionalities, along with progressive technologies stack and intuitive design that meets all purposes for your solution. Get a full free quote on your project from our specialists in one click so far!