4 Ways Blockchain Technology is Supporting Real Estate

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Written By Nidhi Sharma

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The Blockchain app has reached a peak point. Many industries including banking, financial services, and governance have now realized the potential of blockchain.

It is not a common occurrence for blockchain applications to be adopted in the most lucrative sectors of the world.

Blockchain was established in late 2008/early 2009 by Satoshi Nakamoto, a pseudonym used by several people. Although it may seem like this, the blockchain we now know was created long before Bitcoin and Satoshi Nakamoto.

David Chaum was a 1982 doctoral candidate at the University of California at Berkeley. In his dissertation, "Computer Systems Established, Maintained and Trusted By Mutually Suspicious Parties", he described what became known as a Blockchain database.

No matter whether you support team Nakamoto, or team Chaum - the use and application of blockchain technology has been in a remarkable position over the past few years. It is now being widely adopted by both businesses and consumers.

Blockchain can be found in all aspects of retail, telecommunications, and mining. However, its next stage of development within the global economy was its incorporation into real estate and property management.

Blockchain in Real Estate

Real estate and property management have been using a slow-running system for decades that was inefficient and costly. It required a lot of intermediaries to complete transactions, which cost buyers, sellers, and investors a lot.

A recently published MSCI Report shows that the professionally managed global real estate investment market is expected to exceed $11.4 trillion by 2021, compared with the $10.5 trillion reported in 2020.

It would be reasonable to expect an industry this large, which accounts for a significant portion of global economic assets and transaction activity, to have experienced a quicker transition toward blockchain technology.

Despite the slow adoption of these solutions, recent developments have shown some promising and practical ways that the real estate industry could offer sellers and buyers better access and transparency.

Security of Transactions has been Increased

Real estate transactions can be slow and expensive. This is why it takes a lot of time and money. Blockchain-based property platforms can simplify the whole process, from the search for a property to eliminating fraudulent activities that could jeopardize it.

Blockchain allows investment and real estate firms to scan documents seamlessly for inaccuracies. To determine if any information was incorrect or falsified, historical data can be tracked and used to assist in current applications.

It is expected that around one in 120 mortgage applications will contain fraud by 2021's second half of. Real estate agencies and other stakeholders can store transactions and data on a digital ledger. This will allow them to eliminate the risk factor and create safer, more affordable, and easier methods.

Smart Contracts

Blockchain enables buyers and sellers, as well as realtors, to use smart contracts to speed up the buying and selling process.

Smart contacts reduce the need for intermediaries and help to save time as well as money. Blockchain technology can automate real estate transactions and title searches. Escrow services can also be automated using smart contracts. Buyers and investors can access historical data about the property, including previous owners, tenants, and any physical changes made to it.

Management companies that manage rental properties can also back-check tenant information, such as financial statements, work history, or previous lease agreements, to ensure applicants meet the requirements.

Smart contracts allow for simplified information storage. They only permit stakeholders to access the data, making it easier to complete real estate transactions.

Tokenizing Real Estate and Property

The digitization of securities is a key component of blockchain technology, often called tokenization. This allows certain real-world assets or securities to be digitally tokenized, which can then be distributed and transferred to investors.

The tokenization of real estate and property will allow the industry to be more accessible and democratized. It will also make digital assets more customizable to suit investor and stakeholder requirements.

Tokenizing real estate makes it easier for investors to distribute the assets and tap into secondary markets. This means that issuance can be done faster, which helps speed up the exchange process as well as administer financial components like payouts and dividends to all involved parties.

Increases Real Estate Liquidity

Market turmoil is mainly caused by high inflation and high interest rates. This means there aren't always buyers and sellers in the market.

In times of economic uncertainty, many people sell liquidity to banks. However, blockchain could allow individuals to trade a portion of their equity through tokens. The tokenization of real property, which we discussed previously, offers an alternative investment opportunity for a group of investors.

We already see that blockchain is making the real-world property more digital and tokenized through the introduction of Web 3.0 capabilities. A Columbia home was recently sold to an investor for $175,000 via a non-fungible token, NFT, through a subsidiary Rootstock chain.

This sale was the first NFT-based residential sale in the United States. It required multiple layers of blockchain players to complete.

This is an example of how real property, commercial or residential can be digitalized and simplified to increase its equity and attract more investors.

Final Thoughts

Blockchain technology is a versatile, multi-layered, and flexible addition to real estate. It could improve security, transparency, accessibility, and accessibility to real estate for a wider range of buyers and sellers.

While there are still many areas to be developed to make the integration more practical and logical within the larger real estate industry, the technology has already been a success in a global industry that sees billions of dollars annually in asset transactions across the globe.

Alternative practices could be implemented by real estate agents and companies on a smaller scale to offer more reliable solutions. This would improve the process and make real estate more accessible to all.

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