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The past decade has been shaken up by many technological developments, one of which is blockchain. Blockchain’s impact across various economic segments has not gone unnoticed on real estate. In fact, blockchain technology has been predicted to fundamentally alter the manner in which real estate is transacted, managed, and owned across the globe. But what is blockchain exactly and how can it affect the world of real estate?
What is blockchain ?
Blockchain can be boiled down to a technology that enables permanent and secure storage to store digital ledgers of contracts, transactions, agreements, and any other information collected by a network of users. The manner in which the technology works involves :
Hence, the fundamental advantage of blockchain technology is transparency, speed, and security. All of the data stored within the ledge is accessible by all participants within the network. Therefore, any member that is part of the network can reverify the transactions or the information stored within the ledger to confirm that there haven’t been any unauthorized attempts that make a change to the data. Information that is contained within such ledgers is recorded using cryptographic principles and distributed across a wide network in a manner that ensures it is secure. This can be a fast transaction and reconciliation of the ledger can occur almost instantly.
Blockchain and Real Estate: What does the future look like ?
The world of real estate has not escaped blockchain either. Previously, the transacting of high-value assets in the form of real estate was carried out exclusively through non-digital means was the norm. Face to face transactions offline across various entities was how real estate has been primarily conducted. Blockchain technology has opened up new avenues to change this tradition. With the introduction of smart contracts, blockchain platforms now allow assets such as real estate to be tokenized and traded similar to how currencies like bitcoin are. Here are a few ways in which blockchain is set to transform the future of the real estate industry.
Banks, lawyers, and brokers have been a crucial part of the real estate ecosystem since time immemorial. However, blockchain technology may soon usher a change in the roles each of these parties play in real estate transactions, as per Deloitte. Modern platforms are expected to assume functionality such as offering customers legal documentation, listings, and payments, without the need of any of these parties. Hence, cutting out intermediaries will naturally result in sellers and buyers getting more out of their money since they will save on commissions as well as fees that were charged by these intermediaries. The process is also made a lot quicker since the lag that occurred from the back and forth between middlemen gets shortened.
Real estate’s technology has originally been concerned mainly with listings and connecting like-minded sellers and buyers. However, blockchain technology can introduce us to new ways to trade real estate that can enable online marketplaces and trading platforms that support these transactions more comprehensively and organically. As an example, consider ALANT which has developed a platform that uses blockchain to facilitate rental property transactions and real estate. Assets can be traded similar to how stocks are online by tokenizing real property into data.
By permitting its user fractional ownership, blockchain technology can also lower any barriers when it comes to real estate investing. It is commonplace for real estate investments to mandate a large amount of money upfront so one can acquire a property. Alternatively, to acquire bigger ticket investments, investors have also been known to pool their money. With the aid of blockchain technology, investors simply hold access to a trading app that allows them to sell or buy fractions of tokens of property as they see fit. Fractional ownership also helps them avoid managing the property themselves and avoid cumbersome chores like leasing and maintenance.
Today, global real estate platforms are worth thousands of crores but are dominated by huge corporations. Through the adoption of blockchain technology, more people may access the market where these transactions are equitable, secure, and transparent. Ultimately, real estate transactions may truly become peer-to-peer with platforms powered by blockchain carrying out most of the work.