Digitization: How is Blockchain Reshaping Real Estate
The Blockchain is a fairly new word speaking of Real Estate. Real Estate is considered the world’s largest and most prominent asset class. The current situations amidst the pandemic have caused a major turnover in the way we do business. The real estate world is now making a digitized appearance. Given the subsequent widespread implementation of Blockchain across sectors, it is one of the most promising changes the real estate will ever put up with.
A Blockchain, in the simplest of terms, is a time-stamped series of immutable records of data managed by a cluster of computers. Each of these blocks of data (i.e. block) is secured using cryptographic principles (i.e. chain). Blockchain produces copies of changes made and makes it available for all the participants over the group. This increases transparency and helps transform the conventional pen-paper based inefficient business model to a well-organized and digitized one.
The major shortcomings in the traditional system and how can Blockchain help?
1. Platform and market places
- TRADITIONAL CASE – The traditional reality business needs a physical communication between the sellers and buyers. To verify the property, an in-person visit to sites is often desired. This is extremely problematic if the trading has to take place internationally.
- BLOCKCHAIN SOLUTION – It enables online marketplaces to proceed with real estate transactions. Introducing modern means of dealing in real estate provides more robust support. The sales across exchange networks and marketplaces, now, do not need physical communication. The online transactions are done through tokenization i.e. it can be converted into tokens which can later be traded like stocks and can be exchanged for soft money.
2. Intermediates and high fees
- TRADITIONAL CASE – Brokers, Lawyers, and Banks have been irreplaceable to the ecosystem for a long time now. The involvement of middlemen has turned real estate into an expensive affair. Also, the involvement of lawyers and accountants adds up to the expenses.
- BLOCKCHAIN SOLUTION – The involvement of blockchain makes everything including the listings, verification of legal documents, and payments online and transparent. It provides a securer environment since all the transactions are immutably recorded. This drastically cuts down the money spent in the commission paid to the middlemen.
- TRADITIONAL CASE – The conventional real estate business has often been subject to corruption and dishonesty. Time and again, the middlemen involved are observed to be exploiting the buyers for their interests. This results in massive cases of tax evasion, and money laundering.
- BLOCKCHAIN SOLUTION – Decentralisation plays an integral role in the Blockchain approach. The information stored in the respective blocks is transparent and immutable to all the grounds. The information can easily be authenticated by the various buyers and sellers, making a conducive environment for transactions. This elevates the level of trust and confidence within the ecosystem.
- TRADITIONAL CASE – Liquidity is defined as how quickly an asset or investment can be converted into cash. The classic real estate requires a lot of money and time, resulting in customers’ hesitation towards it. To convert the asset into cash, the developer needs to sell the whole property, which may be a difficult task considering the present pandemic situations.
- BLOCKCHAIN SOLUTION – The tokenization makes Blockchain desirable making real estate readily tradable. The property can be bought in fractional ownerships, making it convenient for the customers with minimal funds. This implies, for encashing a property, the developer need not wait for a buyer who can afford to buy the whole property at once.
5. Fractional Ownership
- TRADITIONAL CASE – As of now, concluding a deal indicates the sale of the complete property as a whole. Investments require considerable upfront investment to purchase real estate. Individual ownership makes it difficult for buyers with inadequate funds to invest.
- BLOCKCHAIN SOLUTION – This approach helps buyers pool money and buy a property. That is, you can buy a portion or fraction of the property and pay only for that. This would hugely help people with minimal funds to invest in real estate. This would also help the developers increase liquidity.
Advancements in technology has transformed real estate business, easy yet efficient. However, maintaining the security of transaction database can still be a tedious job. Blockchain technology is designed just to handle that, making the transaction information tamper-proof. Data is stored on network of computers and thus, it is protected from any kind of eavesdropping or hacking activities.