Blockchain technology has been driving innovation across several industries. It has already proved its mettle in the financial world and is not taking the world by storm. Cryptocurrencies that operate on blockchain technology have greatly influenced payment structures, remittances, and forex. Initial coin offerings or ICOs are giving a stiff competition to stock investments, start-up loans, and venture capitals. Blockchain technology has left a huge mark on the food supply field as well.
Not even the real estate industry has remained untouched by the impact of blockchains. Trading assets such as property and land is not something that has been done digitally in the past. Real estate in particular has time and again involved one-on-one interaction with various entities offline and that, of course, is inclusive of its own time and costs. Blockchain technology revolutionized this by adding a token system. It is now possible to trade real estate like cryptocurrencies. However, it is not exactly the same as trading Bitcoin.
1. Platforms and Marketplaces
Listings and connecting potential buyers with sellers has been the core driving principle behind real estate technology. But with blockchain, this has diversified. New ways of trading real estate have emerged. Trading platforms can now support online marketplaces. That’s not all, real estate transactions can also be carried out seamlessly online with the help of blockchains.
2. No Intermediaries
The real estate landscape involved several entities other than buyers and sellers. Real estate managers, lawyers, and even bankers are typically part of the transactions. With blockchain technology coming into the picture, the role they play in such transactions will also undergo a major change. Listings, payments, and legal documentation can be taken care of by the new platforms. As a result, the role of intermediaries will be reduced and thus both buyers, as well as sellers, can save up on commissions, thereby earning more at a much faster rate.
Selling any property can be time-consuming. Thus, the real estate business was never seen as a liquid market. This is remarkably different from the way assets like cryptocurrencies work. It is easy to trade digital tokens for physical currencies via exchanges. A similar function happens when tokens are traded as real estate. It saves the sellers the trouble of waiting for a buyer who would want to invest in the property as a whole. Rather, they can tokenize the property to earn some money from their existing physical asset.
4. Fractional Ownership
Fractional ownership in real estate opens new horizons for investments through blockchains. In general, if you want to buy a property you would be expected to pay a lump sum upfront to seal the deal. Another option is to pitch in resources with different investors so there is scope to acquire significantly larger properties. When blockchain comes into the picture, buying and selling token fractions as per your requirement is as easy as accessing a trading app and placing an order. Fractional ownership also comes with the bonus of avoiding physical management of properties with activities like maintenance, upkeep, and renting out.
It is no secret that maintenance costs can be extremely high. In addition to that, the hassle of dealing with tenants is yet another aspect that one needs to deal with. It could also cause delays in activities such as lending where one may need quick cash by putting their property up as collateral. In certain circumstances, you could even negotiate a deal where you could still use your property after putting it away as collateral.
A major reason why blockchain has earned trust and is seen as a secure platform is because it is a decentralized technology. Information saved on the blockchain can be accessed by all in the peer-to-peer network which further strengthens the transparency of the network. To put this into perspective, let us go back to 2008 when the housing bubble fell flat due to the lack of transparency. Now, the decentralized exchange has made the system more trustworthy as information can now be verified at various levels.
The transparency can help in bringing down costs that are typically linked to real estate transactions. Other than what one can potentially save by ruling out intermediaries and commissions, inspection, registration, loan fees, etc can also be checked. Note that these costs can vary from one region to another. Interestingly, we can entirely rule out these costs by automating the system. At a global level, real estate may be worth trillions but a majority of it lies in the hands of a few influential corporations. Blockchain technology can make it easier for more people to access the market with safe, transparent, and reliable transactions. In the long run, real estate could become entirely automatic with the help of blockchain technology.