Blockchain has so far mainly been associated with cryptocurrencies but lately it’s finding uses in an increasing amount of business areas from banking and insurance to healthcare. The area that many have so far overlooked in association to blockchain is real estate. We have grown accustomed to opaque areas in the real estate business such as pricing or accessibility of international listings, which blockchain can easily help to change.
The concept of blockchain is very simple – it works as a distributed ledger that anyone can access. There’s also no limitations on the amount or type of data that can be stored enabling many different business areas to benefit from it. The entries to the ledger are almost real-time and have to be confirmed by all network participants, limiting fraudulent activity.
Benefits of blockchain
- High speed of information sharing
Blockchain speeds up settlement of transactions and reduces risks as records will be difficult to erase or cancel. If one copy of the ledger is compromised then other instances remain uncorrupted, making the network resilient to fraudulent activity.
- Leaves out the middleman
Blockchain provides cryptographic proof of transactions that lets the two parties to come to a deal without needing a middleman for extra security.
- Public transaction history
All transactions are publicly recorded on the peer-to-peer network. The blockchain therefore is a secure source of proof of transactions. It is increasingly difficult manipulate the network due to the growing number of participants.
Uses of blockchain in real estate
- Due diligence
All prior transactions on the blockchain can easily be traced and digital identities checked, removing the time-consuming process that so far has been mainly done on paper.
- Faster and smarter contracts
The terms of the agreement are recorded on the blockchain almost immediately and will be visible at all times. The contract will therefore be much more transparent than before and easily verifiable.
- Incremental ownership of properties
Until now it has been difficult to sell 0,7 percent of property due to legal restrictions, but as fractional ownership of properties for investment purposes is on the rise, blockchain will enable to securely trace the size and value of such stakes. Smart contracts will make these transactions fast and easily traceable similarly as stock in companies is recorded on the exchanges.
- Reducing the amount of participants in a deal
Usually real estate deals mean involving several people and authorities in the process. Such as estate agents, lawyers, local authorities, banks and many more depending on the country where the deal is made. All the participants hold a part of the information necessary for the deal and store it separately. Blockchain would allow the information to be held in one place referencing the asset and accessible to all. This would save up a significant amount of time and money for the participants involved.
Blockchain has disrupted the real estate industry already by making it faster, more transparent and easily accessible to smaller investors. There will still be many changes to come such as easily accessible listings worldwide and more widespread acceptance of cryptocurrency payments for real estate. It’s early to say how widespread the acceptance of blockchain usage in real estate will be but there are definite benefits to be seen for the industry.