How Blockchain Overhauls the Real Estate Technology and the Industry Itself

Blockchain Overhauls the Real Estate Technology

Blockchain as new technology in real estate, once adopted, will infuse cataclysmic changes in an industry that for centuries was reluctant to progress.

The technical evolution will catch from behind this high-value assets industry totalizing $228 trillion in 2017. In real estate world, realizing transactions exclusively online seemed like science fiction, since these are complex operations with face-to-face engagements, third-party intermediaries, and official authorities involved.

As the blockchain system permits faster and cheaper operation, increased security with fewer errors and risks, and implies lowers costs, its adoption and adjustment are just a matter of time. Some real estate actors have already started to test and dig for opportunities to leverage the benefits of the blockchain. Sweden authorities started a pilot project to test blockchain for their land registry. Distributed ledger technologies could be the base for different real estates activities like property registration, the conclusion of agreements or money transfers.

Look at some ways that blockchain will impact the real estate technology:

Reduces or Excludes Intermediaries from Real Estate Transactions

Brokers, lawyers/notaries, and banks have been involved in real estate ever since. This configuration is about to change, as new blockchain platforms may be able to manage listings, legal documents, smart contracts, and payments. Reducing the role or getting the intermediaries out of the game means saving on commissions and fees and more value for buyers and sellers. Not to mention, it speeds up the process and reduces human error percentage and distortion possibilities.

All information concerning the property, the transactions, state of encumbrances, title registration can be embedded into distributed ledgers and made accessible online upon any device.

Blockchain and associated technologies have the power to make smart contracts more trustful and safer, as the execution is guaranteed by IT protocols without human interference. If standards are not met, there won’t be any agreement. Rental agreements and property sales contracts can use such smart contracts. Following the conclusion of a smart contract, the escrow account can be automatically disbursed by the system. 

Deloitte is conducting a pilot project for rental agreements registered via blockchain technology together with CIC (Cambridge Innovation Center) and the City hall of Rotterdam.

Online Real Estate Industry of the Future Might Allow Fractional Ownership

Blockchain technology reveals new horizons and eases access to real estate investing. Traditionally this is a privilege of scale investors and requires large funds. Through blockchain, small investors could access a trading application that allows buying and selling fractions of properties. And even facilitate verified small investments in large real estate developments. Fractional ownership of property allows small investors to enjoy the benefits without dealing with the associate's activities like property management, leasing, and maintenance.

Diminishes the Costs of Real Estate Transactions

Besides costs associated with professional intermediaries, property transactions encapsulate other categories of costs and fees like loan fees, registration fees, audit and inspection fees, taxes on the property. These costs vary largely upon jurisdiction and territory. Some of these expenses can be eliminated or at least reduced, as digital platforms execute and automate the processes, as part of the system’s protocol.

Also, same savings could be made on money transfers, if the blockchain technology is largely adopted by the banking system and becomes the norm for fiat currencies.

So, what’s next? DIY transactions?

New real estate technologies will enable access to this market to new segments of clients, due to lowering entry barriers. And automation of processes inside blockchain-powered platforms will be very favorable to peer-to-peer transactions. 

To be honest, these business transformation solutions will not become reality overnight, there is a long way till all this potential will be translated into facts, for now, they are just some punctual improvements.

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