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Gone are the days when real estate transactions used to be conducted offline through face to face interactions. The emergence of blockchain technology has allowed real estate to be and traded like popular cryptocurrencies like Bitcoin and Ethereum. 

Different Use Cases Where Blockchain Technology Is Creating a Change Through Real Estate Backed Tokens 

  • Improving the property search process - The third-party platforms used by real estate brokers, owners, buyers, and tenants charge hefty subscription fees. There are no standardized processes followed in these platforms. Blockchain technology is a blessing in disguise as it permits different properties to be listed simultaneously on a single decentralized database. 

  • Expedite the process of pre-lease due diligence - By engaging third-party service providers for the manual verification process, the chances of errors are more. Blockchain technology digitizes the entire process increasing efficiency, lowering costs, enhancing data security, and reducing the chances of manual errors to take place. By establishing a common digital identity, all the information such as vacancies available, tenant profile, financial, and legal status can be consolidated easily. 

  • Ease the management of the property - Property management is generally considered to be complex with multiple stakeholders existing in the form of tenants, landlords, property managers, and vendors. By using a unified decentralized application, manual paperwork can be eliminated. Different activities like signing lease agreements, mortgage agreements, tenancy contracts, maintenance work, and cash flow management can be conducted securely and transparently. 

  • Cheaper property title management - Since property titles are currently paper-based, it creates a chance for errors and frauds to occur. Hence, property owners are forced to incur high legal fees to ensure the complete authenticity and accuracy of their property titles. Blockchain technology can act as a viable alternative in this situation by storing immutable digital records of the land titles. This reduces the risk of title fraud and the need for availing additional insurance. It will decrease chances of losses and bring down the operational costs by many times. 

  • More efficient processing of financing and payments - The traditional methods of real estate buying and selling involves extensive documentation and has various intermediaries. This leads to slow and expensive procedures. By using blockchain technology, it reduces the time for due diligence and speeds up the mortgage approval process.

Related: How to Tokenize Commercial Real Estate Asset

Some of the Ways in Which the Real Estate Industry Has Been Disputed Are  

  • Platforms and marketplaces - There were several platforms where properties were listed to connect prospective buyers and sellers. Blockchain technology has created online marketplaces to facilitate quick processing of real estate transactions. The tokens can be exchanged for fiat currency benefitting the local traders. 

  • Absence of any intermediaries in the system - Brokers, lawyers, banks, and agents have been an integral part of the real estate ecosystem for several ages. Blockchain technology has eliminated its role altogether. The platforms are taking care of everything from legal documentation, the listing of different properties, and the execution of payments. This benefits buyers and sellers to save commission which would have been paid to these intermediaries. It ensures a quicker process of receiving fractional ownership by cutting the involvement of the middleman. 

  • Creates more liquidity - Historically, real estate has been considered as an illiquid asset. The usage of tokens ensures real-time trading as they can be traded for fiat currencies in the secondary markets and exchanges. 

  • Ensures fractional ownership - The barriers to investing in real estate are significantly reduced through the tokenization of real estate. There is no need to pay a hefty upfront fee. Investors can also pool in their money and buy big-ticket properties. They can save money on activities like maintenance and leasing. They can continue using the property based on flexible terms and conditions. It ensures the democratization of investments. 

  • Creates complete decentralization - It creates trust and ensures a high level of security. The data is transparent as well as immutable. More confidence is created among the buyers, sellers, and peers as they have access to all the information at their fingertips without any restrictions. This also reduces the chances of frauds to take place ensuring a safe investment experience for all the parties involved in the network. 

  • Decreases the costs to be incurred - By cutting down the commission and other kinds of fees paid to the intermediaries, real estate platforms can automate several processes reducing the expenses on inspection of the property, property registration, loan fees, and taxes. It also improves the access of more investors into the market ensuring that investment in real estate is not reserved only for the elite and wealthy. Transactions are conducted securely, transparently, and equitably.

  • Ensures better portfolio diversification - Instead of locking up all your money in a single real estate asset, you can buy fractional stakes in multiple properties located in different parts of the world. This reduces your overall risk by many times. 

Though tokenization of real estate has a positive future ahead, it has to navigate through different challenges like regulatory uncertainty, scalability, and interoperability before witnessing widespread adoption.