Blockchain in Real Estate
Each and every person has faced the real estate “issue” throughout their life. It depends on the case, but maybe you wanted to purchase, sell, or make money off of your property, and what you definitely acknowledged was the big volume of paperwork, bureaucracy, payments, service fees, loads of service fees, intermediaries; and you stand there with a question in your head: “could this have been easier without any of these?” until you decide “to get rid of them”.
So if we ask ourselves “what are the main challenges concerning the real estate industry”, we will have the following points:
- Possibility of fraud: agreements drawn up on paper can be manipulated and changed easily,
- Heavy paperwork: paperwork often distracts from the main goal and takes unnecessary time,
- A large number of intermediaries: paying fees to multiple parties can result in a build-up of unnecessary costs,
- High entrance barriers: real estate property trading typically demands significant amounts of cash,
- The difficulty of getting real property information.
We have heard about blockchain and future technologies revolutionizing the traditional industries. So what is the case about real estate? Why do we need blockchain in this industry?
The magic feature in blockchain-based processes- executing transactions without an intermediary or a clearinghouse, very much compliments a market like real estate. The distributed ledger holds the history of a transaction, a property, an asset, or a title. The transaction is processed on the ledger, providing the opportunity to transfer funds in new ways.
Blockchain in real estate, therefore, can eliminate the need for intermediaries, like lawyers and agents, by providing means for property verification and payment to buyers. Paying for a property using cryptocurrencies can also help buyers bypass bank fees. It cuts the fees associated with escrow, by using smart contracts that can be customized according to the needs of the parties involved. The technology makes the whole process easier and provides more accurate deed transfers. It can improve transparency issues in investing as well as speed up MLS (multiple listing services) listings.
We may have the feeling that investing in real estate has typically been in the realm of the rich. Cryptocurrency and the public ledger come to change that, making investment available to the masses by purchasing “fractional ownership”. The technology allows groups of people, who don’t necessarily know one another, to pool their resources on the public ledger, and purchase a valuable property. Individual investors can then sell off their portions as needed, with all of the movement tracked publicly. Blockchain allows for one of the most sought-after, yet previously unachievable, qualities of real estate investing: liquidity.
There are a number of use cases around the globe, which are bringing innovation to the industry. See some outstanding projects below.
- The UK “Digital Street” project, announced plans to move the country’s land registry to the blockchain by 2022.
- The Swedish Land Registry, tech firm ChromaWay, Kairos Future and the Telia Company have investigated the possibilities of using blockchain technology for real estate transactions.
- Through a partnership with real estate tech startup Velox.re, Chicago’s Cook County is testing the use of the Bitcoin blockchain for transferring and tracking property titles and other public records. The Cook County Recorder’s Office is the second-largest office of its kind in the United States, and it will be the first in the US to experiment with blockchain technology.
- Bitland provides services that allow individuals and groups to survey land and record title deeds on the Bitland blockchain – providing a permanent and auditable record – as well as acting as a liaison with the government to help resolve disputes. The pilot project is launched in Ghana.
- The Georgian government, in partnership with BitFury, starting April 2017, have been using blockchain to register land titles and have been verifying them using the public bitcoin blockchain. This marked the first time a national government used the bitcoin blockchain to validate and secure government actions. As for now, there are more than 300,000 land titles on Georgia’s Blockchain.
- ConsenSys and the Dubai government are developing blockchain strategies for public services and smart city connectivity.
- Ubitquity, Velox.RE and Propy are developing the blockchain for title deed transparency and cross-border transactions of high end residential real estate.
- Deloitte Netherlands, the City of Rotterdam, and Cambridge Innovation Centre are developing a blockchain application for recording lease agreements.
- IMBREX (former RexMLS) is a US-based multi-listing service that has developed a peer-to-peer proposition, whereby information providers and validators can be paid in cryptocurrency.
There are impressive startups that are trying to address the challenges of the real estate industry, moving forward with a strong belief that in the future, the application of blockchain in the industry will particularly lead to
- less error, less duplication, less human inefficiency- eventually leading to much lower costs,
- greater transparency (through consensus and distribution) of prices and contracts,
- potentially reduced transaction times, and
- greater market liquidity and turnover.
In this regard, I really liked the idea of seeing real estate as a service and not as a product. I do believe that with the applications of blockchain and future technologies, we can bring the industry to a new level, having in mind the opportunities that an asset can offer.
Now you may ask: “What’s next?”…and I am telling you, I am going to watch “The Big Short”, and try to understand what could have been done differently at that time. How about you?
Also, for all new blockchain enthusiasts, we have a lot of articles about blockchain applications in various industries ranging from fashion to healthcare and from HORECA to art. Find them here.