For the past few years, blockchain has been on the rise. It has influenced major industries and the international economy on a huge scale. The real estate industry is no exception. Blockchain has taken the real estate industry by storm by revolutionizing the payment system.
Blockchain and the Real Estate Industry
Tokenization of AssetsThe digitalization of assets, securities, and financial contracts is referred to as tokenization. There are online platforms specifically designed for the real estate industry. Blockchain offers tokenization which can be used to exchange stocks. These tokens representing real estate property can be exchanged online. You can liquidate the assets into tokens and trade these tokens for fiat money. Tokenization improves the regulation and control over real estate assets.
Elimination of IntermediationReal estate purchases require several intermediates, including lawyers, bankers, and brokers. Blockchain platforms for real estate are flourishing at a great pace. These platforms can eliminate the need for intermediates and assume charge of the legal documentation, payments, and listings. Eliminating intermediates from the industry will save a lot of time that goes into processing the purchases through them. It will also cut costs since these intermediates charge huge fees. It will also save the hassle of dealing with a number of people just for a single purchase or sale.
Reduced CostsIn addition to the expenses charged by intermediates, blockchain platforms can also cut other costs like expenses of inspection, loan fees, and registration fees. All this owes to the decentralization and automation of the system. Large corporations dominate the real estate industry and are benefiting from the huge amount of money the industry offers. The real estate market is not directly accessible to a lot of people. With blockchain, almost anyone can have access to the market and benefit from safe, impartial, and unambiguous transactions. These platforms will come up with transactions between only two individuals.
Automation and DecentralizationBlockchain can decrease the occurrence of fraud by cutting downtime and providing safety. In the real estate industry, there is a prevalence of corruption and lack of transparency, and often ownership of the property is ambiguous. Blockchain provides transparency and prevents these frauds. Peers can access the information provided by the blockchain platforms without any limitations by the sellers, buyers, banks, or real estate agencies. Blockchain delivers the present status and background history of the property. Considering the crash in the housing market a decade ago, decentralization solves a major problem in the real estate industry.
Alternative FinancingManaging property finances is hard for property developers. Taking a loan from a single bank costs a huge percentage of interest. Yes, they can loan money from multiple sources, but it gets difficult to manage and keep an account of all the finances. Blockchain simplifies investor management for developers by providing alternative finance models. It helps the investors keep track of the Return on Investment. Blockchain can also help in global distribution. All these things will motivate the investors to invest their money in the real estate industry.
Mortgage and Loan SecurityLoan origination relies on paper documentation in the real estate industry. The process requires a great deal of mindless and intricate paperwork. Outdated data is used for trading and asset servicing. Cash flow is highly affected by conventional methods. Blockchain provides banks with a single version of the information that is verified, secure data transfer, real-time payment settlement, and immutable transaction monitoring. Digitization of mortgages or loans gives a choice to document relevant information like loan payment status and ownership rights. Regulators can get an up-to-date report, and you can form smart contracts to distribute and receive payments from investors.
Property and Land RegistriesLand ownership is highly prone to fraud due to its reliance on paper documentation. Moreover, the purchase and sale of property require lengthy and frustrating paperwork, which costs a lot of money and wastes a lot of time. Blockchain has replaced paper documentation. Any changes in property ownership or assets are documented in a single online database. This online information is highly accessible to investors and buyers, and this helps them make decisions regarding property dealing without having any trust issues.
Urban PlanningConventional methods of sale and purchase of property do not provide any feedback from the community. Blockchain helps in urban planning by keeping a record of the inclinations of people and an input flow from the community. This ensures engagement in the community and the sustainability of success for the developers.
Smart ContractsBlockchain helps create smart contracts between peers, which abolish the requirement of a third party. This ensures the security of the information and prevents any modifications by the third party. Smart contracts have played a major role in the automation of assets. All the virtual exchanges are recorded in the blockchain, and this record is transparent and unchangeable.
Peers’ IdentityDoing business through blockchain requires a concrete identity. This identity goes through the process of several background checks. These identities are a means to proving your ownership of the property which can be shared with the relevant parties.
Improved Real-Time AccountingBlockchain records all the transactions and cash flow. This online record present in one place can help accountants create annual financial statements like income statements, statements of cash flow, or balance sheets. This also reduces the chances of concealing any fraud in the final audit.
Fractional OwnershipBlockchain has made investing in the real estate industry easier with the use of fractional ownership. Normally, sellers ask for a large upfront sum if you want to purchase a property. With blockchain, you can buy or sell a fraction of tokens using a trading app. Fractional ownership also helps with the management of the property.
DrawbacksCryptocurrency is highly volatile, and its value can change drastically in a short time. This can cause you a huge loss. You may have some problems with taxes since there are not any standard rules for taxing on cryptocurrency. You might get some tax benefits if you opt to use conventional methods for purchasing properties.
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