Blockchain’s Potential in Real Estate: Emerging Use Cases
In the last 10 years, the real estate business has used IT technologies. As of September 2021, the market revenue for this industry was different in different parts of the world.
The system for sending digital information is called “blockchain.” It keeps track of data so it can’t be hacked, changed, or used to break the system. So, blockchain technology is for most transactions around the world. Especially ones that have to do with money (cryptocurrencies). Most real estate deals have always been done offline, i.e., in person. But since the Covid-19 pandemic, online transactions have become more critical, so smart contracts have come into the business world.
As an Enabling Technology, Blockchain
One benefit of blockchain technology and security tokens, in particular, is that they make it possible to buy and sell real estate in smaller pieces. For example, a property brokes up into separate investment units, each represented by a security token (via the ERC 20 or ERC 721 specifications or a variant thereof). These tokens will show who owns the property, provide a way to handle transactions, and serve as the property’s identifier to trade on regulated secondary markets.
People often say that blockchain technology “will change everything,” but we think that’s not too far from the truth in this case, especially if you look at it as a complete system for recording and processing transactions and give it a lot of time. At its core, a blockchain is a shared database or ledger spread across many computers. Transactions are processed and put together in groups called blocks. Each block is encrypted and linked to the next block in a chain using cryptography. The processing happens in a network of nodes, which can be public or private. Consensus design is to spread out authority so that no one source is the only one who can decide if a transaction is valid or not. Instead, power spreads among the people who run nodes, with each node validating and keeping copies of the checked ledger.
Uses of blockchain in the real estate industry that make the market more liquid
One of the best ways to use blockchain in the real estate industry is to make the market more liquid. Using blockchain technology, real estate companies can build a platform where they can sell and buy assets.
People who invest in real estate can also list their properties to get more people to see them. Anyone can add their assets to a public blockchain platform if they want to. They must undergo an authentication process to check their background and rule out any possible scams.
But if there were a place where people could buy and sell real estate, it would be easier to connect people who want to buy and people who want to sell.
Using computers to buy and sell property
Buying and selling real estate takes a long time to do. Both the prices and the brokers’ fees will change during this time. Because of all the problems, the sector is falling behind quickly. Because of this, smart contracts in real estate will make buying and selling homes more accessible.
Blockchain has the potential to make the whole process of buying a house automatically. Consumers can visit a website where people who want to sell things can show off what they have. Once they choose one, they can see it in person or take a tour online. After setting up the conditions, all they have to do is process the payment.
Unsafe Titles or Management of Data
Another problem in real estate is that records are no more secure, which is essential for doing business quickly.
The leading blockchain real estate software development company provides an immersive platform that can help you secure all your records.
With blockchain, everyone and everything gets a digital identity that can’t be misplaced or stolen. It makes it easier to keep track of records about property titles, liens, or financing. This technology has made it possible to do away with title companies using blockchain.
The tokenization of the real estate
Tokens are pieces of real estate that represent a certain number of shares. They can be issued, bought, and sold using cryptocurrency on blockchain platforms. It makes property sales go faster and lowers the barriers to crowdfunding.
What’s important to note is that this system makes it easier for regular people to invest in real estate. Investing in commercial real estate overseas is also easier to handle. Simply put, you can now trade properties on exchanges like you would trade stocks.
Investing and Having a Shared Ownership
Blockchain technology changes real estate by letting people own and invest in small pieces of property. Real estate is a significant investment since property prices are constantly rising. Investors can pool their money and buy a piece of property they couldn’t buy on their own through the blockchain.
Shared ownership lets investors sell their share of the business whenever they want. It also keeps them from taking care of and renting out their properties, which can be a lot of work.
Access to opportunities on the secondary market
By giving access to the secondary market, tokenizing real estate assets opens up new opportunities. It is possible because there is purchased digitally, which lowers the cost of transactions and makes them available worldwide.
When you use blockchain in real estate, you can turn assets that are hard to sell into investments that are easy to sell and attract more investors. Because of this, anyone can buy a digital asset or a piece of one and then sell it on the secondary market.
Blockchain experts think issuing No Objection Certificates (NOCs) and other compliance certificates recorded through blockchain technology could help the real estate industry grow. This will bring trust and openness on its own.
“Blockchain and smart contracts could change how offline and paper-based commercial real estate transactions, like sales, leases, financing, etc., are done. Distributed ledger technology has more uses in intelligent city ecosystems than smart parking. It also helps city managers make better decisions by giving them real-time information, according to Sharat Chandra, vice president of research and analysis at blockchain company EarthID.
How does blockchain affect the building and development of real estate?
Larger construction projects are getting harder to run because there are no unified subcontracting and procurement processes, and the supply chain isn’t transparent. A blockchain platform can make it easier to buy things by helping suppliers and subcontractors manage their reputations and giving them incentives to do a good job. Smart contracts can make it easier to manage money by automating contract agreements and payment terms. Blockchain can show that premium goods are accurate at their origin by linking them to non-fungible tokens that can be used as digital certificates. Last, blockchain can make project management easier by digitizing processes from start to finish. This will make it easier for construction managers to keep track of and share the status of a project with the people who matter most. It will also make it easier to avoid bottlenecks, making project management more efficient.
How do payments and leasing change because of blockchain?
Because of distributed ledger technology, can sign leases, and payments can be made on-chain. This means that reconciliations don’t have to be done by hand, and rent and dividend payments to property owners can create automatically. Smart contracts can also automate other kinds of costs and fees to encourage tenants, landlords, and service providers to act well.
How does blockchain change accounting in real-time?
When property ownership and cash flows with on-chain recording, investors and people who own assets can take advantage of automated and almost instant accounting. In the future, annual financial statements like the balance sheet, statement of cash flows, and income statement will be made with the possibility of audits happening in real-time. This makes progress possible for compliance, regulatory oversight, and investor relations.
What effect does blockchain have on other ways to finance real estate?
It’s hard to get money for new real estate projects. When banks are the only source of loans for property development companies, the interest rates can be as high as 29%. They also face problems getting loans from more than one place because crowdfunding can be hard to manage.
Blockchain makes it easier to use alternative financing models by making it easier for developers to manage investors and for investors to see how their investments are doing and keep track of their return on investment (ROI) in real-time. These solutions make it easier for investors and give them more confidence and access to a larger pool of investors.
How does blockchain change the securitization of loans and mortgages?
Loan origination and underwriting are still done on paper and are not standardized. Security structuring is open to interpretation, and it takes a lot of work to keep assets from double-pledged. Most of the time, trading and asset management decisions depict old data. And finally, cash reconciliations between events in the lifecycle often cause settlement delays that affect investors’ cash flow.
Blockchain gives banks a single version of verified information, safe data sharing, real-time monitoring of transactions that never change, and payment settlement. By digitizing a loan or mortgage, it can be set up to include important information, like who owns it and how much is a payback, to help future servicing decisions. Smart contracts facilitate users to collect and send payments to the people who own them and report to regulators in real-time. This makes lifecycle management more efficient and boosts investor confidence in secondary markets by showing proof of asset performance.
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