The Influence Of Blockchain Technology On Real Estate
How is blockchain technology influencing the real estate business? Real estate remains an interesting field to apply the technology. Read more and get the idea behind it.
How Is Real Estate Dealing Blockchain Technology?
Talking about the block chain’s disruption of financial services, it is also hard to find a segment that hasn’t been influenced by the blockchain technology. Making a strong impact on payments, remittances and foreign exchange are the cryptocurrencies. With initial coin offerings challenging stock investing, startup loans, and venture capitals, these currencies are here to stay and make their mark.
In this context, real estate hasn’t escaped blockchain disruption either, as previously transacting high-value assets including real estate exclusively through digital channels has never been the norm. Often conducted offline, real estate transactions involve face-to-face engagements with various entities. Opening up ways to change this is the primary objective of Blockchain. By introducing smart contracts, in blockchain platforms, it now allows assets like real estate to be tokenized and traded similar to cryptocurrencies like Bitcoin and Ether.
While trading real estate varies in this way, there are six ways that blockchain is changing the real estate game.
Platforms And Marketplaces
Mostly concerned with listing and connecting buyers and sellers, real estate technology comes with blockchain introducing new ways to trade real estate and enable trading platforms and online marketplaces to support the transactions more comprehensively. As an example, ATLANT that recently launched its ICO develops a platform using blockchain technology facilitating real-estate and rental property transactions. This way of tokenizing real property helps assets to be traded much like stocks on an exchange and transactions to be done online.
Allowing sellers to tokenize assets, ATLANT essentially handles like a stock sale liquidating the asset through a token sale using the platform. Collected tokens are exchanged for fiat currency with buyers owning a percentage stake of the property.
A part of the real estate ecosystem is broker, lawyers, and banks where blockchain may soon usher in a shift in roles and participation in real estate transactions. Assuming functions such as listings, payments, and legal documentation, new platforms are eventually cutting out intermediaries resulting in buyers and sellers getting more out of the money they save on commissions and fees charged by intermediaries. Thus the process is much quicker as the back-and-forth between these middlemen gets cut.
As it takes time for sales to conclude, real estate has long been considered an illiquid asset whereas this isn’t the case with cryptocurrencies as tokens can readily be traded for fiat currencies through exchanges and these tokens as real estate can be readily traded. It isn’t necessary that a seller has to wait for a buyer who can afford the whole property to get some value out of the property.
Blockchain lowers the barriers to real estate investing by allowing fractional ownership that typically has investments requiring significant money upfront to acquire the property. On the one hand, investors can pool the money acquiring bigger ticket properties, whereas, through blockchain, they simply have to access a trading app to buy and sell even fractions of tokens as they see it. In this way, fractional ownership helps them avoid managing the properties themselves such as maintenance and leasing.
There is a hurdle as the upkeep alone can add up to significant costs and dealing with tenants may be a troublesome effort. Affecting related activities such as lending where property owners often put their properties as collateral for loans, it is important to get quick access to cash. Property owners continue enjoying the use of property depending on the terms.
Being a decentralized technology, blockchain commands trust and security as information stored in the blockchain is accessible to all peers on the network making data transparent and immutable. It is enough to go back to the housing bubble crash a decade ago to see how the greed and lack of transparency in the part of institutions have a catastrophic consequence. With trust built into the system, a decentralized exchange comes with information verifiable to peers, buyers, and sellers having more confidence in conducting transactions. This leads to lessening of fraud attempts as smart contracts increasingly become admissible records with Vermont and Arizona passing such legislation. This leads smart contracts to have more enforceability beyond technology itself.
With this sort of transparency, it is possible to trim down all associated costs with real estate transactions. Even if the savings in cutting out intermediaries’ professional fees and commissions, there are other costs like inspection costs, registration fees, loan fees, and taxes associated with real estate. Depending on the territory, these costs vary according to the jurisdiction. comparing to intermediaries, these can be eliminated from the equation as these platforms readily automate these processes making them part of the system.
Concluding On The Write-up Working Towards True Peer-To-Peer
Estimated to be worth $217 trillion, the global real estate is dominated by wealthy and large corporations, as also through the blockchain, more people can access the market where transactions are now made more transparent, secure and equitable. It is set to be a peer-to-peer activity with blockchain technology powered platforms doing most of the work.