Blockchain tech can deliver significant advancements in real estate industry
BITCOIN, the cryptocurrency which gained global recognition in the recent years due to its potential for friction-less and lightning-fast monetary transactions, is currently going through a renaissance, with technology startups banking on e-payments and e-commerce to bolster the demand for cryptocurrency transactions.
The value of Bitcoin peaked this first quarter of 2017, with speculation capital controls in China would further boost demand for the digital currency. However, some analysts are warning against a potential bubble.
Amid all this speculative analysis about Bitcoin, the fundamentals of the cryptocurrency are what make it all the more interesting not only for fintech startups, but also for emerging companies in other industries. Take for example property tech and insurance tech (proptech and insurtech, respectively).
Transactions in real estate, insurance, and basically any industry which requires contracts and exchange of value, can potentially benefit from Blockchain technology, due to the decentralized transactions, which can also potentially disintermediate these industries – meaning cutting off the middleman.
What is Blockchain?
Blockchain technology essentially allows users to record transactions on a semi-public digital ledger. The system provides transparent and equal-access to all users, and it can include specific information about such transactions.
Thus, while Bitcoin’s blockchain only includes information on payor, payee, amounts, and history of Bitcoins transacted, such Bitcoin tech, when applied to real estate, can include other information, as well, such as ownership details, addresses, encumbrances, ownership history, and more.
This means buying, selling, and even renting, of properties can be done on a secure platform without the need for other paper trail. Users can own property titles on a secure digital wallet. They can also dispose of these properties just as easily in a secure online marketplace, wherein transactions will be verified, tracked, and recorded on the Blockchain.
What makes it viable in proptech?
Since blockchain can potentially eliminate the middleman, it can facilitate faster, more reliable, and cheaper transactions for both parties – seller and buyer.
Selling property has always been complicated and expensive – not to mention rife with information asymmetry – because of multiple middlemen. These can include brokerages, brokers, agents, conveyance law firms, and even government titling offices.
Each one holds a particular interest and piece of information, and each one needs to be paid his own percentage in the transaction. Introducing blockchain can cut through the bureaucracy. Buyers can deal directly with sellers, and all information is exchanged through the platform itself.
Aside from the cost, blockchain tech can also bring down the time it takes to complete a transaction. For example, the sales process involved in buying a property entails interacting with the owner or his agent, checking the legal title of the property, and checking the market for prevailing prices, among others. These are done by different parties and intermediaries, and it can take several months and considerable amount of money to facilitate a sale.
In contrast, a blockchain-powered real estate transaction will let all parties know the history of a title, any pre-existing or previous encumbrances, past sales transaction, and ownership confirmation. To proceed with a sale, both parties can execute a Smart Contract, which can factor in any financing requirements, interest, and underlying regulations. If a buyer has enough cryptocurrency (such as Bitcoin) to facilitate the sale or the initial down payment, then buying the property is just a literal click away.
Addressing on-demand economy
On-demand has shaped the lifestyles of many consumers today. The popularity of Uber and Grab in the region, for example, addresses the need for on-demand private car (and for car owners, a means to provide ad hoc services to make extra money). Airbnb – notwithstanding legal and regulatory issues in the region – also fulfils the same need.
Blockchain technology in property tech can also provide significant innovations in the rental space. In Singapore, for example, the Metropolitan Redevelopment Board has enforced a ban on short-term rentals, which means startups like Airbnb are essentially illegal. However, authorities are considering a new rental property type, which can particularly address the need for short-term rentals.
Incorporating Blockchain technology can also mean faster transactions when it comes to rental property. Airbnb was reported to have acquired a Blockchain tech startup last year, which could mean it is interesting in incorporating such technology into its rental platform. For instance, short-term renters can potentially unlock apartment or room doors automatically once they send payments in Bitcoin.
What does this all mean for the traditional realty industry? It is essentially a threat to traditional real estate brokers and agents, since Blockchain tech in proptech will potentially cut them out as middlemen.
This will require innovation and disruption on the part of the realty business, then. Startups like 99.co, Zipmatch, Bitmark, Bluzelle, and others are introducing their own innovations to the real property industry. Perhaps it’s time for traditional players to evolve – and quickly at that – in order to remain competitive.