How blockchain is transforming the real estate industry
WHILE blockchain technology was popularized by cryptocurrencies, its potential is not just limited to the world of finance. Blockchain technology is beginning to disrupt many industries, including supply chains, healthcare, and even the government.
An industry that seems to be less discussed in the ever-increasing world of blockchain is real estate, a sector that is known to be notorious for its opaque, long-winded processes. Here, we take a look at three ways in which blockchain is advancing the real estate industry.
A typical, traditional property journey involves multiple stakeholders. Assuming it is a chain-free transaction not involving multiple buyers and sellers, it still includes a buyer, a seller, the land registry, and a team of lawyers, mortgage providers, and surveyors at a minimum.
The transaction journey can become a long and complicated process as the stakeholders involved figure out who needs to do what and when. Many times, different participants in the leasing lifecycle do not have pre-existing relationships, which can result in mistrust.
Blockchain seeks to create transparency in the buying journey, increasing the degree of trust and reducing bureaucracy. The adoption of ‘smart contracts’ can ensure that all steps are completed by the appropriate party before any money is transferred.
Due to the distributed qualities of blockchain, the parties involved would no longer be reliant on a single source of truth (usually a lawyer), thus increasing trust and speeding up the transaction.
Cutting costs (and the middlemen)
Much to the frustration of buyers, the real estate purchasing journey can often involve countless extra fees and processes that go beyond the price of the property itself. Blockchain seeks to cut down some of these costs by reducing the number of people involved in the journey.
New platforms will be able to take over these functions such as listings, payments, and legal documentation. Cutting out the “middlemen” will mean that buyers and sellers will get more out of their money as they will save on the fees and commissions issued by these intermediaries. It will also speed up and streamline the process as there will be less back-and-forth action.
Crowdvilla is a non-profit, Singaporean start-up that is creating a community-based sharing economy model for holiday properties. The company is utilizing blockchain technology to build an open and transparent system of recording digital assets, and aims to revolutionize the time-sharing model in real estate.
Crowdvilla CEO and co-founder Darvin Kurniawan agrees that blockchain in real estate will significantly cut down the costs associated with the middlemen.
“We should be able to offer apartments or accommodations at a discount of 20-25 percent since all these middle-man are cut off. You are really just paying the cost price of the accommodation, so this is the main benefit here,” he tells Tech Wire Asia.
Real estate fraud costs home-buyers millions of dollars every year, and the victims are commonly those individuals who are looking to make a quick deal and thus willing to forego appropriate safety measures.
Technological advances has made the forgery of documents and advertising of fake properties much easier for fraudsters.
“Forgery of documents showing someone is the owner of a property but really is not is one major problem,” Paul Barbagelata, owner of Barbagelata Real Estate in San Francisco told MarketWatch.
“It’s been reinvented with technology as the duplicating of notary stamps and grant deeds is much easier with the use of the Internet.”
One of the most common types of real estate frauds is rental scams, which involves a scam-artist imitating a real listing, and re-posting it on another site, posing as the agent responsible for the property. The scam-artist will usually ask for money up front from interested parties as a fee for their services and disappear once it is received.
Blockchain offers to solve these fraud issues by being 100 percent incorruptible, storing details of funds from sender and recipient. Through blockchain, “digital ownership certificates” can be created for properties, which would be almost impossible to replicate. These digital certificates would be directly linked to one property in the system, meaning that forged ownership documents and false listings will be a thing of the past.