5 Ways Blockchain is Revolutionizing the Real Estate Sector
Real Estate has been considered as one of the most suitable investment options in the market for many years, providing investors with profitable returns and a steady passive income. Yet, many people, especially small investors looking to invest in real estate have often been discouraged by the traditional process of buying property, that is tedious and expensive. However, the advent of blockchain technology in the real estate market is opening up a plethora of opportunities for investors of various investing capacities. Here are 5 ways in which blockchain technology is revolutionizing the real estate sector.
What is Blockchain Technology?
In its most basic form, Blockchain is a data system that stores transactional records while maintaining encryption, transparency, and decentralisation. It’s also possible to think of it as a chain of records stored in the form of blocks that aren’t managed by a single authority. It is difficult to update or modify information after it has been stored on a blockchain. On a blockchain, each transaction is protected by a digital signature that verifies its authenticity.
Blockchain in Real Estate
The real estate sector has been functioning offline for many years, therefore, all the data pertaining to various transactions, property details and regulations were managed locally by several institutions and middlemen. This form of offline module has been rendered completely inefficient and lengthy, and therefore, discouraging potential investors into exploring this sector.
The Blockchain technology has provided a solution for effectively monitoring, recording and transacting properties based on an online platform that connects various buyers and sellers.
How Does Blockchain Work in Real Estate?
Blockchain technology allows sellers to list the digital shares of their property on the online platform. This information is available on a distributed database that everyone has access to. Once a buyer and seller come in contact they can access information about each other’s identity, information and price of the property. They can then enter into a smart contract. According to the rules of real estate transactions mentioned in the database, a smart contract will be issued to make the sale of the property. Both the parties can then engage in a secured transaction.
Advantages of Blockchain in Real Estate
Previously, high value real estate transactions were conducted offline involving a lengthy process of paperwork, authentication and registration before one could own a property. This tedious process has discouraged many potential investors from entering into the real estate sector. However, the introduction of blockchain technology has facilitated connecting buyers and sellers over a secured online platform. It has also provided easy accessibility to owning properties to various individual investors and not just institutional investors. Blockchain enables tokenizing properties in a way that real estate assets can be traded in the same manner as stocks.
Blockchain has enabled an easy property search process that has conveniently ruled out the requirement of brokers in the process of purchasing real estate. Buyers no longer need to get in touch with lawyers and banks to carry out high value transactions. Blockchain has effectively overcome one of the biggest hurdles in real estate investing by removing middlemen and unnecessary costs in the form of commissions, registration fee and service fee that are charged by these middlemen.
Decentralized and Transparent
Since the data on blockchain is decentralized and distributed, it is accessible to buyers and sellers throughout the network. This allows complete transparency and trust in the process of transactions and the information available on the database as it is verified by fellow investors and sellers online. Since the data stored on blockchain follows a chronological format, it prevents any single party to alter any data, thereby protecting the authenticity of the data online. The traditional method of buying property left scope for many loopholes in the system that could be used by middlemen to exploit the buyers into paying more and engaging in other fraudulent practices.
Real estate properties are usually considered illiquid investments. This means that a seller has to often wait for a long period of time to sell his/her property at the right price when there are less or no potential buyers available. However, using blockchain, sellers can tokenize their properties into real estate shares that can be fractionally owned by several investors.
Fractional ownership is a great investment option for individual investors who are looking to invest a considerably small amount. Traditionally small investors would not be able to own singular properties with very low funds, but fractional ownership through blockchain platforms allow small investors to connect with buyers who are willing to sell digital shares of their properties.
Blockchain technology is very cost efficient, in the sense that it empowers the buyers to be self-sufficient throughout the process of searching for properties, connecting with buyers and making secured financial transactions without having to pay ridiculous commissions to brokers or a lump sum fee to lawyers and banks. Moreover, through fractional ownership, buyers do not have to engage in taking bank loans and don’t have to pay any loan fees.
Blockchain technology has enabled a seamless and efficient way of investing in the real estate market. It has empowered individual investors, who can now buy and sell on their own terms by accessing an elaborate database without being dependent on intermediaries. Blockchain is set to revolutionize the way people used to look at the real estate market and act as a catalyst to help many investors tap into the profitable real estate sector.
Assetmonk is a unique online platform that utilizes blockchain technology to promote and support complete transparency and trust amongst the investors. It also provides investment opportunities in many emerging segments of the real estate sector such as fractional ownership facilities.
Blockchain in Real Estate FAQs:
A seller can use Blockchain to list his/her property on the database in the form of digital shares. This is very similar to how stocks are traded in the share market. Prospective buyers or even investors interested in fractional ownership can contact the seller on the blockchain platform. They can suitably enter into a smart contract that is issued after assessing the documents and identities of the two parties. Upon verification, the two parties can then conclude the transaction. Hence, blockchain provides an ease in investing in the real estate market.
Blockchain is amongst the most trending technologies in the financial sector. Many companies like IBM, Deloitte and INTEL are investing heavily into this technology. Blockchain is actually a very reliable tool to store data about types of transactions. This is one of the reasons it is gaining popularity amongst investors to invest through blockchain platforms.
Blockchain is a distributed database that makes use of hashing encryption that can be accessed by all the participants ensuring transparency. Other key features include, secured data monitoring of transactions, decentralized technology and automatic timestamp that arranges the data in a chronological manner. Data stored in Blockchain cannot be altered by a third party.
Blockchain has been previously used in many different sectors and has been incorporated into many business modules globally in a surge. However, its impact on the real estate sector in completely revolutionizing the way that people engage in investments is getting widely noticed and popular in India. It is already being used as a solution to complicated land-registry problems, to reduce property frauds in India.
There is no relevant legislation in India that governs and regulates blockchain technology and its various applications. However, one of the important features of Blockchain is the smart contract that allows two parties to enter into an agreement by validating the contract through digital signatures. In India, eSignatures can be used to sign almost all documents under the Information Technology Act of 2000. (exceptions being Registered Property Sale Deeds, Notarized documents). Electronic signatures may also be used as proof in a court of law to justify the presence, validity, and valid approval of a contract under section 65B of the Evidence Act, 1872.