What is Blockchain Technology?
In its most basic form, a Blockchain is a data system that stores transactional records while maintaining encryption, transparency, and decentralization. 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 about various transactions, property details, and regulations were managed locally by several institutions and middlemen. This form of the offline module has been rendered completely inefficient and lengthy, therefore, discouraging potential investors from exploring this sector.
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
Easy Accessibility
Previously, high-value real estate transactions were conducted offline involving a lengthy process of paperwork, authentication, and registration before one could own property. This tedious process has discouraged many potential investors from entering 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 access 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.
Smart Contracts in real estate
 A smart contract is a normal contract but, in a digital format. This smart contract can be stored in the block and ensures the efficient transfer of funds under the terms and conditions agreed upon in the contract. The most common complaint of real estate investors is the blockage of funds installed in real estate projects or the failure to obtain the described property in the contract, among other things. With the use of a smart contract, the funds are held in the block in the blockchain until the desired demands are met by the property developers while transferring the asset. If the asset or property fails to meet the contract specifications, then the funds are returned to the buyer. This system functions similarly to an escrow account, but without the need for banks or any other entity as an intermediary.
No intermediaries
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 fees, and service fees that are charged by these middlemen.
Decentralized and Transparent
Since the data on the 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.
Fractional Ownership
Real estate properties are usually considered illiquid investments. This means that a seller has to often wait for a long period to sell his property at the right price when there are fewer 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 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 allows small investors to connect with buyers who are willing to sell digital shares of their properties.
Cost-Efficient
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.
Tokenized real estate properties
With blockchain technology, assets can be tokenized and customized to meet the desired requirements of free transferability of ownership, distributions, legal compliance, and so on. Tokenization of properties would enable real estate transactions to happen digitally, eliminating the need for buyers and sellers to meet in person. We can trade real estate assets using blockchain technology in the same way as we trade stocks on the stock exchange. Thus, expensive real estate properties can be traded in small units making them more affordable for common people. This innovation would be critical in changing our perception of real estate investments. Furthermore, this technology will eliminate intermediaries like property agents, professional enforceability of law on contracts, Government officials for giving title clearance, and so on. As a result, the real estate transactions will be completed with the tip of your finger.
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 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 investors. It also provides investment opportunities in many emerging segments of the real estate sector such as fractional ownership facilities.
