Secured, transparent, and accurate. Blockchain in real estate is becoming appealing for investors.
Global real estate value tops trillions US dollars. Yet, the sector is less likely to be affected by the unprecedented changes in technology. The rapid growth of technology in the 4.0 revolution will initiate the inevitable transformation within the sector, even for a traditionally slow-to-change industry. The mayhem in real estate is ripe for blockchain. Gradually, blockchain in real estate is becoming appealing to the investors.
The state of the property market
Real estate’s sophisticated, enduring information management system requires the participation of multiple intermediaries and paper works in certifying ownership and conducting transactions. This cumbersome and heavy system comes with a lack of transparency, confusion between projects, which increases the costs of management and investment.
Besides, the purchase value of a real estate is often extravagant, restraining the access of the majority because some well-established organizations, namely Savills, CBRE, JLL, and Knight Frank own most of premium real estate throughout the world.
Apart from that, liquidity is far from being attained in real estate investment. The liquidity in real estate remains low due to the lack of coordination between supply and demand, causing the waste of social resources.
The need for changes in real estate investment stems from the inadequacies above.
How are enterprises using blockchain in real estate?
Blockchain is a distributed data storage technology that uses encryption combined with consensus algorithms. The salient and valuable feature of blockchain is the ability to store data with security, immutability, and transparency.
Therefore, using blockchain to store data and manage real estate assets is a potential preference for organizations and individuals active in real estate.
Besides, organizations are using smart contracts to alleviate the role of intermediaries and simplify the cumbersome trading system in real estate. Sweden has applied this technology to its land registry department Lantmäteriet. According to GovLab report, although much of the process of land registration has been digitized since the 1970s, the efficiency and accuracy of the existing land transfer process have been held back by legacy processes and legislation mandating paper transactions and physical signatures. The process currently involves numerous paper documents that must be physically signed and exchanged via regular mail. Signing a contract of purchase alone can take two hours, and verifying documents and the identity of signatories is done manually. They use blockchain in quickly identifying property purchase and land transfer. The consortium developed a prototype in which real estate transactions would be put on the blockchain the moment an agreement to sell is reached and remain until the land title is transferred. The prototype sought to limit information asymmetries by allowing all parties - banks, land registry, brokers, buyers, and sellers — to monitor the progress of the transaction, and potentially produce cost savings of more than €100m a year.
One notable application of blockchain in real estate is fractional ownership. By tokenization, a real estate property is divided into multiple portions. Investors then can trade these pieces of the property in the same way as the stock exchange system. This division helps reduce the pressure on the amount of money needed to invest in a property and lowers the barrier for ordinary investors to join, ending the dominance of significant investment organizations.
That the smooth and transparent information flow of management and transaction combines with the ability of property tokenization makes the market more comfortable to buy and sell. As a result, the liquidity of real estate can improve.
Real estate is a potential market to utilize technology applications, notably blockchain, to prevent the industry’s stagnation.
akaChain, a flagship product by FPT Software, has made new strides in the implementation of blockchain technology in different sectors, from finance — banking to insurance, to supply chains, and so on. Built on Hyperledger to run on any cloud, we offer our clients a ready-to-use solution with speed and convenience by using SDKs.
Carrying on after several successful projects of Loyalty & Reward Network, Credit scoring and eKYC collaborating with well-known companies such as Masan Consumer, the pharmaceutical firm Bayer,… we are now developing new projects. In terms of real estate, we are developing a blockchain technology application project to change the dominant game of the incumbent giants. Learn more about akaChain at:
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