When we think about the connection between blockchain and real estate, we might not find any link. At the max, we can only think of the general benefits of blockchain like security, transparency, and traceability. But blockchain used properly in real estate can help to overcome several old-age issues, especially in Commercial Real Estate.
Smart contracts on blockchain for real estate can play a vital role in CRE, possibly transforming core CRE operations such as property transactions (purchase, sale, financing, leasing, and management).
The global real estate market is expected to create a revenue of USD 4,263.7 billion by 2025, according to a report by Grand View research. Furthermore, 10% of global gross domestic product (GDP) will be stored on blockchain by 2012, according to the 2015 World Economic survey.
Uncover the power of blockchain real estate development with our expert team. Remove current inefficiencies, upgrade business processes and take advantage of the incredible benefits that blockchain will provide to the industry.
Issues in Commercial Real Estate
CRE consists of many entities and complex procedures. CRE leasing processes comprises recurring transactions, that cause errors, cost reconciliation, and failures.
Third Party Intermediaries
CRE processes include many stakeholders who sign several agreements together. Any human error in these contract documents can damage the business, and result in a huge loss for all involved entities. Also, existing real estate processes require third-party verification to conduct a transaction such as banks, commission agents. These third-party sources are costly as they impose a particular fee for each transaction.
Fraud is the biggest issue in the industry. People don’t research before investing and subsequently fall for scams. This sector is filled with scummy thieves waiting to take advantage of uncertainties.
Current processes are extremely slow, and it takes too long to strike a deal. Moreover, traditional paper-based processes are concluded after plenty of manual verifications.
Lack of Real-time Data
The real estate industry demands real-time data analytics for effective business opportunities. It requires real-time data to capitalize on eleventh-hour updates.
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Blockchain Use Cases in Real Estate
Listed below are the uses cases of blockchain in this industry.
- Smart Contracts
Blockchain Smart Contracts in Real Estate
Blockchain smart contracts bring revolution in buying and selling procedures of the real estate industry. Smart Contracts are agreements between seller and buyer, written in lines of code. This code automatically executes when provided conditions are met. Presently, complicated processes involve third party’s heavy commissions; blockchain can assure trust between parties through a single version of truth.
Mortgage lenders can easily make accurate decisions regarding credit when identity is kept on a blockchain. The bank, the agent, and the mortgage lender can sign an agreement via smart contracts. This will help the mortgage lender to hold the property as soon as funds are given to the agent. The transfer of house ownership can be automated since transactions are stored on a blockchain; this shared ledger allows all authorized parties to look over the process anytime, anywhere.
Tokenization on Blockchain in Real Estate
Tokens are programmable assets managed by blockchain smart contracts. In blockchain, tokens can be used to represent several physical assets like ownership of an asset, cash flow from the estate, and property itself. Whoever owns the token is considered as the sole owner of the property. Tokenized real estate only differs from real estate investment trust in the matter of flexibility, non-fungible, and lower middleman fees.
Tokenization in real estate initiates substantial benefits such as increased liquidity, supervising dividends, reduce investment hurdles, security, and prevent risks. It may not change the legal paperwork process involved in leasing, but it can serve as an initial step in the leasing process.
Real Estate Blockchain Platforms in Practice:
St. Regis Aspen Resort in the United States is already practicing security token offering and raised $18 million via Aspen Coin. It became the first prime real security offering in 2018.
Sweden’s land registry has used blockchain for real estate sales. They collaborated with telecommunication firm Telia, consulting firm Kairos Future and blockchain technology company ChromaWay to launch a blockchain-powered property sales system.
Deedcoin has reduced the 6% of high agent commission to 1% to reduce the financial burden on property owners. Homeowners can use Deedcoin to connect with their broker through Deadcoin’s website.
Blockchain has the potential to transform the industry. Tokenization will add more liquidity and reduce costs in the marketplace. To reap the benefits of blockchain in your real estate business, contact Reactive Space, and get an unbound quote.