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Whether you work in real estate, finance or a different industry altogether, you’ve most likely heard of blockchain. The technology is making waves in a number of business sectors, and now it's having major implications for transactions in the world of real estate.
Blockchain technology is revitalizing the sale process of real estate properties, which has been riddled with fraud for years, in a myriad of ways. It helps to increase the security of transactions, cuts intermediaries out of the purchasing process, reduces overhead costs, tokenizes assets to allow for fractionalized ownership, and can assist in so many more ways.
What is Blockchain? Blockchain is an open-source digitally distributed, decentralized, public ledger that’s a means of hosting data across a network. This technology is not limited to just Bitcoin or other cryptocurrencies, but rather can be utilized in almost any instance involving data recording and transactions. By utilizing a distributed ledger system and cryptographic encryption, blockchain ensures immutability and promotes transparency and data integrity.
Krishna Meruva, marketing manager at ChangeHero, an instant cryptocurrency exchange, believes blockchain is breaking down borders that exist under the umbrella of traditional real estate sales.
Blockchain enables the “real estate market on a global scale; anybody from anywhere may have an opportunity to acquire a property,” she says. “The real estate market is known for its offline transactions, but blockchain technology will let people trade assets online.”
How Can Blockchain Impact Real Estate? The technology has the potential to transform the real estate industry in a number of ways, including:
#1. Security: Real estate investing can bring about a number of security issues, such as the necessary protection of confidential personal information, but blockchain can enhance trust, security, transparency, and the traceability of data across networks. “Blockchain technology promotes a higher level of confidence as it ensures increased transparency utilizing the DLT, or Distributed Ledger Technology, '' says Dustin Fox, realtor and owner of Fox Teams.
#2. Centralized Databases: The number of real estate transactions happening on any given day is extremely high, says Fox. This is why a centralized database, or a digital space where a list of all leases and acquisitions exists, is crucial in real estate. Blockchain technology is able to deliver this.
#3. Property Management: Blockchain facilitates secure data sharing and can streamline a landlord’s ability to collect rental payments. Asset owners can minimize interaction with tenants, save time, and cut management costs.
“In the real estate rental arena, blockchain-enabled systems can make the renting process for the real estate firm, the renter and the landlord seamless,” says Louis Velazquez, CEO of MegaHoot Technologies, a software and technology company focused on advanced blockchain technology. “Giving a landlord the ability to issue a lease, have it digitally executed, receive identification and sensitive lease records and then have the transaction lodged on the blockchain of a permissioned system.”
#4. Smart Contracts: The rise of “Smart Contracts”, which essentially act as immutable regulators that ensure all participants fulfill the conditions stated in a real estate agreement before funds can be released, streamlines processes within real estate transactions, says Mila Garcia, finance expert and co-founder of iPaydayLoans.
“Since all transactions are made strictly between the client and agent, they eliminate the need for amendments, lawyers, as well as sizable amounts of paperwork. Plus, with such a transparent ecosystem in place, it has also made the home transfer process easier and faster, as well as possible for stakeholders to carry out transactions and have documents signed remotely.”
Stella Cooper, CEO at PaydayLoansUK, an organization that provides short-term loans quickly, agrees with this, noting that “with smarter contracts, every part of a sale or lease agreement is automated, and everyone receives their payments instantaneously, even outside of business hours.”
#5. Tokenization: Blockchain technology can “be used to codify fractional ownership of a real estate property,” says Fox, allowing investors more options to diversify their portfolios, and opening up real estate investment to a much larger audience compared to other direct investment strategies like REITs.
AKRU’s online real estate investment platform, which utilizes blockchain technology, takes advantage of this and opens the doors of the real estate investment world in a way never before seen in the U.S.
“AKRU created a platform for fractional real estate investing that allows for investments in commercial properties for as low as $1,000 per token,” says ARKU CEO Mohsin Masud. “There are other companies that offer lower minimums, but they don’t offer the flexibility and the liquidity that AKRU does.”
#6. Eliminate Intermediaries: Blockchain can be used to cut out the intermediaries, such as lawyers, brokers and others, from a real estate transaction, thus further reducing costs, says Fox. This saves time and lowers costs by speeding up the contract processes.
#7. Cut Through Red Tape: Currently, there are numerous bureaucratic procedures associated with investing in real estate in a ‘traditional’ manner, such as the piles of paperwork that are involved with each purchase transaction. Blockchain tech can eliminate a lot of real estate red-tape.
“A number of difficulties can be solved, and pre-transaction procedures such as underwriting, financial appraisal, and obtaining a loan commitment can be accelerated using a combination of blockchain technology and digital identity,” says Adam Fard, founder & head of design at Adam Fard' UX Agency. “Digital identities of real estate properties that are linked to the digital identities of transacting parties can assist a property in creating useful and secure online records, improving lease information administration, and simplifying the due diligence process significantly.”
Conclusion
Blockchain technology is clearly impacting the real estate industry in a variety of ways, including but not limited to the systems listed above. The use cases of blockchain in real estate — and how it can improve buying processes, simplify renting, and open up commercial real estate to more investors for less money — will only become more prevalent in the coming years. And we at AKRU look forward to leading the way!
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