5 Benefits of Blockchain Technology in Real Estate to Know in 2023
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While it may not be obvious, real estate is one of many industries that can and already benefits from blockchain ledger. Blockchain can represent a better way to run a real estate business than existing protocols.
Blockchain technology is gaining momentum now. While it was first built for the crypto market, its safety, transparency, and decentralized nature allows businesses in several domains to boost their working processes. For example, blockchain technology can improve the framework’s overall transparency while also legalizing the government-mandated real estate transaction record.
One of the most exciting ways blockchain benefits the real estate industry is through the digital securitization of real estate properties, which is known as real estate tokenization. Digital assets can be anything from real estate to governance rights. When you tokenize those assets, they can be easily divided into more granular pieces, which makes them accessible to a wider pool of investors to be used to raise capital.
Although some companies in the real estate domain have already powered their businesses with blockchain, it is unclear what is going on in the market and why this technology is becoming so popular. This guide will explain the market changes and showcase the most exciting blockchain benefits in real estate to watch for in 2023.
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What is Blockchain?
Before diving into the topic, we’ll briefly discuss what is blockchain in real estate. Considering the metaverse and NFTs’ popularity, the blockchain ledger is what helps facilitate digital real estate transactions, which are usually done through bitcoin or another cryptocurrency. To put it simply, blockchain is a trending technology that allows for the secure and permanent storage of a digital, public ledger of all transactions stored in a “block” publicly available in several peer-to-peer databases. These databases are called “chains.”
But how does blockchain relate to the real estate industry? First of all, blockchain works as a reliable source for both parties participating in a deal. That is because it offers a secure, decentralized way to record, access, and transfer ownership of digital assets by storing all transactions, contracts, and other vital data together in the network. Blockchain technology allows transactions in real estate to be done within seconds, as opposed to weeks or months in the case of traditional real estate.
4 Challenges in Real Estate that Blockchain Can Solve
- Lots of Paperwork
Real estate is known for its high volume of paper rok required for the transaction. Transferring the property is long, complex, and time-consuming, so even software tools can’t speed it up. As a result, real estate companies often lose money and potential clients while becoming side-tracked from their key objectives.
Blockchain technology has been shown to resolve this issue. The technology allows real estate companies to say goodbye to the tedious paperwork and keep all vital data in one secure and transparent place.
- Poor Transparency
The real estate industry is not for everyone. That is because it involves multiple factors like cash demand, citizenship, credit score, and accreditation. There is no database containing all the information required to buy or sell a property. Traditional methods do not offer transparency and affect buying and selling decisions.
However, this problem can be solved with blockchain for real estate since it offers high transparency and keeps all data recorded in one place. Now businesses can make the work more transparent while also availing the perks of advanced tech.
- Several Intermediaries
Everyone knows that the real estate industry involves a lot of intermediaries since business owners have to deal with multiple daily tasks. This affected the entire process, making it longer and damaging quality. For example, two parties are participating in the real estate business, so they involve a third party to get the work done faster. But with blockchain, all these tasks can be done by technology.
Blockchain is known for its ability to reduce the need for any intermediaries to be involved. This technology can greatly resolve one of the key challenges that most realtors faced before blockchain was used in real estate.
- Lower Transaction Speed
Thanks to the number of intermediaries involved in the process, the real estate space always struggles with poor transaction speed. According to the survey, around 44% of travelers fix an appointment with realtors before going abroad. It lowers the speed of the process, which damages the transaction rate. Blockchain use in real estate can make transactions two times faster.
5 Benefits of Blockchain in Real Estate
- The Real Estate Tokenization
One of the most popular uses of blockchain technology in real estate is asset tokenization. Tokens are usually a particular number of shares for some real estate assets that can be bought, issued, and transferred through blockchain platforms with cryptocurrencies. Blockchain technology here helps to speed up property sales and lowers crowdfunding barriers.
It is worth mentioning that this system allows for reducing the barrier for ordinary property investors. It also allows overseas investment in commercial real estate to become more manageable. To put it simply, real estate properties can now be traded like a stock on exchanges. It is believed that blockchain will revolutionize the entire commercial property market since it can increase real estate liquidity.
- Smart Contracts
The blockchain technology used in the real estate industry can also benefit companies thanks to smart contracts. Smart contracts, which are already used by financial and banking domains, are one of the leading and most profitable blockchain innovations. Since real estate should constantly handle numerous transactions, smart contracts can also benefit this space.
Thanks to blockchain technology, a property transaction that has long involved nearly endless paperwork can now be done digitally and quickly, where only buyers and sellers participate. And this transaction will have higher transparency and security than ever before.
The key thing here is that smart contracts do not require human interaction to be done. Once all agreements are met, they are self-executed and automated. Since no people are involved, and less effort is needed, it also allows for cost reduction and zero chances of fraud.
- Security and Control Over Transactions
As we mentioned, blockchain use in real estate leads to reduced chances of fraud. It is a common practice where you are selling a property to an unknown person or trying to buy a property from someone you don’t know, so there is no reason for you to trust them blindly. Luckily, blockchain technology real estate reduces the need for third parties to participate in the process and ensures all transactions are done securely.
Extensive documentation and the need for various intermediaries to participate in the process have existed in the real estate industry for so long, but now the situation is changing dramatically. That is because the real estate industry found out that all those factors led to slow, expensive, and opaque modes of financing for property transactions. One of the key benefits of blockchain in real estate is that it allows streamlining payments and increases the security of real estate transactions.
- Property Management Automation
The use of blockchain technology in real estate will also reduce paperwork and manual work by property management automation. All tools and software products that have long been used now can be replaced with betterment and up-gradation. One decentralized application containing blockchain-based smart contracts for real estate will improve the property management process, bringing efficiency and automation. It will also allow for cost reduction and less time needed for administrative tasks.
- Transparent Data Tracking and Analysis
Blockchain uses ledger technology that lasts as the network is running. As a result, all data on the property, transactions, or the history of the building is recorded, making it readily available for future owners and investors. Blockchain allows both parties to agree on terms based on data.
In addition, some companies combined blockchain and big data, which allows accurate tracking of client and owner histories within borders and banks. It reduces the chances of fraud and default.
What is the Future of Blockchain in Real Estate?
In the traditional market, people interested in buying, selling, or renting houses contact different property dealers in the housing market. The property agents connect interested parties to organize further communication. Considering the current market transformation, people can now go to real estate websites and mobile apps to look for properties based on their preferences in terms of house type, location, price, house size, etc.
Back in 2018, 93% of people participating in the survey said they use websites to look for houses. And only 7% of those people said they do not use websites for house hunting, according to the Statista report. With the number of websites and apps available for this purpose, there is a high chance of a property being sold or expired yet still existing on websites, making the process long, inconvenient and incomplete from time to time.
Blockchain technology is an excellent way to solve this problem. It helps make browsing easier and more efficient for real estate investors and sellers. Sellers will be able to enter property details once into a decentralized blockchain database instead of putting all data each time on new platforms.
In addition, blockchain is believed to bring decentralization into our lives. We have been using centralized networks for almost everything we need up until now. Centralized networks have a single central authority responsible for the use of the network. For example, social media platforms like Facebook, banks, etc.
Blockchain provides decentralization which will be crucial for the real estate market. That is because the data will be stored on multiple computer nodes rather than under one authority. The information will also be encrypted using a hash algorithm. This will improve the efficiency of the data input, protect transaction details from unwanted access and provide needed transparency that the real estate market lacks.
How Can Interexy Help?
Interexy is a trusted blockchain development provider. We offer well-thought-out blockchain development services for various industries, including real estate. Thanks to our expertise in the field and a team of developers with trending skills, we always deliver the expected results and help real estate organizations power up their businesses.
Since we always stay informed regarding trends that appear in this domain, we were among the first companies offering real estate tokenization services allowing clients to tokenize their properties for higher liquidity and easier transactions.
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Blockchain technology is definitely changing the future of real estate. It makes transactions more secure, transparent, and efficient. By offering decentralization and streamlining the entire real estate transaction process from start to finish, buying and selling properties will become twice easier, faster, and more cost-effective. If you are wondering whether blockchain can benefit your business, book a call with one of our experts!