Blockchain is proven to hold the potential to revamp every business vertical. For instance, blockchain in real estate has given a clear indication that it has various applications beyond cryptocurrencies and can be the right weapon to tackle the prevailing industrial challenges.
A ripple effect of this is that various industries have adopted blockchain technology, even the most traditional ones like real estate.
Real estate is witnessing a disruptive evolution with the blockchain acting as the driving force. What was historically considered as a ‘pen and pencil’ business has now begun expanding to the global market with better and long-term outcomes. This has made numerous entrepreneurs and traditional investors interested in understanding the use of blockchain for real estate. Something we will talk about in this article in detail.
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Challenges Faced by the Real Estate Industry
The fluctuation in the economy and growing trends introduce new challenges in the real estate industry every now and then. Realtors keep a check on the hurdles hampering the revenue while staying in business. In real estate, various factors impact the revenue like property listings, contact information management, dealing with stakeholders, and more. A few of the common challenges faced by the realtors are stated below:
1. Lack of Transparency
The real estate industry is not open to everyone due to the involvement of various factors like citizenship, cash requirements, accreditation, credit score, etc. Additionally, there is no market database or a concrete way to access the information required for making buying and selling decisions.
This, as a whole, makes the sector unclear and turbid for all.
2. Tedious Paperwork
In the traditional real estate economy, every transaction involves a stringed set of tedious and time-consuming paperwork. Because of this, many times real estate companies end up losing their money and potential customers, along with getting distracted from the main goal.
3. Higher Risk of Fraud
Since all the property agreements are in paper form and the trust is based on humans, there’s a higher risk of fraud in the Real estate industry. A proof of this is that 404 publicly-reported data compromises in the U.S. represent a 14 percent increase compared to Q1 2021. Q1 2022 is the third consecutive year when breaches have increased compared to Q1 of the previous year.
4. Expensive Investment
Due to the involvement of a wider number of intermediaries, various fees like broker fees, attorney fees, exchange fees, taxes, etc., are added to the real estate cost, which ultimately makes real estate investments expensive.
5. Large Number of Intermediaries
Another problem associated with the traditional real estate economy is that trust is based on human factors. Any two parties have to involve third parties at different levels to build trust in the process. This is again one of the challenges in real estate solved by blockchain.
6. Poor Transaction Speed
Last but not least, real estate processes suffer from poor transaction speed due to the involvement of multiple people.
As per a Chinese global travel survey, 44% of travelers fix an appointment with real estate agents before going abroad. Also, 74% of them meet two or more experts to be sure of their decision to purchase property in the city they’re traveling to.
However, blockchain technology, with its incredible features, is entering different areas and processes of the real estate industry and solving these problems.
Before we talk about the benefits of blockchain in real estate, let’s have a quick recap of the basics of Blockchain – how it works and the features it comes with.
With this attended to, it is a good time to dig deeper into the industry and see how blockchain is one of the key technology in real estate helping the industry thrive during the pandemic.
Areas Revamping with the Adoption of Blockchain in Real Estate
Blockchain in real estate can benefit several areas in the industry. A few of the common areas that are revamping with blockchain implementation are mentioned below.
1. Property Search
Currently, brokers, owners, tenants, and buyers turn towards multiple listing platforms like Zillow to search for any property information.
These platforms are subscription-based and demand high fees. Besides, the property data provided by them is often inaccurate, outdated, or partially distorted. This increases inefficiencies in the process and many times, results in disputes.
But, all of this can be prevented using a Blockchain-based real estate app.
A blockchain-backed application can decentralize data and enable everyone to share data in a P2P network. It also facilitates brokers with an opportunity to receive additional data monitoring options and eventually helps to cut down the associated costs.
[Also Read: How much does it cost to build a property and lease management software]
2. Due Diligence and Financial Evaluation
In the real estate sector, major time is spent on diligence activities before buying/renting any property. Various intermediaries are involved in the process of inspecting property documents to prevent any kind of legal, technical, or financial issues in the future.
Currently, all the property data is kept on papers that can be easily changed or corrupted by anyone.
However, with the adoption of blockchain in real estate app development, this subdomain can also be improved.
All the property-related papers can be stored digitally in blockchain-powered platforms, such that they can be accessed publicly but can’t be altered. This will make the due diligence and financial evaluation process automated, quick, and less inaccurate.
3. File and Payments
A significant impact of blockchain on real estate is also experienced in the field of file and payments.
At present, the extensive documentation and involvement of third-party intermediaries are making the process lengthy, troublesome, and costly. And this effect is becoming more significant when international transactions or mortgages are involved.
Now here, blockchain, the new technology in real estate can simplify the filing process and bring innovation in real estate processes by introducing verifiable digital identities for properties.
Likewise, the introduction of cryptocurrencies can lower the barrier of different currencies used in different places. It can even minimize the involved taxes and fees, alongside streamlining the payment process.
4. Property Management
In the traditional real estate economy, the process of property management is highly complex, especially when multiple stakeholders are involved.
The management of the property is either done offline via manual paperwork, or some independent softwares is used. Because of this, the information remains confined to a particular database or person.
However, with the increasing role of blockchain for property transactions, the future of real estate can be changed.
A blockchain-based property management system that uses smart contracts for real estate can ease the whole process – right from signing lease agreements to regulating cash flow and filing maintenance requests.
A smart contract can automatically set up lease payments between a landlord and a tenant. When the lease terminates, the smart contract can automatically transfer the security deposit back to the tenant’s account and deliver a seamless experience to both parties.
Also read: How much does it cost to develop a crypto wallet app?
5. Deed Management
Another field where you can see the impact of blockchain on the real estate apps market is deed management.
Currently, property titles are paper-based. Because of this, there is a higher risk of errors and fraud cases. In fact, it has been revealed by American Land Title Association that 25% of all the titles are found to be defective during the transaction process.
The presence of any defect makes it illegal to proceed with the deed management process unless the issue has been resolved. This makes it imperative for property owners to pay high legal fees to ensure the accuracy and authenticity of their property titles.
This issue can be easily resolved with the use of blockchain technology in the real estate industry as immutable digital records – making the whole process transparent and secure.
6. Real Estate Investing
Last but not least, a blockchain-based real estate platform can also streamline the investing process using the concept of tokenization and fractional ownership. Well, most organizations aren’t sure how to tokenize real estate whereas others are implementing it on a larger scale.
[Also Read: How much does it cost to build a real estate app like Property Finder]
Tokenization is termed as a process in which the owner can give digital tokens to those having a share in the property. They all can track their investment using blockchain, with each transaction being immutable and time-stamped.
This concept of tokenization of real estate using blockchain technology can make it possible to reduce the risk of fraud associated with the industry.
Fractional ownership will reshape the future of the traditional real estate economy. The process of making unrelated parties come together to share and eradicate the risks associated with the ownership of a high-value tangible asset can help small investors enjoy ROI without waiting for months or years. And eventually, make trading of real estate properties possible beyond the geographical boundaries.
While this would have given you an idea of the endless opportunities of blockchain technology in the real estate industry, let’s go through some real-life examples to understand it better.
[Also Read: Key Technologies Driving Real Estate Innovation in 2022]
Blockchain-based Real Estate Companies Turning Hype into Reality
A few big incumbents are betting on the growing tech and are entering into several partnerships to enable high-grade systems for better real estate transactions. Here are some blockchain real estate companies that are turning the hype into reality.
UBITQUITY is a SaaS (Software-as-a-Service) blockchain platform that helps track the lifecycle of any property. The platform provides title companies, government, and value-added resellers a clean record of ownership. And in this way, leverage the advantages of blockchain such as lower future title search time and enhanced transparency.
Founded in 2016, ATLANT is a blockchain-backed ICO that enables tokenization of real estate ownership and P2P rentals.
Propy is also one of the real estate companies using blockchain technology for serving the world with better opportunities and introduces various benefits of blockchain in the real estate industry to end-users. The company provides a global real estate marketplace that empowers buyers, brokers, sellers, and notaries to come together and ensure better transactions by utilizing the power of smart contracts for real estate.
PropertyClub is among other real estate companies using blockchain that refines the way we think about the role of blockchain and real estate progress. It relies on smart contracts for real estate to perform digital transactions in the real estate ecosystem using cryptocurrencies like Bitcoin or PCC (PropertyClub Coin) and thus, enhancing customer experience.
Harbor is a digital platform that employs blockchain to create a series of tokenized securities powered by real-world assets. Founded in 2017, this platform certains that tokenized security goes with existing security laws on trades, depending on the regions they are working in.
RealtyBits is also a blockchain-powered Y-Combinator-backed finance platform to invest in American commercial real estate. Founded in 2018, it aids real estate investment funds to raise capital via verified and authorized investors in a streamlined, compliant, and cost-effective manner.
Brickschain is a data management platform that digitizes the main overview of the construction supply chain. Also known as Briq, it facilitates the introduction of protocol layers to easily manage the flow of building materials, and eventually streamline real-estate development.
SelterZoom is also a real-time real estate platform that embraces blockchain technology to simplify transactions and management processes. It enables users to track their offers, get rid of manual documentation, and perform any transaction in real time via a mobile app.
9. The LendingCoin
Founded in 2017, this startup focuses on exploring the potential of blockchain in commercial real estate in the form of a P2P-driven funding model.
The LendingCoin offers the facility to make payments using its token and also encourages the resulting monthly payments through any refinancing conducted on the platform.
As we have seen so far, blockchain is bringing innovation in to real estate via different characteristics, including transparency, simplification, and security. Various companies have already integrated the technology into their business model and many more will be joining them in the future.
This makes it obvious to conclude that blockchain is the future of the real estate, and thus, it won’t be affordable to exist in the market by overlooking it. Something that proves that it is high time for real estate companies to hire a blockchain development company and upgrade their business model.
So, let’s move towards how to add blockchain to your existing real estate business model.
[Also Read: How to build a real estate crowdfunding investment and REIT platform like Fundrise?]
How to Incorporate Blockchain Technology in Real Estate Business Apps?
When it comes to investing in Blockchain app development for real estate, there are basically two approaches you can go with:-
1. Build a Smart Contract using LISK
LISK is a platform for Blockchain application development that acts as a PaaS (Platform-as-a-Service). It offers operating systems, databases, cloud infrastructure, and a programming language runtime environment. This helps in bringing your own code to create a side chain or a crypto token.
2. Develop an Ethereum-backed Real Estate Platform
In this approach, the Ethereum platform, which has reached Ethereum 2.0 level, can be employed for building a real estate blockchain platform.
While both approaches are profitable in terms of how to build a real estate app on Blockchain, it is best to contact reputed Blockchain software development company to enjoy a better ROI.
Now while we are familiar with the uses of blockchain technology in real estate and the companies embracing it, it is good to be aware of the fact that there are still some challenges hindering the evolution of the blockchain-based real estate economy. Something we will end our article with.
Also Read: Proptech in Sustainable Real Estate Development: The Nexus of ESG-led Future
Challenges you Might Face while Introducing Blockchain in your Processes
Any growing technology such as blockchain goes through a hype stage and it takes a lot of time to get rid of the challenges and use it to power modern-day solutions. Some of the challenges that you might face while implementing blockchain in your processes are mentioned below.
1. Widespread Adoption
It’s true that blockchain is one of the top technology trends in the real estate domain. But, the technology is still evolving. Because of this, many entrepreneurs are finding it tough to understand its potential thoroughly. This is acting as a barrier in the process of integrating Blockchain technology in the real estate business.
[Bonus Read: An Entrepreneur’s Handbook to Blockchain]
In the real estate economy, billions of global transactions are made annually. This demands a network that can handle large transactions volume. However, there are still not many options available in the Blockchain space to meet this need.
While Bitcoin is able to handle 5 transactions per second, Ethereum is offering the opportunity to manage 15 transactions every second. Likewise, Ripple’s XRP – which is one of the cryptocurrencies trends, is hoping to perform 1,500 transactions per second.
However, this is still not close to the need of large-scale companies that requires ultra-speed processing in real-time.
3. Chain Interoperability
Another challenge that real estate companies are facing while embracing Blockchain is chain interoperability.
There are various blockchains existing in the digital market, many of which are not able to connect or work together. This lack of interoperability is making it tough for real estate companies to use different data available on a public and private Ethereum blockchain simultaneously and streamline their processes.
Also Read: Smart Homes – IoT in Real Estate Leading the Future
How Appinventiv can help you with blockchain app development?
Blockchain transformation doesn’t happen overnight and Appinventiv has an impressive track record of helping businesses around the world in delivering high-end solutions backed by emerging technologies like blockchain. The company boasts an extensive portfolio of clients who are successfully exploring the world of secure decentralized applications with the help of an expert team.
Asian Bank of the fintech industry and Empire Hotels of the hospitality industry are a few of the globally recognized organizations that have partnered with Appinventiv to mitigate payments and real-time tracking issues and tap into the world of decentralized applications.
We partnered with Empire hotels and offered them a complete overhaul from ideation to design and development. As an end result, we were able to set up a complete hotel booking ecosystem with complete transparency where no involved party is made to pay unjustified additional costs in the name of convenience and transaction fees.
Similarly, we helped Asian Bank with its app design, development, and deployment. Currently, the app has over 250K app downloads with over 50K cryptocurrency transactions
Real estate is taking a big leap into a decentralized digital world with industry leaders and governments exploring and implementing blockchain into applications. Blockchain in real estate delivers a new level of transparency and eases the overall process of transactions. The future of real estate incorporates an amalgamation of other emerging technologies such as Big data and artificial intelligence with blockchain, and brings a revolutionary change to the old real estate processes.
Frequently Asked Questions
Q. How will Blockchain change Real Estate?
A: There are various advantages of blockchain technology in real estate that will change the face of real estate. A few of them are:
- Higher Transparency and traceability
- Elimination of third parties
- Faster transactions
- Lowered cost of every transaction
Q. How to use Blockchain for real estate business?
A: Blockchain can be used in different areas of real estate in different forms, such as:-
- A smart contract,
- A decentralized and immutable ledger, and
- In the form of cryptocurrencies.
Q. How will blockchain technology affect the real estate industry?
A: Blockchain technology in the real estate economy will help overcome the existing challenges and bring better opportunities. It will:
- make the real estate process transparent,
- reduce the cost involved,
- simplify the process of property and deed management,
- enhance security level, and much more.