How Adoption of Blockchain in Real Estate is Changing the Scenario

The transformative power of blockchain has stretched far across every business vertical, including the most traditional ones like real estate.

Blockchain in real estate is not a novelty anymore, but a practical solution that is revolutionizing the sector. The digital transformation brought by the technology has given a clear indication that it has various applications beyond cryptocurrencies and can be the right weapon to tackle the prevailing industrial challenges.

What are the prevailing challenges?

• Lack of Transparency: The real estate industry’s complexity, including citizenship requirements and credit scores, limits access. Without a centralized database, making informed buying/selling decisions becomes challenging, leading to opacity in the sector.
• Tedious Paperwork: Traditional real estate transactions are bogged down by lengthy paperwork, causing delays and potentially losing customers and money for companies.
• 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.
• Expensive Investment: Numerous intermediaries, like brokers and attorneys, add fees to real estate costs, making investments more expensive.
• Large Number of Intermediaries: Relying on human trust factors requires involving multiple third parties, complicating and lengthening the real estate process.
• Poor Transaction Speed: Last but not least, real estate processes suffer from poor transaction speed due to the involvement of multiple people.

The challenges mentioned highlight significant inefficiencies within the real estate industry while underscoring the necessity for innovative solutions that can streamline processes and enhance security.

Blockchain technology emerges as a necessary solution to these challenges, offering transparency through decentralized records, reducing the need for intermediaries, and enhancing transaction efficiency with smart contracts.

While the technology was initially recognized as Bitcoin’s backbone, its potential now extends far beyond. In the commercial real estate (CRE) sector, blockchain-based smart contracts are revolutionizing core operations, including property transactions like purchases, sales, financing, leasing, and management.

As blockchain continues to permeate the real estate sector, businesses are expected to experience improved operations and reduced costs, paving the way for a more secure and efficient market landscape.

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 helping the real estate industry thrive.

How is Blockchain Technology Transforming the Real Estate Industry?

Blockchain technology transforms the real estate sector by improving transaction speed, security, and transparency, increasing investment options, optimizing procedures, and tokenizing assets. Let’s have a deeper look below.

Enhanced Security and Transparency

By generating an immutable ledger of property records, blockchain lowers the possibility of fraud and disputes by offering transparent and impenetrable transaction histories. Moreover, property data is safely kept across numerous nodes because of the blockchain’s decentralized architecture, which guards against hacking and illegal changes.

Buyers, sellers, and investors feel more confident due to this increased level of security, which increases trust in the real estate market.

Furthermore, blockchain technology enables real-time property ownership and transaction history tracking, giving stakeholders immediate access to the most recent data. By enhancing security and transparency across the real estate lifecycle, blockchain creates a more inclusive, reliable, and efficient ecosystem for the real estate industry, eventually helping all stakeholders.

Also Read: How Does Blockchain Resolve Data Privacy and Security Issues for Businesses?

Increased Efficiency

By eliminating intermediaries and automating processes, blockchain for the real estate industry reduces administrative costs and speeds up transactions, making real estate transactions more efficient and cost-effective. Moreover, automating tasks such as verifying property titles, credit checks, and contract execution minimizes manual intervention, thereby reducing the time required to complete transactions.

This increased efficiency accelerates the pace of real estate deals and lowers operational expenses for all parties involved. Furthermore, blockchain streamlines the due diligence process by providing instant access to comprehensive property records, saving both time and resources for buyers, sellers, and real estate professionals.

Streamlined Processes

By automating several procedures, including payments, leasing agreements, and property transfers, smart contracts reduce paperwork, minimize errors, and speed up transaction times. Furthermore, smart contracts ensure that transactions are carried out automatically when certain criteria are satisfied, eliminating the need for middlemen and lowering the possibility of delays or human error.

In addition to saving time, this automation improves reliability and precision in real estate transactions. Moreover, smart contracts promote trust and reduce conflict by giving all parties access to the terms and conditions included in the contract, which increases transparency.

Fractional Ownership

Blockchain technology allows real estate assets to be owned in fractional shares, making investments more accessible by enabling investors to purchase and sell fractional shares of properties. Blockchain-based fractional ownership removes conventional real estate investment entry barriers, allowing people to make high-value real estate investments with less money down.

Real estate investors who might not have previously had access to such opportunities are among the wider group who can now take advantage of the democratization of real estate investing. Furthermore, fractional ownership rights are precisely recorded and easily transferred because blockchain’s transparency and security improve real estate market liquidity.

Asset Tokenization

Blockchain applications in real estate facilitate the tokenization of real estate assets, turning tangible properties into readily traded digital tokens on blockchain-based platforms. The tokenization of real estate using blockchain technology enhances liquidity through fractional ownership, allowing investors to purchase and sell tokens representing partial ownership of properties easily.

This innovative approach democratizes real estate investment and streamlines the buying and selling process, making it more accessible for investors.

As a result, buying or selling real estate requires less time and effort, and the market for real estate investments becomes more liquid. Furthermore, ownership records are safely maintained and readily available because of the blockchain’s transparent and decentralized structure, which boosts investor’s trust in tokenized assets.

Global Accessibility

Real estate on blockchain facilitates cross-border transactions by providing foreign buyers and sellers with a safe, transparent platform to conduct business without the need for middlemen. Furthermore, blockchain’s decentralized infrastructure facilitates smooth cross-border transactions, circumventing obstacles like time zone differences, different legal regimes, and currency translations.

Due to its accessibility, a wider spectrum of investors can participate in the global real estate industry, enabling diversification across various geographical areas. Blockchain’s transparent ledger further enhances trust in international real estate transactions, guaranteeing that transaction histories are safely documented and available to all parties.

Applications of Blockchain in Real Estate

Blockchain in real estate can benefit several areas of the industry. Below are a few of the common areas that are being revamped with blockchain implementation.

1. Property Search

Currently, brokers, owners, tenants, and buyers turn to multiple listing platforms like Zillow to search for any property information.

These platforms are subscription-based and demand high fees. Besides, the property data they provide is often inaccurate, outdated, or partially distorted. This increases inefficiencies in the process and many times, results in disputes. All of this can be prevented by utilizing blockchain solutions for real estate.

A blockchain-backed application can decentralize data and enable everyone to share data in a P2P network. It also allows brokers to receive additional data monitoring options and eventually helps cut down the associated costs.

2. Due Diligence and Financial Evaluation

In the real estate sector, major time is spent on diligence activities before buying or renting a property. Various intermediaries are involved in inspecting property documents to prevent future legal, technical, or financial issues. Currently, all property data is kept on papers that anyone can easily change or corrupt.

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 automate the due diligence and financial evaluation process quickly and inaccurately.

3. File and Payments

Blockchain also significantly impacts real estate when it comes to managing files and payments. At present, the extensive documentation and involvement of third-party intermediaries make the process lengthy, troublesome, and costly. This effect is becoming more significant when international transactions or mortgages are involved.

Now, blockchain technology in real estate can simplify the filing process and bring innovation in real estate processes by introducing verifiable digital identities for properties. Likewise, introducing cryptocurrencies can lower the barrier of different currencies used in different places. It can even minimize the taxes and fees involved, alongside streamlining the payment process.

4. Property Management

In the traditional real estate economy, property management is highly complex, especially when multiple stakeholders are involved. Property management 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.

5. Deed Management

Another field where you can see the impact of blockchain on the real estate app market is deed management. Currently, property titles are paper-based, which increases the risk of errors and fraud.

Any defect makes it illegal to proceed with the deed management process unless the issue has been resolved. Therefore, property owners must pay high legal fees to ensure the accuracy and authenticity of their property titles.

This issue can be easily resolved using 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 concepts of tokenization and fractional ownership. Most organizations aren’t sure how to tokenize real estate, whereas others are implementing it on a larger scale.

Tokenization is a process in which the owner gives digital tokens to those who share in the property. They can all track their investments using blockchain, with each transaction being immutable and time-stamped. This concept of tokenizing real estate using blockchain technology can reduce the risk of fraud associated with the industry.

While this would have given you an idea of the endless opportunities of blockchain technology, let’s go through some real-life examples or use cases of blockchain in real estate to understand it better.

[Also Read: Key Technologies Driving Real Estate Innovation in 2024]

Real-World Examples of Blockchain in Real Estate: How Businesses Are Leveraging the Disruptive Technology

Blockchain technology is reshaping the real estate industry by enhancing transparency, security, and efficiency in various aspects of property management, transaction administration, and asset tokenization.

Major players like CBRE Group and Brookfield Asset Management are leveraging blockchain to streamline operations, increase liquidity, and offer innovative investment opportunities, setting new standards for the future of blockchain and real estate.

Blockchain-Powered Property Management by CBRE Group

CBRE Group is using blockchain technology to transform property management. By leveraging blockchain’s transparency and security capabilities, CBRE automates and simplifies maintenance requests, financial transactions, lease administration, and other property management processes.

The blockchain’s immutable ledger ensures a tamper-proof record of all property-related operations, lowering conflict and increasing tenant-landlord confidence. Furthermore, blockchain in real estate can help tenants, property managers, and service providers communicate easily, increasing the effectiveness and responsiveness of property management operations.

Retail Lease Management with Blockchain by Simon Property Group

Simon Property Group uses blockchain technology for tenant relations and retail lease administration. By utilizing blockchain’s automation features, Simon Property Group can more effectively track property utilization, automate rent payments, and streamline lease administration.

Owing to blockchain’s transparent ledger, landlords and tenants can communicate transparently and monitor lease agreements in real-time, increasing tenant satisfaction and operational efficiency. Utilizing blockchain technology in the real estate industry, Simon Property Group establishes new benchmarks for efficiency, transparency, and tenant involvement.

Blockchain-Based Transaction Management by Jones Lang LaSalle (JLL)

Jones Lang LaSalle (JLL) is implementing blockchain technology to enhance transaction management in real estate. JLL utilizes blockchain to streamline and safeguard property transfers, cut down on administrative burdens, and automate property transactions by leveraging blockchain’s transparent and safe platform.

With immutable records provided by blockchain for real estate transactions, buyers, sellers, and investors can have increased trust. This transparency ensures a reliable transaction history, reducing disagreements and fostering trust among all parties involved. JLL’s use of blockchain in transaction management increases productivity, cuts expenses, and enhances the general client experience in real estate transactions.

Blockchain-Based Asset Tokenization by Brookfield Asset Management

Brookfield Asset Management is exploring blockchain commercial real estate for asset tokenization. By tokenizing real estate assets on the blockchain, Brookfield aims to increase liquidity and diversify investment opportunities. This allows for fractional ownership, enabling a broader range of investors to participate.

The transparent and decentralized nature of blockchain simplifies property token trading and ensures secure and accurate recording of ownership rights. With this innovative approach to asset tokenization in blockchain commercial real estate, Brookfield is democratizing access to real estate investing and paving the way for new avenues of investment.

Supply Chain Management with Blockchain by Prologis

Prologis integrates blockchain technology for industrial real estate supply chain and logistics management. Using blockchain, Prologis increases inventory control, automates logistical procedures, and improves supply chain transparency.

The decentralized ledger of real estate blockchain ensures precise item tracking, prompt delivery, and effective inventory management, resulting in enhanced operational efficiency and decreased expenses. In the industrial real estate industry, Prologis’s use of blockchain in supply chain management fosters innovation, enhances operational effectiveness, and provides value to tenants.

How to Incorporate Blockchain Technology in Real Estate Business Apps?

Incorporating blockchain solutions for real estate can bring about transformative changes in terms of transparency, security, and efficiency. Here’s a step-by-step process on how to integrate blockchain into your real estate apps:

Identify Use Cases

Determine the specific areas within your real estate business where blockchain can add value. This could be lease management, asset tokenization, property transactions, or property record management.

Opt for the Right Blockchain Platform

When it comes to investing in Blockchain app development for real estate, there are basically two approaches you can go with:-

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 you bring your own code to create a side chain or a crypto token. Leveraging smart contracts real estate on the LISK platform empowers you to enhance transparency, security, and efficiency in real estate transactions and management.

Develop an Ethereum-backed Real Estate Platform

In this approach, the Ethereum platform, which has reached Ethereum 3.0 level, can be employed for building a real estate blockchain platform.

While both approaches are profitable for building a real estate app on Blockchain, it is best to contact a reputed blockchain commercial real estate company to gain the best guidance and services.

Put Tokenization Into Practice

Tokenization turns physical assets into blockchain-based digital tokens. Due to this, a wider spectrum of investors can more easily participate in real estate investments through fractional ownership.

Assure Security and Compliance

Blockchain applications in real estate should abide by all applicable laws and industry norms. Implement strong security measures to safeguard transactions and sensitive data and ensure that it adheres to all regulatory compliances.

Also Read: How enterprises can ensure compliance using blockchain

Integrate with Current Systems

To optimize productivity and enhance user experience, it’s crucial to seamlessly integrate blockchain with your existing CRM platforms, real estate management systems, and other business applications.

Also Read: Mortgage CRM Software Development Cost

User Education and Adoption

Educate your users, including investors, tenants, buyers, and sellers, about the features and advantages of blockchain-based real estate apps. Provide support and user-friendly interfaces to promote adoption.

Now while we are familiar with the uses of blockchain technology in real estate, the companies embracing it, and the incorporation process, it is good to be aware that there are still some challenges hindering the evolution of the blockchain-based real estate economy. Something we will end our article with along with proposing possible solutions.

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. Inadequate Knowledge

It’s true that blockchain is one of the top technology trends in the real estate domain. But, since the technology is still evolving, many entrepreneurs are finding it tough to understand its potential thoroughly. This is acting as a barrier in the process of integrating blockchain in real estate business.

Solution: Entrepreneurs and other industry stakeholders can benefit from education and training programs that help demystify blockchain technology. Businesses can better comprehend and utilize blockchain’s potential by investing in webinars, workshops, and educational materials.

2. Scaling

In the real estate economy, billions of global transactions are made annually. This demands a network that can handle large transaction volumes. However, few options are available in the Blockchain space to meet this need.

While Bitcoin can handle 5 transactions per second, Ethereum offers the opportunity to manage 15 transactions per second. Likewise, Ripple’s XRP, one of the cryptocurrency trends, is hoping to perform 1,500 transactions per second. However, this is still not close to large-scale companies requiring ultra-speed processing in real-time.

Solution: Working with a renowned blockchain development firm can assist in creating scalable blockchain solutions for real estate that are suited to the sector’s requirements. This challenge can also be solved by looking into layer 2 solutions, sharding, and other scalability strategies.

3. Chain Interoperability

Another challenge real estate companies face while embracing Blockchain is chain interoperability. Various blockchains exist in the digital market, many of which are unable to connect or work together.

This lack of interoperability makes it tough for real estate companies to simultaneously use different data available on a public and private Ethereum blockchain and streamline their processes.

Solution: Adopting or developing interoperability protocols and platforms can help bridge the gap between different blockchains. Collaboration with blockchain interoperability projects and investing in research can pave the way for seamless data exchange and integration across different blockchain networks.

Adherence to Regulations

Real estate enterprises may face difficulties due to the changing regulatory environment surrounding cryptocurrencies and blockchain technology. Although it can be difficult, ensuring compliance with current and future standards is essential.

Solution: Keep abreast of regulatory advancements to manage compliance obligations. One way regulatory compliance can be ensured is by integrating Know Your Customer (KYC) and Anti-Money Laundering (AML) processes with blockchain technology.

Data Privacy and Security

Protecting personal information and sensitive real estate transactions on a blockchain requires high privacy and security.

Solution: To protect data, implement strong security measures, including encryption, multi-factor authentication, and frequent security audits. Use private or permissioned blockchains to manage access to sensitive data and abide by data protection laws.

How Can Appinventiv Help Your Real Estate Business with Blockchain App Development?

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, and brings a revolutionary change to the old real estate processes.

Blockchain transformation doesn’t happen overnight and Appinventiv, as an esteemed blockchain software development company, 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.

Empire Hotels of the hospitality industry is one of the organizations that have partnered with Appinventiv to mitigate payments and real-time tracking issues and tap into the world of decentralized applications.

Our partnership with Empire Hotels 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.

Want to make your next move in the real estate industry by leveraging advanced technologies like blockchain? Connect with our experts to get your vision turned into reality.

FAQs

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. What role do smart contracts play in real estate blockchain adoption?

A. The introduction of blockchain technology in real estate is greatly aided by smart contracts that automatically execute and enforce provisions when certain conditions are met. Smart contracts eliminate the need for middlemen, expedite transactions, and improve party confidence by automating procedures, including property transfers, rental agreements, and escrow services. Furthermore, self-executing transactions made possible by smart contracts provide quicker and more effective real estate transactions while lowering the possibility of fraud or disagreements.

Q. What are the benefits of blockchain in real estate?

A. Some of the advantages of blockchain in real estate include:

Security: By removing single points of failure and lowering the possibility of fraud or tampering, blockchain’s decentralized architecture improves security.

Efficiency: Blockchain technology in real estate can reduce paperwork, minimize errors, and speed up transaction times by automating and streamlining various real estate procedures.

Transparency: Blockchain in real estate ensures that all parties have access to accurate and verifiable information by providing an immutable and visible log of transactions.

Cost-Effectiveness: Blockchain commercial real estate can result in significant cost savings in real estate transactions by eliminating middlemen and cutting administrative expenses.

Fractional Ownership: Blockchain allows real estate assets to be owned in fractional shares, allowing investors to purchase and sell fractional shares of properties and boosting market accessibility and liquidity.

Data Integrity: Blockchain reduces conflicts and boosts trust in property records by offering a tamper-proof record of property ownership, history, and transactions and shaping the future of blockchain and real estate.

THE AUTHOR

chirag

Blockchain Evangelist