Unlocking Efficiency

Why Blockchain is the powerful new key to reaching greater levels of efficiency in the real estate market

Blockchain has a distinctive application to the real estate market in that it has a massive potential to disrupt the current dominance of REITs. The global value of real estate assets today is placed at 217 trillion¹ with REITs accounting for 73 percent of the total market capitalization². Platforms like Ethereum offer applications that are able to accomplish the same basic tasks and services as those usually provided by third parties. One example of this is the development of smart contracts, which essentially perform similarly to a regular contract but contain digitized protocols that are made to enforce the underlying terms of the settlement. These terms are implemented within the blockchain itself, so that policies and terms of agreement are executed automatically — a ubiquitous device when it comes to promoting trust between non-affiliated entities and decreasing the risk of future disputes and/or discrepancies between investors and investees.

Traditional business models employed by existing REITs are restrictive of cost and time efficiency because they require the employment of costly intermediaries at each step of the way. In order to reach terms of settlement as well as to commit an actual transaction, REITs rely on expensive banks, legal firms, consultants and expensive property services companies with no actual contention to the assets being negotiated. This poses obvious potential for conflict of interest, as well as backend practices that negatively affect both cost efficiency and timelines.

Blockchain, on the other hand, creates a friction-less environment for the transactions to take place, and the interests of both investors and investees are protected through the smart contract as well as through the decentralized ledger which tracks and records each transfer as it takes place. By allowing only those who are seeking to acquire or currently own real estate assets, blockchain creates unprecedented transparency compared to the traditional investment model.

Another way that the blockchain-based investment model beats out traditional REITs is in its unique capacity to produce immediate liquidity. Here’s how:

Blockchain can be used to digitize and send assets all over the world within a fraction of the time and cost that an intermediary would take to do so. Transactions of these monetary and property assets become near immediate, and are unbound by factors that international payments are usually subject to. This is because the confirmation of delivery of any and all monetary or property assets is instantaneously executed and recorded on the blockchain itself.

To learn more about how smart contracts and immediate liquidity of digital assets are being done on the blockchain and disrupting the real estate market, please visit blockchain.noon.sg

[1] Visualcapitalist.com

[2] Reit.com