The Possibilities Of Blockchain For Real Estate

Real estate remains one of the most important sectors in today’s economy. By 2018, the housing and land market was worth $ 4,551 billion, with a forecast of over 1% increase in investment by 2019.

In this sector, the transparency and efficacy of market operations are key but often made possible at a high cost. The need for technological solutions to ease real estate transactions is rather inevitable in order to keep up with many of the hurdles faced by this industry today. This is shown in recent reports, where blockchain appears as a trend in the property tech market.

The Real Estate Issue

Currently, the legal and financial operations related to the real estate market functions with notable core defects, which are reflected in a rather slow and costly process for property buying and selling.

There are four main issues in the real estate market:

1. Exclusivity: The barriers for entering the real estate market have always been high, with conditions that filter the public enabled to participate in it, such as citizenship, banking, and financial requirements, accreditation, and more.
2. High costs: The intervention of middlemen to manage the market processes (renting, buying, selling, investing, etc.) carry a high service cost and high fees, making the market especially expensive in the case of international real estate.
3. Liquidity Shortage: Real estate is among the most illiquid assets. The lack of cash flow in property transactions occurs due to factors like being mostly done in private markets, slow processes and expensive operations.
4. Transaction Speed: Due to the amount of paperwork and third parties involved in every transaction, real estate operations can be extremely slow, taking from days to weeks to be successfully executed.

Blockchain For Real Estate

The use of blockchain technology comes to play as a useful tool, which covers solutions for current issues related to land record-keeping, increasing liquidity and rental contracts.

Among a wide range of possibilities, we can name three main use cases for blockchain:

1. Decentralized Digital Records. The use of blockchain as safe and decentralized storage for documents like land records is a viable and useful service since these documents are often kept in physical locations where they are easily misplaced or modifiable. The use of blockchain would also provide a uniform record-keeping to be shared among the pertinent parties in charge of that information, being able to keep track of immutable information, including a case for the commonly used Multiple Search Listings (MLS).
2. Rental Contracts: In order to keep the auditability and traceability of rental contracts, the use of smart contract solutions allow to ensure the compliance to both parties (landlord and tenant) to the rental agreement, even including the possibility of having a contract to deduct automatically each month an agreed rent amount from the tenant’s to the landlord’s account.
3. Property Tokens: In order to facilitate the liquidity of property assets, the tokenization of real estate shares it’s a more affordable and accessible solution, with the possibility for investors to buy a property in a borderless manner without a third party or allowing fractional ownership between several stakeholders. The latest option also allows each stakeholder to receive a rent amount proportional to their investment.

The inclusion of crypto and blockchain solutions for real estate remains in very early stages, with some experiments already been carried out mainly focused on the use of bitcoin as a medium of exchange. In Atix we’ve developed blockchain solutions to address some of the market’s issues, from a decentralized app to allow borderless real estate investment, to contract auditing and traceability.

Moving forward, it’s possible to expect a major adoption of technological solutions, including blockchain, to facilitate and boost the real estate market, making it more accessible, transparent and less expensive.

Here in Atix we want to keep on creating new solutions. If you have an idea and want us to help us keep building, please drop us an email to info@atixlabs.com.