The Future of Real Estate With Blockchain Technology

For many, blockchain is a bit like the Internet in the early ’90s: advanced, exciting, but slightly confusing.  Does blockchain technology have the power to potentially revolutionize real estate? Many believe that the use of this technology could transform both investing in real estate and the operational transactions associated with owning real estate.

So, what exactly is a blockchain? In the simplest terms, it’s a type of database, a digital ledger that keeps track of transactions. It’s transparent, secure, and decentralized, meaning no single entity owns or controls it. Instead, multiple participants maintain and verify the data. The use of digital channels for real estate transactions has historically not been the standard means of conducting business, but using such channels could be transformative.

Real estate, one of the oldest in history, is known for its paperwork, intermediaries, and inefficiencies. Imagine a world where buying real estate, whether residential or commercial – whether for investment or personal use – is as easy as online shopping, without the need for stacks of documents or weeks of waiting for approvals. Enter blockchain.

Blockchain can make property transactions faster, cheaper, and more transparent. By digitizing real estate assets into tokens on the blockchain, so they can be traded much like cryptocurrencies. This process, known as tokenization, can make real estate investing more accessible. Instead of buying an entire property, you could buy a ‘token’ representing a portion of a property, similar to buying a single share in a company.

Moreover, the blockchain ledger can provide a transparent and immutable record of ownership: no more title disputes, no more fraudulent transactions. Every transaction is recorded on the blockchain, visible to everyone, and impossible to alter or delete. This could significantly reduce the need for intermediaries, such as brokers or lawyers, thus lowering costs.

Blockchain also has the potential to streamline and increase operational efficiency. Whether collecting payments from tenants or purchasers or making payments to property owners, the technology can aid in both time and cost savings through process efficiency in operations.

One efficiency to be gained is through the use of smart contracts. These are self-activating contracts with terms of an agreement directly written into code – another exciting application of blockchain in real estate. These contracts can automate and speed up processes such as property transfer or rent payments, executing transactions instantly once conditions are met.

The use of blockchain technology also can increase security and reduce the time to complete background checks, check credit history and proof of identity, and remove the need for manual reconciliations through automation. The accounting for operational transactions would be almost immediate, resulting in the ability to have faster and more timely financial reporting.

Trends evolve based on changes in technology, consumer behavior, and other societal factors. Not so long ago, people marveled at the convenience of having a portable CD player. Today, the concept of owning music is being pushed aside by subscription services like Spotify and Apple Music. On another front, dietary trends have evolved drastically, moving from fat-free obsessions of the ‘90s to today’s focus on plant-based and sustainable diets.

In similar vein, blockchain technology could disrupt the traditional real estate industry by making transactions more transparent, accessible, and efficient. However, it’s essential to remember that the integration of blockchain into real estate is still in its early days. There are regulatory hurdles and technological challenges to overcome. But the potential is enormous.

So, while you might not buy your next house using blockchain technology, keep an eye on this space. Blockchain’s journey in the real estate world has just begun, and it’s set to be a game-changer.

Authors: Mohammed Bari | [email protected] and Lena Combs, Partner and Hospitality Practice Leader | [email protected]

Republished with permission from ARDA, copyright 2023.