Blockchain makes cryptocurrencies like Bitcoin and Ethereum possible. But the underlying technologies – distributed ledgers and smart contracts – offer almost limitless possibilities for use cases beyond crypto, and as a result, blockchain is finding a home in many industries. Real estate is no exception, and blockchain platforms are emerging in all sectors of the economy.

Residential real estate

One of the earliest uses for blockchain in real estate has been in the residential sector with short term rentals. Inspired by the success of companies such as Uber and Airbnb, developers have put these models on the blockchain. Transactions are completed using smart contracts, so there is no middleman to take a cut, and all the money stays within the parties in the transaction. Rentberry, an established home rental company with a substantial user base, has recently moved its operations to the blockchain and has established a process that prevents bidding wars. Taking direct aim at Airbnb, Bee Token and Atlant are blockchain platforms that offer short-term peer-to-peer (P2P) rentals.

Another way that blockchain is having an impact on residential real estate is through virtual reality. Blockchain-powered VR make virtual walk-throughs possible for any property, and are a significant advance on the traditional static images and video tours that have been standard in the industry.[1]

Commercial and industrial real estate

Virtual reality is also being used in the commercial and industrial real estate sectors.  It allows developers to demonstrate what an as-yet unbuilt property will look like, which will help secure financing and investment. VR can streamline the process of finding tenants, as interested parties can tour the space at their own convenience. Tenants can see exactly how a space will function, and they can prepare to move in as soon as the property is finished, thus maximizing revenue for the developers.

Of course, as usage of virtual reality technology becomes commonplace, storage needs will increase, and this will also have an impact on industrial real estate, as data centres will experience growing demand.[2]

Straightforward transactions and reliable access to property records

Blockchain also offers many other practical advantages for commercial real estate. A transparent MLS ledger stored on the blockchain simplifies property searches. Both parties have access to the same information: vendors or lessors can list their requirements, and purchasers or lessees can search listings. Storing property records in a distributed ledger offers near-real time settlement of leasing and purchase transactions. Transactions are completed without the need for third party assistance. Since transaction records are accessible, unalterable and secure, every transaction is verifiable.  So the chances of fraud, double spending, or other forms of abuse are minimized. Accessible records also allow multiple parties to access records. This is an advantage for commercial properties, where interested parties may include owners, tenants, investors, and service providers. In addition, smart identities stored on the blockchain make it easier to conduct due diligence checks, and smart contracts simplify the completion of leasing or purchase agreements. Processing of financing and payments is more efficient with blockchain-based P2P transactions. Finally, blockchain technology offers an opportunity to move beyond paper-based property titles. Storing property titles on the blockchain lowers the chance of errors, makes fraud less likely, and keeps costs down.[3]

Ubitquity offers a software-as-a-service (SaaS) platform that lets “individuals, businesses and municipalities securely store and track properties” using distributed ledger technology.[4] This idea is gaining traction worldwide: in the UK, the Digital Street project has moved into its second year and is working towards developing technologies such as digital signatures and smart contracts that will transform the Land Registry.[5]

Liquidity and investment

Blockchain technology also offers opportunities to improve liquidity, thus making investment in real estate investment trusts (REITS) more attractive. Blockchain powered token offerings offer investment firms a straightforward way to generate capital, and this will become commonplace as blockchain exchanges such as the Gibraltar Blockchain Exchange gain popularity.[6] In addition, platforms such as REAL (Real Estate Asset Ledger) offer the possibility of tokenized ownership. If ownership can be easily split between multiple stakeholders, and if transfers of ownership are conducted through smart contracts, investment potential will be improved.

Although some of the platforms and projects listed here are still in development, that should not stop innovators and investors from considering how blockchain will disrupt real estate. Change is coming to real estate: the only question remaining is how quickly it will happen.

[1] https://finovate.com/virtual-reality-big-data-blockchain-changing-proptech/

[2] https://www.bisnow.com/national/news/technology/here-are-four-ways-mixed-reality-will-impact-cre-going-forward-63483

[3] https://www2.deloitte.com/us/en/pages/financial-services/articles/blockchain-in-commercial-real-estate.html

[4] https://www.investinblockchain.com/blockchain-projects-real-estate/

[5] https://hmlandregistry.blog.gov.uk/2018/10/09/moving-to-our-second-year-on-digital-street/

[6] https://investmentbank.com/blockchain-real-estate/

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