Real estate is historically the most stable form of investment and one that involves the least risk as an investment mechanism. There are many types of buyers in the real estate market ranging from first time buyers to seasoned investors and commercial developers. They all have one thing in common, mountains of paperwork, and layers of process inefficiency which makes transactions lengthy and cumbersome at times. Technology is being adopted in the real estate ecosphere primarily to attract buyers and generate new business for agents, while the purchase process is where technology adoption and automation is needed most. This is where the power of blockchain technology can be a true disrupter in the real estate industry.
If you are unfamiliar with blockchain technology, blockchain is a distributed ledger technology meaning each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary. Just think of the possibilities in the transaction process if you were able to leverage blockchain to authenticate data, a homeowner would be able to transfer a title instantly without the need for third parties. Blockchain allows transactions to happen peer to peer, communication occurs directly between peers instead of through a central intermediary. In real estate the many middlemen, escrow, title, insurance etc., drive up cost. What if this could happen peer to peer? Another key attribute is database and transaction transparency. Every transaction and its associated value are visible to anyone with access to the system. In essence there can be a decentralized database composed of property records, deeds, titles etc. with ease of access and secure immutable files. The introduction of smart contracts in blockchain platforms now allows assets like real estate to be tokenized and traded. This means there is technology to digitize the asset value of a real estate transaction and issue ownership to people or entities who possess the digital token.
One blockchain based startup is gearing up to disrupt and innovate how people, buy, sell invest and trade within the real estate markets through their crowd sale and trading platform. The organization is called Etherty, they have a global property portfolio and are issuing their own cryptocurrency to be used on their platform. The CEO Murtaza Khan stated: “Our business concept capitalizes on the increasing local and international investment movement in the real estate market. We make purchasing property much more accessible and easy by breaking the minimum threshold for investment using crowd-investment of Tokenized real estate units (property shares traded as Tokenized units) and by creating a marketplace on our platform to trade their Tokenized real estate shares. We provide all the tools and services necessary for our users throughout the transaction chain – starting with assistance to create the right type of listings, inspecting and gaining valuations of properties and providing stock market type indicators on Tokenized properties, through to completing the transaction by ensuring security and transparency through the Blockchain engine using smart contracts, and putting in place the correct legal in-country documentation and framework in case of multiple owners.”
By backing the organization’s cryptocurrency up with a commoditized asset Etherty provides their crowd sale participants the ability to own a piece of real estate projects across the globe all while opening up more efficient transaction processes and generating business for service professionals in their markets. This seamless approach allows cross border investment, which is normally an arduous task, to become as easy as using a mobile app.
Blockchain is most synonymous with Bitcoin, but almost all major banks and many Fortune 500 companies including IBM, Microsoft, Barclays, Goldman Sachs have all made heavy investments into leveraging blockchain internally with proof of concept pilot projects. This dynamic underpinning technology will eventually touch every industry to improve process flow, secure data, mitigate risk through decentralization, and create new financial ecosystems. The current state of the real estate industry with legacy systems and processes make it a prime target for blockchain disruption. The primary question is how fast will this be adopted and what hurdles will need to be overcome by new entrants to unseat the existing process of transaction flow.