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BLOCKCHAIN IN REAL ESTATE

In terms of asset base and transactional activity, the commercial real estate industry is an important global economic segment. The value of the professionally managed global real estate investment market climbed from $7.4 trillion in 2016 to $8.5 trillion in 2017, according to MSCI research.

While the real estate investment industry is massive, it has been occupied by a rather closed network of corporations and organizations capable of shouldering large, bulky, illiquid investments. It is also hindered by high transactional friction and opacity. While there have been advancements in the digital age, particularly in information flow and transaction setup and completion, we are still in the early stages of digitization.

Over time, the real estate industry has become aware of Blockchain technology's advantages and recognizes its significance in addressing the industry's inadequacies and imprecisions. This realization led to the establishment of the "International Blockchain Real Estate Association" (IBREA), a non-profit, member-focused advocacy, educational, and trade organization devoted to implementing Bitcoin and other blockchain technologies in real estate. IBREA was founded in Orange County, California, in 2013 and has since risen to almost 3,000 members in 17 countries.

Understanding Real Estate Industry

Blockchain in real estate has gained significant interest from property owners, agencies, companies, and property managers interested in giving their customers unlimited access to their data and a transparent method for real estate transactions. Blockchain in real estate has proven to be an innovative technology that has bought evolution in the industry by the introducing new ways of buying real estate assets and property through the decentralized process, attracting potential buyers, making audit contracts through a diligence process that ensures the security and confidentiality of the platform.

What is Blockchain in Real Estate?

Even though most people think about blockchain technology as a solution looking for a problem, evidence from its applications and use cases proves the contrary. One of the problems of the real estate industry is the transfer of ownership. It is hard to say who owns property because other ways of proving ownership are mostly oral and written, making them all subjective. It is also challenging to know the price of real estate assets without relying on the information provided by a single individual or company. Doing due diligence for most real estate assets takes much time, unlike traditional stocks and bonds.

Other crucial problems include weak security and accessibility, high transaction costs, inaccessible data, non-interoperable proprietary software, legal inconsistencies, and fraud. The leading causes of these challenges are fragmentation and centralization. Software used in the real estate industry needs to be more cohesive. They do not interact with each other, and the rules are often incompatible. Information in real estate is mostly with the government and brokers in the industry, sidelining key players in the industry. Blockchain development services can unify real estate software and decentralize the industry. Real estate software and transactions can be open source and can work together in a frictionless way.

Blockchain Use Cases in Real Estate Industry

There are many blockchain use cases in the real estate industry. Some of them are:

Management of assets

Blockchain in real estate helps users manage assets. Asset management is done by tokenizing the property and the assets. Tokenization reduces the processing fee by excluding third parties from the process. The reduction in the processing fees of the assets allows real estate asset owners to lower the minimum investment amount, remove barriers to entry, and attract more customers for their projects.

Financing of project

Raising funds has been difficult these days due to the lesser interest of the investors. The use of blockchain in real estate has accelerated the process of raising funds. When dealing with banks as single loan providers, the rate of interest and the amount can be as high as 29%. This amount can be reduced by finding other investors. This problem was resolved by using blockchain in real estate, enabling the user to connect to hundreds and thousands of people interested in investing their money in their project.

Management of Real Estate Property

People dealing with many properties face issues with the maintenance of property documentation due to a lack of time. Blockchain experts have now resolved this problem using distributed ledger technology that maintains all the data of the entire property, fractional ownership, asset management, legal documents, and closing documents in digital form and in an organized manner.

Issuance of Contracts

Issuance of Contracts is likely the main Blockchain use case in real estate industry. Land titles are based on an extensive documentation process that may lead to misleading or misplaced documents. In addition, the asset transfer documentation process is lengthy and costly. This process and its issues have now been resolved through the introduction of blockchain technology that handles the documentation in digital form that is easy to maintain, safe, and error-free.

Development of Property

Lack of transparency in the supply chain of the subcontracting in the construction and management of the asset has led to a problem for the investors and the asset owner. The issues that the owners faced during the property development in real estate were also resolved by introducing blockchain technology in the real estate field. The problem is resolved by using blockchain in real estate, the ability to prove the quality of the goods being used by tracing the origin of their manufacturing.

Payment

Distributed ledger technology enables the user to carry out the payment process and to be paid on-chain. Doing this removes the need for consultation with some custodian banks or the involvement of a third party in the process. Moreover, using the key takeaways of blockchain in real estate technology has also made transactions of large amounts easy and accessible to all.

Blockchain Benefits in Real Estate Transactions

The ease of the real estate transaction process is made possible through the provision of smart real estate contracts offered by the technology that leads to the satisfaction of both the buyer and the seller of the asset. The transactions that are made through the use of blockchain technology are done using digital currencies that are more efficient and decentralized. Records of all the transactions are kept safe in the form of blocks and are stored on the blockchain forever. The transaction method using blockchain technology is much easier than the existing systems still used in many places. The following are the benefits of using blockchain technology for real estate transactions:

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Faster Method of Transactions

The use of blockchain for real estate transactions presents a faster method and a better option than traditional physical payment methods. The transaction is made through a peer-to-peer network and is easy and quick. In traditional real estate, the apps used for transactions have certain limitations on their usage. For example, some apps limit the amount of money that can be transferred. Some apps do not allow transferring money in the same region. These problems have now been resolved by introducing blockchain technology as the transaction method for the real estate industry. A specialist blockchain app development company can help governments and companies develop applications for real estate transactions that a free from these barriers and limits.

Transparency of Records

One of the biggest plus points of using blockchain technology in real estate investing is the transparency of the real estate transaction records. All the records of the payments made by the national and international real estate investors and real estate investments are kept in digital form that is safe and error-free.

No Involvement of the Third Party

The biggest advantage of using blockchain technology is the omission of validation of the third party with a due diligence process that facilitates transactions in real estate and other processes making the process faster and less costly. Many companies have had to pay millions and billions of dollars to the middleman who connects the assets' investors and sellers. The money paid to the third party is now saved due to the peer-to-peer connection offered by blockchain technology in real estate.

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Real Estate Markets and Smart Contracts

Blockchain in real estate has given its user the advantage of developing smart contracts in real estate investing. The users can make a smart contract depending on their needs and requirements. Smart contracts are digital forms of an agreement made after the mutual consultation of both parties. The contract is made by keeping both parties' viewpoints utterly dependent upon the parties. The blockchain has nothing to do with the contract. After the buyer and sellers meet and the buyer or investors show an interest in buying the digital asset, they are brought together by the blockchain to discuss the contract. A smart contract is developed with both parties' mutual consent and brought forward before the final transaction. Blockchain real estate also gives the leverage of canceling the contract if the parties to the transaction do not follow the rules of the contract.

Conclusion

Blockchain in real estate has revolutionized buying and selling of real estate assets. The method is much easier than it was before. Blockchain development in real estate offers numerous benefits to customers, like easier and more transparent transactions, easier documentation in digital form with lesser errors, and an easier method of transferring funds. Moreover, it also helps collect funds by connecting different people across the globe. The real estate firm partnering with a blockchain development company and blockchain technology experts has ability to create a secure and transparent platform for property transactions and custom Blockchain solutions.

Blockchain real estate platforms offer many benefits of Blockchain in real estate investing parties. They are given the ease of smart contracts without a third party. The documents are made independently by two parties dealing with the project without the involvement of a third party. The ease of smart contracts has led to investors' greater interest in using blockchain real estate, which takes up a significant portion of the real estate market. Another main advantage of blockchain real estate is the option of cancellation of the contract at any point in the process. For example, if the points of the contract are not being satisfied by any party, the contract can be canceled without any further due.

The main application of blockchain in real estate is its customer-friendly service. If you carry out the process of buying and selling your assets in real, it will take months to first advertise it and then find a suitable customer. This problem has been resolved by introducing blockchain technology in the real estate field. The seller must put up the asset they want to sell on the blockchain. The other people or companies connected to the network will look through the asset. If the asset is suitable for their needs, they can contact the seller, develop a smart contract, and then carry out the transaction and payment in digital currencies.

The payment done on the blockchain is in the form of digital currencies. The blockchain real estate transaction saves the user from the pain of waiting for days and weeks to transfer money as they have to do while using other apps with certain limitations. But blockchain leaves its users satisfied with easier and faster payments than other apps. The buyer can transfer money, and the seller can receive it on the same day.

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