The real estate industry has many aspects in the way it operates. There is a lot of paperwork involved at each stage of the property transaction as lease rental rates, agreements, property value, valuations and much more. In today’s digitized and hyper-connected world there is a greater demand for transparency. Therefore, much of the property related information due to the technological advancements is now available in digital form. However, this information is maintained on different systems that result in lack of efficiency, no transparency, and higher chances of inaccuracies. And with a number of middlemen involved, there is a greater potential for frauds. Therefore, real estate industry is moving towards adopting the blockchain technology into their systems.
The blockchain is a decentralized-digital ledger that records information which is linked and secured by cryptography. The information is maintained as blocks that include a digital mark of both past and present records. Experts reveal that blockchain can play a major role in transforming the real estate industry and will make it more efficient and modern.
Buying a home is one of the biggest investments a person makes in his lifetime and though there have been technological advancements to make the process faster and more secure for the homeowners, lenders, and buyers alike but there are still certain loopholes.
The blockchain technology has the ability to share processes and databases. This gives an opportunity to make the real estate data, which is the most important part of the whole process of selling and buying a property, more accessible and centralized. So now let’s have a look as to how the blockchain technology could disrupt the real estate industry in terms of providing more transparency, providing safer investments to all the parties involved, and speeding up the overall process.
1) Reducing the influence of middlemen – One of the essential elements to accelerate the process is on reducing the number of middlemen involved. These people exist as they hold a lot of information that as a buyer or seller you don’t have access or license. However, this information is needed to perform a property transaction. Blockchain can help the real estate industry to distribute database so that anyone can record information without a need of a centralized controlling authority.
In the present system, the title to a property is a piece of paper and if you want to transfer a property you will have to fill the deed, sign it. The middleman then will get the deed notarized, stamped and will send it to the local government authority to be entered in their database which takes a lot of time, effort, and money. However, with blockchain, this transfer can be done digitally and effortlessly. The transaction is cryptographically secured and the parties involved can verify the records of property on their own, thus eliminating the need for middlemen.
2) Transactions – The efficiency and security of property transactions can be transformed with blockchain as this technology does not make trust as the base of all transactions between the parties involved, unlike the traditional setup. Each user gets a unique identity via cryptography as a result financial information for a consumer can be shared with other parties securely. Funds transferred from one person won’t get released till the time transaction gets formally completed. This helps in speeding up the process of transaction management. Even if the buyer and seller are not in the same place the property transaction can still be done faster since the financial record of each party is available.
3) Reducing fraud- Forging of documents to show that one person is the owner of a property though he is not is a very common problem in the real estate industry. The fraudsters are somehow able to make fake title ownership by using some editing software to carry out the transfer. The copying of the notary stamps has also become much easier with the help of internet. This is when blockchain technology outshines the traditional process as proof of exchange, proof of ownership, proof of transaction, and proof of existence gets digitalized and secured. It replaces the paper proof with the digital proof and once the title documentation is uploaded on the blockchain network, the decentralized nature of this technology prevents a criminal to commit forgery.
4) Smart Contracts will ensure complete transparency – Most of the buyers take bank loans to purchase a property and the process of availing the loan is slow and tedious due to the administrative requirements. However, with smart contracts which are based on blockchain technology, it gets simpler. There are professional blockchain developers who can develop these smart contracts. A digital ID can be created for a property as a seller or as a buyer and by doing this the process of transfer of ownership becomes easier when compared to the traditional method. These contracts also serve as the means to monitor the progress of the real estate transaction. The smart contracts get permanently stored in the blockchain network and once published they cannot be altered or tampered with.
Managing real estate transactions involves a lot of people from sellers, buyers, tenants, operators, and other service providers who provide, modify and access the information. And most of the times the parties involved do not have a pre-existing relationship which leads to mistrust. But with blockchain, since the data is distributed and available to everyone the parties involved can independently verify the records before entering into a contract, thus eliminating the need for middlemen as well. However, the transformation may not happen overnight as blockchain technology is still in a nascent stage and it will take initiative from some progressive real estate firms to set an example to convince the rest of the industry about the benefits of this technology.
To sum it up in the future the blockchain technology can make the process of buying or selling of a property, mortgage loan more streamlined, secured, and transparent and will allow people to concentrate on building a home without any legal or administrative hassles.