PROMINENT
BLOCKCHAIN APPLICATIONS ARE:
Secure sharing of medical
data
NFT marketplaces
Music royalties tracking
Cross-border payments
Real-time IoT operating
systems
Personal identity security
Anti-money laundering
tracking system
Supply chain and logistics
monitoring
Voting mechanism
Advertising insights
Original content creation
Cryptocurrency exchange
Real estate processing platform
These
intermediaries promise to get the buyers best deals based on their criteria. No matter how
reliable and honest these intermediaries claim to be, they are always susceptible
to the following limitations:
1. Transparency
All these intermediaries are in the market to make a profit. They all have a business model,
which makes them biased towards the deals that earn them more profit. Such
deals are not always in favour of buyers. These intermediaries can choose to
limit the options visible to the seller or give priority to the ones that are
more lucrative to them. Hence, there is a good chance that the buyers would
lose out the property, which might be the best fit.
2. Reliability
Everyone knows the capabilities of online scams. With an impressive website and
few imposters, buyers can be deceived into buying a property that is not
available/suitable for sale. Not all the buyers are well educated or aware
enough to do background checks of these intermediaries. The result is a lot of
legal suites and loss of a significant chunk of money.
3. Correctness
Expanding the above point, forged documents play a crucial role in fooling
buyers and make them buy illegal/not for sale/unsuitable property. The morphing
software has made it possible to edit the entire image of a person. With such
advancements, editing text in a physical document and reproducing it is an easy
task. These physical documents can be property papers or bank statements.
Additionally, with the right contacts, imposters can prove that the fake
documents are legitimate.
4. Extra Cost
The owner of the property wants to
sell the property and the buyer wants to own it. Why any of them should pay
some extra money to the intermediaries? Many times, the amount of money they
charge does not justify the services they deliver. And instead of getting
better deals and making the whole experience smooth for the buyer, they end up
doing more harm than good. To add, in many cases, the broker partners with the
seller, to sell a property at a higher price than the market standard.
Problems of the Commercial
Real Estate (CRE) Market
As compared to the process mentioned
above, CRE is a much more complicated process and involves many stakeholders.
Hence, Blockchain for real estate makes sense even more in the commercial
perspective. CRE leasing process has many recurring transactions that mean more
reconciliation cost, error instances, points of failure, and redundancies.
As mentioned above, the CRE leasing involves many entities
and they have several contracts signed between them. Any error or mismatch in
any of these documents can disrupt the business proceedings, resulting in a
loss for all the parties involved.
Since the property is leased not by one entity, but by multiple,
managing lease payouts is difficult. Keeping track of
everything, ensuring payouts has been received,
taking confirmations, distributing maintenance charges among entities, and
more, makes the whole process cumbersome.
With so many transactions happening, recording each transaction is
challenging. It’s not
about ensuring everything gets recorded, but also guaranteeing that the records
can’t be tampered with and only
accessible to authorized people.
To get the best property that fits the criteria, access to real-time
data is required to capitalize on the last-minute updates.
·
Blockchain is a network of distributed databases (known as the distributed
ledger), in which information of each transaction is recorded in the form of a
group of hashes (known as ‘blocks’). These blocks are stacked together in an
immutable way (each block has information about the previous and next block) to
form a chain of blocks.
·
To get to the information stored in a particular block, a hacker
needs to get through the whole blockchain that requires an immense amount of
computing power. Thus, as a result, hacking and alteration of the information
become non-profitable for the culprit. To add, this technology is ‘write-once.’
That means the new information can only be appended; the old information can’t be edited. All these features make Blockchain almost
immutable.
·
Hence, storing real estate document information on the
Blockchain will ensure their originality and credibility. Moreover, any
approvals and confirmation can easily happen on Blockchain network, since all
the parties are on the network. These approvals and confirmation can be stored
with the timestamp for future references.
·
The distributed database serves as a single source of truth.
Since everyone in the network has a copy of the database, the reconciliation is
performed automatically. Any changes in the database get transmitted to every
node (system) in the network and get updated in their copy of the database
almost instantaneously. As a result, any chances of mismatches/errors are
eliminated.
To add, in the case of
private permissioned Blockchains that are more relevant for the enterprises,
the verifying authority validates each transaction, so only the legitimate
transactions are processed and become the part of the Blockchain.
They are two prominent
features of Blockchain that can be helpful in real estate:
·
They are the lines of code written to get executed autonomously
when exposed to a specific data trigger. Smart Contracts are a set of
predefined rules that can’t be edited, once coded (in
most cases). For example, If X happens, transfer the amount in the ratio
20:30:50 to A, B, and C. Thus, these Smart Contracts can streamline extremely
complex leasing payout contracts.
·
Since each of the transactions is time-stamped and recorded,
there is no need to keep track of everything. As a result, the whole process
gets automated, saving time, effort, and money.
·
A token, in the true sense, is a Smart Contract on Blockchain.
However, the real use case of a token is the digital representation of a
physical asset. An asset, in this case, a property can be said to be
‘tokenized,’ when a token representing the asset is created on the Blockchain
that has a unique identity and can’t be traded for
another token (non-fungible). Whoever owns this digital token can be considered
as the owner of the property.
·
Thus, it becomes easy to prove the ownership of the property. To
add, these tokens can be easily traded. This feature is particularly helpful in
buying/selling property, anytime, anywhere, almost instantaneously.
·
Tokenization might not replace the legal paperwork involved in
purchasing the property (this can happen only if the government switch to a
blockchain based digital system completely), but it can act as a quick and
reliable system to make the first level of commitment in the purchase process.
Blockchain Real Estate Process
In contrast to the general
property buying process, the CRE process on Blockchain can be as follows:
·
Lessor and the lessee will meet at the online marketplace where
verified information about the property is available to everyone transparently,
including owners’ details, geo-location, chain of custody, the area covered,
and more. The marketplace will be integrated with the government systems to
ensure the authenticity of the information.
·
A separate Blockchain based identity verification solution will
be integrated with the marketplace. This may involve third-party verification
companies, government agencies, banks, investors, and more, who will verify the
identities. The solution will validate the information from multiple sources,
such as bank transactions.
·
Once both parties decide to go ahead and enter into the
agreement, the terms and conditions of the agreement will be recorded in the
Smart Contract.
·
Based on the T&C stored in the Smart Contract, the lease pay-out
will get credited in the accounts of the lessor. All the data will be recorded
on Blockchain with the timestamp and can be utilized for real-time data analysis.
A
Blockchain-based marketplace will allow users to have more control over their
data. An intermediary,
such as a broking agent or broking website, won’t be
able to manipulate the data. This will reduce costs, enhance
transparency, and improve the visibility of international listings.
With
Blockchain solutions, the buyer and seller will be able to communicate
directly, which will either remove the role of intermediaries or at least reduce their influence on
the process.
The
Blockchain solution will have multiple verifying parties present on the network
that can quickly validate the information. The process will be much faster than
the current offline method.
Blockchain-based
Smart Contracts can automate all the processes that involve multiple
stakeholders who coordinate among each other to distribute lease payouts and pay maintenance charges. These transactions can
be traced back for future reference.
With
the insights generated via data analysis and availability of the real-time
data, corporates can make better decisions.