It’s hard to identify a sector that hasn't been impacted by blockchain given the technology's disruption of financial services and subsequent widespread deployment across industries. From payments to stocks to venture capital firms to the food supply business, blockchain is everywhere. The real estate sector is also touched by it. Here’s how:
According to Sristhi Assudani, a blockchain leader at SettleMint, a blockchain platform, blockchain technology can provide for property or land title management through immutable records and auditable transaction history for land registration and transfers. “The technology can also be leveraged to provide efficiencies in property management through use of smart contracts,” she says.
However, Srinivas Mahankali, chief business officer at SecureKloud Technologies, a blockchain company, says that currently there are a few regulatory and custodial challenges in implementing real estate tokenisation on blockchain. "If and when implemented, it can vastly streamline and speed up the process of purchasing, enjoying the dividends and financial benefits of owning real estate assets across the world in fractional units," he says.
He adds that blockchain technology and distributed ledger technologies can offer security and privacy to the participants.
“Fractional ownership is helping small retail investors own a part of dream properties," says Kamlesh Nagware, chief technology officer of Snapper Future Tech, a global blockchain development company.
It will create a new business model of owning a part of real estate property that can be traded using blockchain-based tokens, say experts.
Another use case that blockchain experts believe could be helpful in the growth of the real estate sector is issuance of No Objection Certificate (NOC) and other compliance certificates, which can be recorded through blockchain technology. This will automatically bring trust and transparency.
“Blockchain and smart contracts can potentially transform paper-driven and offline commercial real estate transactions such as sales, leases, financing, etc. Distributed ledger technology has broader application in smart city ecosystems such as smart parking and enables smarter decision-making in city management by offering real-time insights," says Sharat Chandra, vice-president, research and analysis, EarthID, a blockchain company.
A report by global community of blockchain leaders Enterprise Ethereum Alliance, named Real Estate Use Cases for Blockchain Technology, which was released in 2019, said that asset management investors are constantly looking for ways to increase or preserve liquidity options, allowing them to improve positions and manage risk.
"A pension fund, for example, might own several large commercial buildings in one city but might want to expand into another city either as part of a diversification or portfolio expansion strategy. They might not, however, have the desire to buy an entire building or an investment block. Instead, they might want to buy a smaller securitized portion of a property," says the report.
Blockchain can help tokenise real estate and exchanges like cryptocurrencies, thanks to the inclusion of smart contracts in blockchain platforms. “Blockchain technology is disrupting the real estate sector and creating innovative, new business models. In the first place, real estate tokenisation creates alternative ways for financing projects, while enabling the transfer of assets in a transparent and trustless manner," says Assudani.
