Blockchain technology has the potential to address many challenges within the real estate industry.
Technology has transformed many aspects of our lives, consistently offering unprecedented opportunities for the future. It is essential for organisations to keep up with this transformation. These advancing technologies are improving the efficiency, powering new products and services, enabling new business models, and blurring the boundaries between industries.
The conventional industrial methods have been disrupted as emerging technologies have created a huge wave of transformation in every industry including the real estate.
With the advent of technology, Indian Real Estate is set to revolutionise by eliminating all the drawbacks of the trade. In the past decade, technology has changed the real estate industry by making it safer and smarter. One of such technological advances would be Blockchain, which is creating a prominent impact in keeping a check on the growth in the real estate market.
Blockchain technology could have a major effect on the real estate industry, from property purchasing to due diligence to title management. The decentralised-record-keeping technology, which is designed to instill trust in the authenticity of digital transactions, could be used to create efficient solutions for both commercial and residential real estate — from buying property to conducting due diligence to enabling crowd-sourced investments, and more.
This technology enables transactions between parties using online payments that don’t have to go through a financial institution. It operates through decentralised peer-to-peer platforms, building resilience against the spread of corrupted information and boosting resistance to fraud.
Blockchain in India needed the right support from people as well as a proper structure to settle itself as a prime technology in the upcoming years. There is a long road ahead before blockchain technology reaches maturity. Companies are still experimenting with its applications, and many issues remain to be addressed as the general public continues to learn how to use and understand the decentralised technology. Moreover, blockchain technology must overcome the somewhat negative image it has gained from speculative cryptocurrency bubbles, with some projects amounting to thinly-veiled get-rich-quick schemes or even outright fraud.
Blockchain technology has the potential to address many challenges within the real estate industry, including:
- Improving trust and transparency: Blockchain technology offers a verifiable and censorship-resistant option for sharing information (such as valuation details).
- Reducing siloed databases: Real estate processes would benefit from secure and tamper-resistant shared databases that compile data and documents from various different stakeholders in one place.
- Making transaction processes more efficient: Most real estate transactions are still conducted through wire transfers and require costly verification processes that can take days to complete. Blockchain-based transactions could enable a streamlined process which delivers quickly and reduces costs.
- Limiting the use of intermediaries: Many intermediaries — from brokers to escrow companies — could be rendered obsolete by blockchain-based approaches, as records could be stored, verified, and transferred using blockchain technology. Removing the need for intermediaries could dramatically reduce costs and save time.
Blockchain will help the industry to have debt free development as it does not allow any kind of leverage at any level. If the developer does not have sufficient funds for land and approvals, new project may not be viable. With faster transactions, developers would depend upon receivables from sales during construction stages, which is usually adequate to meet development cost.
We believe blockchain is set to make a positive contribution to the world of real estate, in terms of uniformity, efficiency and transparency. With industry leaders and governments exploring and implementing blockchain applications in the real estate space, it’s possible that Indian Real Estate may be one of the first to make the leap into a decentralised digital world. From seamlessly registering land with the government to creating a truly liquid property market to effortlessly facilitating rental agreements, it seems clear that blockchain will have a massive impact on real estate in the coming years.
The author is the MD - RICS.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of the organization.