- August 5, 2022
- Posted by: Khyati S
- Categories: Blockchain, Economics
It’s challenging to identify a sector that hasn’t been impacted by blockchain technology given the technology’s disruption of financial services and subsequent widespread deployment across industries. Payments, remittances, and foreign exchange have all been significantly impacted by cryptocurrencies. Initial coin offerings (ICOs) have put a strain on venture financing, startup loans, and stock investing. Blockchain has altered several industries, including the food supply chain.
The upheaval caused by blockchain has also reached real estate. Before now, only using digital means to transact high-value assets like real estate was unusual. Offline real estate transactions frequently involve face-to-face interactions with numerous parties. However, the advent of blockchain made this possible to change. Now that blockchain systems have smart contracts, it is possible to tokenize and exchange assets like real estate and cryptocurrencies like ether and bitcoin. This method of real estate trading differs.
Six ways blockchain technology has altered the real estate market are listed below:
1. Platforms and Marketplaces:
Traditionally, real estate technology has focused mostly on listings and bringing buyers and sellers together. However, blockchain opens up new avenues for real estate dealing and can help trading platforms and online marketplaces provide more extensive real estate transaction assistance. For instance, ATLANT has created a platform that enables real estate and rental property transactions using blockchain technology. Real estate can be tokenized and then traded online similarly to stocks on a stock exchange.
ATLANT enables sellers to tokenize assets, thereby treating them like stocks, and liquidate those assets utilizing the platform through a token sale. With buyers owning a portion of the property, the accumulated tokens can be converted into fiat money.
2. No Middlemen:
The real estate industry has long included brokers, attorneys, and banks. Blockchain, however, may soon bring about a change in their participation and roles in real estate transactions. New platforms may eventually take over tasks like listing, payment, and legal paperwork. By eliminating the middlemen, buyers and sellers will be able to receive more for their money because they would pay less in commissions and other costs.
Since it takes time for sales to close, real estate has historically been seen as an illiquid asset. Cryptocurrencies and tokens, on the other hand, can theoretically be easily exchanged for fiat money through exchanges, thus this isn’t the case with them. Real estate, however, can be easily sold when used as tokens. A seller can gain some value from their property without having to wait for a buyer who can afford the entire thing.
4. Fractional Ownership:
Blockchain also decreases the obstacles to real estate investing by allowing fractional ownership. Investments typically require a sizable down payment to purchase real estate. As an alternative, investors might combine their funds to buy more expensive properties. Investors would just need to open a trading app and use it to buy and sell tokens of any denomination as they saw fit if blockchain technology were to be used. Additionally, fractional ownership would enable them to forgo managing the properties themselves, including leasing and maintenance.
Dealing with tenants can be difficult and upkeep fees alone can be expensive. This has an impact on associated sectors as well, such as lending, where property owners frequently use their assets as collateral for loans to obtain quick cash. Property owners may also continue to use their property according to the terms.
As a decentralized technology, blockchain inspires confidence and security. All peers in the network have access to the data stored on the blockchain, making it transparent and unchangeable. One simply needs to go back to the 2008 housing bubble burst to see how institutions’ greed and lack of openness may have disastrous results. The system of a decentralized exchange is predicated on trust. Buyers and sellers can make transactions with greater confidence knowing that information can be independently verified by peers. Additionally, fraud attempts would decline. With legislation for admissible records being passed in Vermont and Arizona, smart contracts are progressively becoming such documents. As a result, smart contracts would be easier to enforce in areas outside of Blockchain Technology.
A decentralized network’s openness can reduce the costs involved in real estate transactions. There are additional costs involved with real estate, such as inspection costs, registration fees, loan fees, and taxes, in addition to the savings realized by eliminating intermediaries’ professional fees and commissions. Even the jurisdictional territory affects how much these prices vary. As platforms automate these activities and integrate them into the system, these can be minimized or even removed from the equation, similar to how middlemen are.
Despite having a value of hundreds of trillions of dollars, affluent individuals and major corporations own most of the world’s real estate. More people might have access to the market where transactions can be made more transparent, safe, and equal thanks to blockchain technology. In the future, real estate transactions might genuinely be a peer-to-peer activity, with platforms powered by blockchains handling the bulk of the work.
In conclusion, blockchain technology has the potential to change the real estate sector. Platforms built on the blockchain have the potential to streamline the entire real estate transaction process. They can help match buyers and sellers and provide a secure, open platform so that everyone can track the progress of a transaction.