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Editor's Note: This article is part of our propllech JLL, produced in collaboration with JLL, a leading company in the professional services sector specializing in property management and investment. We believe in transparency in our publication
The closure of a real estate transaction can become complicated. Buyers, sellers, brokers, legal representatives, mortgage providers and, of course, the government, require all forms and cards that need to be stamped, scanned, faxed or sent via postal or delivery services.
Blockchain and real estate transactions seem to be a perfect combination because such transactions require secure and unchangeable property registrations and trust is the key. Blockchain technology potentially allows any two parties to negotiate directly with each other without the need for trusted third parties as intermediaries as real estate agents. Although it seems unlikely that the intermediaries disappear completely.
In some countries, the real estate sector is already adopting blockchain technology. In Sweden, property buyers and sellers can be verified by an identity solution from Telia telecommunications company. Georgia plans to use the blockchain to register land titles and validate real estate transactions with Bitfury help. The service will allow the nation's government to verify and sign a document containing the information of a citizen and proof of ownership of the property.
China is already experimenting with technology in Xiong & # 39; an New Area, the emerging city of the country's future.
"The use of the blockchain in the land registry will mark when the blockchain becomes a mainstream technology for the real estate sector and will facilitate a real acceleration in other real estate uses," said James Hawkey, Head of Retail China at the real estate company JLL.
He said that the most basic use case for blockchain in property is to put the cadastral register of a country, or its equivalent, on blockchain. This would allow to document all property and changes of ownership in property and property rights.
Hawkey added that the creation of digital property records is a major obstacle and that records of any kind are missing in some parts of the world. "This is a huge undertaking and requires government sponsorship," he said.
Smart contracts
The self-executed contracts that contain the terms of the contract between two parties, or smart contracts, are another key characteristic of the blockchain. These contracts can verify documents and authorizations with the help of digital signatures. Since they are distributed, each action is recorded on multiple "nodes", the block contains an infallible record of every transaction ever made. This helps avoid double spending, fraud, abuse and manipulation.
In Xiong & # 39; an, a blockchain-enabled project fund management platform is designed to help prevent misappropriation and interception of funds. Xiong & # 39; an, with the help of Ant Financial and other partners, is also preparing a blockchain case rental platform that provides accurate information on government-controlled lists, tenants and landlords. This should help the city solve the widespread problem of property listings that are heavily embellished or simply fake.
Smart contracts also allow greater automation. For example, they can "know" when approaching the end of the lease of a property and remind the owner to return any deposits.
A Singapore startup does just that. "What we actually do is allow owners to easily create digital contracts, and we can collect data from digital contracts and help them build analytics platforms to generate reports," said Ivan Lim, founder and CEO of RealEstateDoc, who focuses on the commercial real estate market.
Hawkey from JLL states that a key advantage for smart contracts is reducing the time required and coordination between the parties involved: buyer, buyer, agent and mortgage lender. "This is perhaps the perfect case for the smart contract, and when the conditions are met, the transaction moves forward," he said.
There are many other applications. The Chinese startup PutLink aims to help Chinese investments in overseas property using traditional cryptocurrencies like Bitcoin and Ethereum.
"Blockchain makes payments safer, easier and faster, makes contracts immutable and reliable, there is no need to fly overseas to sign it," said Michael Su of PutLink.
A fraction of the cost
An even more radical idea would be to make real estate a process of representing the ownership of real world resources on a master blockchain. Tokenization can transform ownership into something that resembles a publicly traded company where property can be fractional.
Zi Wang, a former Google engineer and co-founder of the US company Third Planet, said that blockchain has some unique applications or properties that allow us to think in a new way to the real estate sector.
"One of the things we're working on is working with developers and investors to help reduce the barrier to entry for average investors," he says, citing fractional ownership as an example. A typical 10-story development is usually financed by banks, private equity or wealthy investors. The fractional property supported by blockchain could change it, he added.
"Instead of getting 10 investors, you could get 10,000 investors or a million," Wang said. Such an approach could help make property more accessible, especially to young people who are struggling to afford their own place, he added.
Blockchain could also help to add more data information to an industry that is undergoing a data revolution. Many real estate systems and processes are currently silent, which means that it is difficult to link points and draw conclusions.
However, blockchain has its limits and is not suitable for any type of system. It could even increase costs if implemented incorrectly, according to a report from the consulting firm Deloitte. For example, immutability is considered one of the blockchain superpowers, but this could prove to be a burden since the cancellation of orders and transactions can be a frequent event.
Blockchain in real estate is still in its early stages of development. While some applications seem obvious, others will become clearer as successful case studies emerge.
