Real Estate companies are starting to look at how the technology has the potential to optimise their processes and facilitate Real Estate transactions.
The property listing market is dominated by centralised, sometimes monopolistic, platforms which are often subscription-based, charging high fees and subject to human error. These intermediaries have cut off the direct connection between the asset owner and customer.
A blockchain-based listing gives the connection, and valuable information about users, back to the asset owners and allows users to view information such as the properties location, history, ownership and the title information.
The use of blockchain for the property search process will ultimately reduce transaction costs and be more secure and efficient.
Conducting due diligence
Currently the due diligence process in a real estate transaction is predominantly offline and highly labour intensive, with documents surrounding proof of identity for the history of property ownership, tenants and modifications. A blockchain solution for digital identities and title registers enables a streamlined and secure due diligence for both the buyers and the lenders, eliminating much of the potential for human error and fraud. This would also open up opportunities in countries with no mandatory land register and/or field book as sensitive information secured on the blockchain contributes to the credibility of the information.
Self-executing (smart) Smart contracts will help to facilitate, automate as well as make secure exchanges for items such as payments or titles through self-execution on the Blockchain.
Smart contracts (sitting on the blockchain) can be used to create dynamic tenancy agreements. This enables details of the contract such as rent value, payment terms and information around the state of the property to be agreed and signed digitally between the landlord and tenant. Following this, the payment of the lease and eventual return of the deposit and payments to agreed contractors can all be executed automatically via the smart contract once the agreed criteria has been met. Once again meaning a more efficient, auditable and legally enforceable process.
Blockchain could be used to create or support a land registry where all components of the process are held together in a secure and transparent way. This would enable users to track the history of ownership and other information necessary for various purposes. For instance; title transfer, land register registrations, to name a few.
Smart contracts will also enable us to manage and track payments to and from the owner of the property, again leading to more efficiency within the process.
These are but a few examples of how Blockchain might disrupt the Real Estate Sector, and there are even more impacting factors to take into consideration when including cryptocurrencies and tokenisation within the sector too.
Blockchain will undoubtedly change the way we purchase, lease and manage property portfolios. It will make the transfer of valuable information and assets more secure and efficient, enabling Real Estate investment to be more accessible through this decentralised ledger.
Terms and Conditions
DWF’s market leading Real Estate experts have come together to explore how Blockchain is disrupting the industry. We understand this complex technology and its legal ramifications and our Real Estate sector experts are here to guide you through what the changes may mean for your business.