Because of its decentralization and transparency, blockchain technology is increasingly being used in various fields, including the real estate market. We’ll tell and show you how it’s happening now, using examples of specific platforms.
The first real estate transaction for cryptocurrency took place back in 2017: Michael Arrington sold his apartment in Kiev on the Propy platform as an NFT. Its new owner, Devon Bernard, said that this historic purchase would be the first of many to follow.
Here are some more recent illustrative examples.
- In the summer of 2021, E11EVEN Hotel and Residences, a major luxury housing developer in Miami, made it possible to make crypto deposits on real estate. Co-founder Mark Roberts noted that this could be one of the most important decisions.
- In September, the Hong Kong and Bangkok-based startup Fraction, which includes real estate, received a license from the Securities and Exchange Commission (SEC) of Thailand and can now officially trade tokens representing ownership of physical or digital assets.
It Increases the Level of Trust Between Market Participants
With blockchain technology, it is possible to create a secure database where each property has a digital passport with all the information about it: information about documents, owners, sale prices and transaction dates, lease contracts, etc. Smart contract transactions are transparent and public. Digital ownership of property on a blockchain cannot be altered or counterfeited, unlike traditional documents, which means the risk of fraud is minimized.
Some companies working with cryptocurrency focus on the trust factor. For example, the African project Seso Global is a trading platform where you can purchase real estate from trusted developers without risks and get access to the services of reliable lawyers, appraisers, etc.
The company approached the issue of privacy with a particular responsibility. While regular blockchain stores information on a public distributed ledger, Seso has a private ledger — a kind of private blockchain that is currently available only to registered users (buyers and specialists).
The Ohio-based project SafeWire focuses on fighting real estate fraud. The blockchain-based platform guarantees the security of transactions and instantly verifies the authenticity of information of all parties involved in the transaction, including identification and banking data.
It Allows You to Do Without Intermediaries
In real estate transactions, three participants are enough: the buyer, the seller, and the land registry office. Intermediaries like notaries, lawyers, banks, realtors or agents slow down timelines and increase costs. Thanks to blockchain technology, transferring ownership and payments will be fully automated and the transaction will take only a few hours or minutes, depending on the speed of the blockchain.
In addition, blockchain platform mediation fees are many times lower than bank fees, notary fees, etc. For example, American Deedcoin takes only a 1% fee from sellers and returns 2% cashback to buyers.
It Reduces the Entry Threshold For Investors
Real estate tokenization offers huge opportunities for fractional ownership. Instead of buying a mansion in Malibu for a conditional 700,000 USD, you can invest in it, for example, 150 USD, and become a co-owner. At the same time, you do not need to come to the country where the property is located, engage in paperwork, or contact intermediaries. Just as quickly, you can exchange or sell the purchased share. Smart contracts with multisignatures ensure any decision made regarding a house will be agreed upon by a majority of owners. Such a scheme can become an affordable alternative to other investments, for example, in company shares.
Examples of blockchain-based investment platforms:
It Makes Renting Easy
The American platform RealT also works on the tokenization principle. Besides fractional ownership, rent can be paid here without the recipient having to wait a month for a standard bank transfer to arrive. Rent is paid in USD stablecoins to xDai or Ethereum wallets.
In addition, RealT offers an interesting risk insurance scheme based on the Opium decentralized protocol. For example, if there is a fire in a rented house, standard insurance will cover the restoration costs. However, tenants may move out during the renovation and not pay rent — but thanks to staking to the decentralized pool, the landlord will still receive 3 months of rent.
These are just a few examples, but one can already judge the trend from them: many more people will be able to invest in the multibillion-dollar global real estate market, and the transactions in the sale, purchase, or rental of housing will become less expensive, faster, transparent and safer.