How Is Blockchain Revolutionizing the Real Estate Industry?

Real estate has been one of the fastest-growing industries during the last decade, standing to be a lucrative investment option for many people. Offering an opportunity to generate considerable passive income opens the way for investors to widen their portfolios and seek higher returns.

However, the conventional method of purchasing property, which is time-consuming and expensive, has frequently deterred many people, particularly small investors wishing to make a real estate investment. This is where blockchain development services came into the picture and impacted the real estate landscape.

Identifying a sector that has yet to be impacted by blockchain would be challenging, given the growing hype across industries. Cryptocurrencies have made an impact on all the major finance-led processes, including payment and foreign exchange. Initial coin offerings have also put a strain on venture financing and stock investing.

Prior to now, only using digital means to exchange high-value assets like real estate had never been the practice. Offline real estate transactions frequently involve interactions with several parties in person. However, the introduction of blockchain technology led to a change in the scenario. Now that blockchain systems have smart contracts, it is possible to tokenize and trade resources like real estate like cryptocurrency without being concerned about the security of those assets.

What is Blockchain Technology?

In its most basic form, a blockchain is a data system that maintains security, transparency, and decentralization while successfully encrypting transactional records. You may also think of it as a set of records that are maintained in blocks but aren’t under the jurisdiction of a single entity. On a blockchain, each transaction is protected by an electronic signature that attests to its validity.

A blockchain, also known as “blocks” that hold data sets, gathers relevant information and groups it together. Each block is associated with a dedicated cap which is linked to the one that was filled first once it is full. As a result, a chain of data-filled blocks is created; hence, it gets its name as blockchain.

The data is immutable and unbreakable because of the link around the blocks. This chain also produces a traceable transaction ledger that anybody may access without being able to change because the data is disseminated over a network of computers. Blockchains differ from traditional databases in this way, where data is stored in tables without always using strong encryptions.

One can often leverage blockchain technology in the real estate industry to achieve a seamless experience. Blockchain technology provides a fast and safe means to complete complicated real estate transactions, from ownership transfers to pricing negotiations.

It is also exciting to understand the change reflected in apartment tours over the years. You can arrange a self-guided trip and see an apartment without speaking to a leasing representative. Similar to this, blockchain technology offers virtual solutions that digitize and streamline various stages involved in buying a property.

Difference Between Bitcoin, Cryptocurrency, and Blockchain

Bitcoin, cryptocurrency, and blockchain are all terms that are often used interchangeably but significantly differ in terms of certain factors.

Bitcoin is a unique type of digital currency that uses cryptography to secure its transactions. It was created in 2009 and has been proven to be a highly powerful digital asset and payment system. Cryptocurrency is a digital or virtual currency that a central bank or government does not issue. It is such a digital asset that it can be used as a form of payment and is often decentralized.

Blockchain is considered to be a distributed database that helps to establish highly secure transactions. As a digital ledger, blockchain records all the different types of transactions in a particular network. Bitcoin, cryptocurrency, and blockchain are all related, but they are not the same thing.

Blockchain Technology in Real Estate – Brief History

Blockchain technology first gained mainstream attention in 2009 with the launch of Bitcoin, the first decentralized digital currency. Bitcoin uses a blockchain to record and verify all transactions, providing a secure and transparent platform for conducting transactions. Since then, blockchain technology has been applied to a variety of other use cases in the real estate industry.

In recent years, we have seen an increasing number of real estate firms and developers experiment with blockchain technology. While the full potential of blockchain in real estate is still yet to be realized, it is clear that this technology is here to stay and is already making a significant impact on the industry.

How is Blockchain Revolutionizing The Real-Estate Industry?

By allowing secure, transparent, and tamper-proof transactions, blockchain becomes an ideal technology for real estate transactions, which are often complex and involve numerous parties. Here are some other ways how blockchain is revolutionizing the real estate industry. Let’s explore!

1. No Intermediaries

Blockchain makes it a mere cakewalk to easily search for properties, simply doing away with the need for agents in the entire buying process. In order to complete high-value deals, buyers are no longer required to contact banks and attorneys. By doing away with middlemen and the associated superfluous expenditures of commission, registration, and service fees, blockchain has successfully overcome one of the main obstacles in real estate investing.

2. Decentralized & Transparent

More often than not, real estate is regarded as one of the most transparent industries. A number of issues, including citizenship, cash needs, and more, may hamper a user’s participation in this industry.

One of the main problems with the conventional real estate system is the absence of any database important to buying and selling a property. As a whole, this makes the system less clear and more complicated for everyone. All different peers in the network have complete access to the data stored on the blockchain, making it completely transparent.

The system of an extensively decentralized exchange is majorly predicated on trust. Sellers and buyers can make transactions more confidently, knowing that peers can independently verify the information. Additionally, fraud attempts would decline.

3. Liquidity

Because real estate sales typically take time to complete, it has traditionally been considered an illiquid asset. On the other hand, cryptocurrency and tokens can theoretically be easily exchanged for fiat money through exchanges; thus, this isn’t the case with them. Real estate assets, however, can easily be traded when used as tokens. A seller can receive a certain value out of their asset without needing to wait for a purchaser who can purchase the entire property.

4. Fractional Ownership

Investments in real estate are typically seen as being illiquid. This means that if there are few or no prospective customers available, a seller tends to wait a long time to sell his home at a suitable price. However, sellers can tokenize their assets using blockchain to create real estate shares that can easily be held in a fractional capacity by various investors.

For individuals wishing to make a relatively small investment, fractional ownership is a fantastic choice. Fractional ownership through blockchain platforms enables small investors to connect with purchasers who are eager to acquire digital shares of their properties, allowing them to own single homes despite having minimal financial resources.

5. Platforms & Marketplaces

The primary goals of blockchain in real estate have been to connect buyers and sellers and to list multiple properties. However, blockchain opens up new avenues for real estate dealing and can help trading networks and online marketplaces provide more extensive real estate transaction assistance.

Blockchain-based real estate platforms can offer a more secure and transparent way to trade property. These platforms can provide a more secure and efficient way to conduct transactions by tokenizing real estate assets and using smart contracts. This could potentially revolutionize the real estate industry by making it more accessible, efficient, and secure.

6. Blockchain-based Smart Contracts

The use of blockchain-based smart contracts is making it possible for transactions to be carried out in a much more efficient and secure manner. With smart contracts, there is no need for central authorities, which greatly reduces the costs and time needed to complete a transaction.

Blockchain-based smart contracts are also helping to improve the transparency of the real estate industry. By providing a decentralized and tamper-proof record of all transactions, blockchain technology is making it easier for buyers and sellers to track a deal’s progress and ensure that all parties are properly adhering to the terms of the contract. This increased transparency is likely to lead to more trust between parties and could help boost the industry’s overall efficiency.

7. Facilitate The Distribution Of Information

The real estate industry is in the midst of a major upheaval, as the traditional way of doing business is being upended by new technology. One of the most impactful forces in this transformation is blockchain, which is changing how information is distributed and monitored.

Blockchain provides a decentralized and transparent way to track data, and this is having a major impact on the real estate industry. For instance, blockchain can be used to track the ownership of a property, as well as any changes that are made to it. This information is then stored on a secure, decentralized network, which makes it tamper-proof. This is a major advantage over the traditional system, which is often opaque and susceptible to fraud.

8. Automated Transactions

Blockchain can be extensively used to track payments, and this is changing the way that real estate deals are done. With this advanced technology, buyers and sellers can have greater confidence in the accuracy of the data, which will help to facilitate transactions.

In the past, buyers and sellers would have to rely on third-party escrow services to hold and distribute the funds. However, with blockchain, the funds can be securely stored on the network, and transactions can be easily automated and completed without the need for third-party involvement.

This makes the entire process of buying and selling property highly efficient. Moreover, it is also providing new opportunities for investors and developers to get involved in the industry.

9. Lowering Down The Costs

Currently, the real estate industry relies on a centralized system of record-keeping that is often slow, inefficient, and subject to errors. Blockchain technology could help to streamline the process by curating a decentralized system of record-keeping that is more transparent and secure.

In addition to the savings realized by eliminating intermediaries’ professional fees and commissions, there are additional expenses related to real estate, including taxes, registration fees, inspection fees, and loan fees. Even the jurisdictional region affects how much these prices differ.

Blockchain-based smart contracts also prove to be of great help as they extensively automate a wide range of processes involved in buying and selling property, further reducing the cost of operations.

10. Fighting Wire and Email Fraud

The rise of wire and email fraud in the real estate industry has been a major problem in recent years. However, the use of blockchain technology is beginning to change that.

Since blockchain allows for highly secure and transparent transactions, it is an ideal solution for fighting fraud. As it is much more difficult for criminals to alter transactions integrated with blockchain technology, your confidential information stays secure. Several startups are already using blockchain to fight fraud in the real estate industry.

Some Blockchain Adoption Challenges In Real Estate

Undoubtedly, blockchain is a game-changer for the real estate industry, but success cannot be achieved without challenges. A similar is the case when it comes down to blockchain adoption in the real-estate sector. Here are some of the most common challenges faced when adopting blockchain in real-estate operations!

1. High Energy Consumption

One of the common challenges in adopting blockchain technology in the real-estate sector is the high energy consumption required to maintain the network.

The Bitcoin network consumes an extensive amount of energy. This is due to the fact that each transaction on the Bitcoin network requires the verification of multiple nodes, which consumes a lot of electricity.

There are a few ways to address this challenge, such as using more energy-efficient algorithms or moving to a Proof-of-Stake consensus model. However, more research and development are needed to find a sustainable solution to this problem.

2. Inefficient Technological Design

Many blockchain applications are designed with the assumption that all participants are equal and have the same level of technical expertise. However, in the real estate sector, participants often have different levels of expertise and knowledge. For example, real estate developers may be more technically savvy than property managers, who, in turn, may be more technically savvy than individual landlords.

This can create problems when it comes to using blockchain applications, as the more technically sophisticated participants may be able to take advantage of the less sophisticated ones. This can lead to frustration and mistrust among participants and ultimately hinder the adoption of blockchain technology in the real estate sector.

3. No Regulation

There is currently no regulation in place for blockchain adoption in the real-estate sector. This is a common challenge that is preventing the wider adoption of this technology.

Without any regulation, it is difficult to know how this technology will be used and how it will impact the sector in the future. This lack of clarity is a significant barrier when it comes to leveraging blockchain technology for real estate.

Wrapping Up

The use of blockchain in the real estate industry is still in its early stages. However, it has the potential to revolutionize the industry and make it much safer for everyone involved.

If you are looking for a real estate app development company to help you take your business to the next level, then we at RV Technologies have covered you. Our experienced teams will help you navigate through all the initial challenges and lead you toward successfully leveraging blockchain for real estate.

Talk to our professionals today!