How Blockchain Can Improve Real Estate Transactions
By improving efficiency and access during transactions, blockchain and other digital technologies offer the potential for savings for facility managers.
In August 2022, Forbes reported that a housing market recession had officially begun just a month before, as the decline in US home sales marked the sixth consecutive month. Builders are struggling to build, with permit applications falling 1.8 percent from June to July 2022 and homes recently under construction falling 9.6 percent over the same period.
The commercial construction and property market is also struggling, with vacancies in the city center still high post-covid as many organizations reassess their space needs. Materials continue to experience record wait times due to supply chain issues caused by Covid-19, interest rates are rising higher and higher, and potential buyers are once again being effectively driven out of the property market.
But even before this year, and well before the Covid-19 pandemic, the construction market was uncertain at best. Data tells the story of a bleak prospect, but innovative technology will prove to be decisive and indispensable in the fight against the crisis we are facing, and result in better living conditions and fair opportunities for all.
A report by 5Jewels Research estimates the role that digital technologies played in preventing around 20 percent of global GDP from being wiped out by 2020. This amounts to a total savings of $17 trillion for the benefit of the global economy, which tells us something worthwhile to highlight: technology can drive sustainable economic recovery, and can be harnessed to “enable widespread integration of renewable energy, make cities more livable, make transport more efficient and greatly improve healthcare delivery”.
Blockchain, in particular, is a disruptive digital technology with the potential to help solve – or at least ameliorate – many of the crises of 2022, including the one facing the real estate space.
When talking about entry barriers to the market, they can be significantly reduced by first-time buyers or potential buyers using shared ownership to get onto the property ladder in new and ingenious ways. Pooling resources and holding, or trading, parts of the property in the form of tokens allows potential buyers who feel cut off from traditional forms of real estate investment to participate within their means, within their means. That’s an incredible advantage, especially when it comes to the lack of affordable housing and prohibitive entry requirements.
By eliminating the need for an intermediary and connecting buyers and sellers directly, blockchain helps both parties reduce costs, cut waiting times and streamline the buying process. And by virtue of blockchain’s decentralized nature, transactions are fast, immutable, secure, transparent and publicly traceable. As a decentralized registry of publicly available data, the possibilities for blockchain utility in the real estate space are almost endless. Blockchain can record property transfers, or it can be a simple way to sell and transfer shares of a single property. Or again, it can be used to prevent fraudulent developers from falsifying data and records for their own gain.
In a peer-to-peer marketplace, barriers to entry are again greatly reduced, allowing investors to buy into the opportunities offered by a specific property, invest in their future appreciation and begin to think of real estate assets much like shares in the stock market . And when it comes to the hype we’ve seen built around NFTs in 2021 and beyond, their utility in the real estate space has yet to be properly explored. But they can prove another great advantage: their application in real estate can be exploited to store purchase records on the blockchain, providing access to all legal documents related to the sale or transfer of property in one (secure, immutable, publicly accessible) place.
Last year, according to a study by Nonfungible.com and BNP Paribas-owned research firm L’Atelier, NFT trading grew by 21,000 percent compared to 2020, for a total of $17.6 billion in total transactions and a total profit of 5.4 billion dollars. So far its popularity has mostly been attributed to the NFT-as-art craze, but I think it doesn’t stop there. In general, blockchain technology allows easy division of property into smaller virtual fractions; and with efficient NFTs and their trading on the blockchain, problems such as lack of liquidity, lack of scalability and access limitations can be solved. In this way, we will open up entire areas of the market for new buyers and new investors that have previously been rejected or closed out completely.
Farbod Sadeghian is the founder of Qlindo, a real estate and energy investment company.
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