Anyone who follows tech news will know that blockchain is increasing its footprint across a range of sectors, including finance, digital media, and – most interestingly from my perspective – real estate, writes Amira Sajwani, General Manager – Sales and Development at DAMAC Properties.
Research from Deloitte suggests that blockchain technology could take over more than half of the entire leasing and sales processes across commercial real estate. In short, it has the potential to revitalize and perhaps even revolutionize this industry.
But how and, more importantly, why?
Well, by operating in a decentralized environment, meaning that no single entity has authority, blockchain transactions negate the need for intermediaries. This allows for faster access to essential data, an improved customer experience, increased productivity, and lower overall costs. At the same time, it is incredibly difficult – if not impossible – to tamper with the blockchain, resulting in one of the most secure systems we have ever seen.
In many cases, blockchain-related innovations are outperforming traditional centralized financial mechanisms, driving new efficiencies through digitization. In terms of commercial real estate, this paperless technology looks set to drive significant advancements in property and payment assessments, helping to make cash-flow management far more efficient than it is today. The fact that all transactions on the blockchain are traceable means that it also offers an unparalleled level of transparency for real estate buyers, with the ability to track and authenticate ownership in real time.
The upshot is that this technology has the potential to make real estate processes more straightforward and transparent for buyers and sellers alike.
Quality-of-life improvements
When we drill down into the details, it becomes apparent that blockchain offers countless potential benefits for the real estate industry, most of which can be – and, in some cases, are being – leveraged right now.
The fact that middlemen are not required for blockchain to operate means that associated fees could be cut dramatically – and who doesn’t like to pay less? In turn, these reduced, or in some cases eliminated charges could widen access for prospective homeowners and investors, ensuring that stakeholders get more for their money.
At the same time, tokenization stands to accelerate the pace at which property can be traded, slashing the time it takes for sales to complete. With a blockchain-based system, we would enjoy more opportunities to join forces and pool our resources through fractional ownership. Again, this combination of simplicity and collaborative investment will serve to make our sector more accessible, attracting greater numbers of investors who may not otherwise have been able to participate due to lack of capital.
And, as this tech is completely decentralized, all information stored within the blockchain is both transparent and irreversible. This will make life much harder for would-be fraudsters and, consequently, help to further strengthen levels of confidence within the real estate sector.
The situation today
Given the many advantages offered by blockchain, it’s hardly surprising that this technology is already becoming a familiar fixture among forward-thinking real estate outfits. Some organizations have begun to use blockchain to trade property, leveraging online platforms and marketplaces to support transactions on a broad scale.
Examples also include the use of smart contracts, which feature lines of code that enable them to ‘self-execute’ within the terms of the agreement between the buyer and the seller. Once signed, this code and its associated contract arrangements are distributed across the decentralized blockchain network. Because smart contracts require no enforcement mechanisms, the fees payable to third parties are minimal.
In addition, some property companies are allowing customers to pay for assets with cryptocurrencies. As real estate continues to establish itself as part of the broader blockchain ecosystem, these developments will no doubt provide a gateway to other areas of the burgeoning decentralized finance (DeFi) sector.
Looking to the future
But what do such shifts tell us about our industry’s longer-term trajectory? What does the future hold for blockchain-powered real estate? Well, based on current trends, it seems inevitable that advanced decentralized technologies will continue to simplify real estate transactions.
I fully expect that blockchain will progress to the point where it is possible to purchase a physical property using cryptocurrency and with only a few clicks of your smartphone – and I believe that these capabilities will arrive much sooner than many of us previously imagined.
More generally, the entire process of real estate trading will become faster and more streamlined as a result of blockchain innovations. Thanks to the information that can be retained and viewed using this technology, users will be able to access data relating to properties and land at a much quicker pace than is possible at present. Essentially, the real-time data and speedy trading mechanisms offered by blockchain will turn instant validation into a reality.
Finally, I am confident that blockchain will supplement rather than replace the human element in real estate. Although this technology negates the need for intermediaries, that’s not to say that those working within our industry will be at risk of losing their jobs. On the contrary, the effective implementation of this technology will require significant expertise, and those with the mind to do so will no doubt forge new careers focused on the decentralization of our sector.
The upshot is that, if leveraged effectively, blockchain will change the face of commercial real estate as we know it, driving efficiencies, adding value, and making life easier for everyone involved in the process.
