Blockchain in real estate is permitting small investors to a multi-trillion dollar industry with liquidity.
From business administration to partnership, blockchain is changing every aspect of industries, even with an undergo change industry like real estate. With the ability to store data in a distributed and immutable way, the idea of tokenizing a property with blockchain makes investment property no longer reserved for wealthy investors. Blockchain in real estate is permitting small investors to a multi-million dollar industry with liquidity.
How blockchain can change the dominance in real estate investment
A report by HSBC in 2017 has pointed out that the global real estate value tops $228 trillion. Yet, this behemoth asset class is managed by a few incumbent players in the property sector. As the market is dominated by several players, the market power for some other minor players is weak. From the viewpoint of the investors, investment property requires a substantial amount of capital and is implicitly for wealthy investors.
Regarding the process for any investor to own a property, the investor must experience an extremely tedious document-based procedure. A standard procedure involves the offer letter to the sellers, the purchase agreement, the home inspection report, the home appraisal, the title search, and the homeowner insurance declaration page. Among these documents, many of them pose the last mile problem. For instance, the title search can require both online and offline search. As for property brokerage, the investment property is largely based on the agents: the listing agents and the buyer agents. For a millions-dollars property, the commission for the agents adds a substantial amount of money to the cost paid by the investors.
The current state of investment property enables a stratospheric opportunity for blockchain. In terms of brokerage and trade, the act of tokenizing a property will make the investment property accessible to ordinary investors. Moreover, the introduction of smart contracts to the trading process will significantly alleviate the role of the agents, slash the verification cost in some of the document processes. From a high-level viewpoint, the introduction of a new form of investment property brokerage based on blockchain will gradually diminish the market power of the incumbent players, as new emerging ride-hailing products did to the transportation sector.
Create a blockchain real estate solution
- The idea of a blockchain-back investment property that aims to fix the scattered chunks in the investment property.
The critical vision is to make investment property accessible to ordinary investors through the act of tokenizing the property. As the property is tokenized, the investors can buy several tokens with the value as they see fit without any upfront investment or a substantial capital. Moreover, as the investors own a fraction of the property, they can avoid the cost of maintenance and leasing. With this act of tokenizing, the liquidity in a traditionally illiquid sector enables. Tokenization also facilitates peer-2-peer trading. For the investors, each of them can diversify their investment portfolio as well as mitigate the risk as they don’t have to reserve a whacking capital amount.
In terms of trust, transparency, and process betterment, the blockchain benefits the investors, the service provider, and the society as a whole. Among the documents required in the purchase process of a property, land title, and title insurance stem from many concerns about authenticity, accuracy, and cost. According to the American Land Title Association, in nearly all real estate transactions, there is at least one title defect that must be corrected before transferring the title. With the scope and the value of the property sector, the value lost due to land title fraud can surmount billions of dollars.
Blockchain can fix this defective chunk in the process of investment property. In a 2019 report by the World Economic Forum (WEF), the organization mentioned the concept of Digital ID and its potential in unlocking great economic value. Notably, the Digital ID is not only for a person but also for an asset. Respectively, a property can have a Digital ID. A blockchain-backed digital ID for an investment property can encapsulate critical information such as history, location, ownership, and other details. The nature of a blockchain – consensus, tamper-proof, enhanced security – can prevent any corruption of the information by unauthorized users. Although some researchers have pointed out that the rise of quantum computing can affect the blockchain, it will perhaps take decades for quantum computing to become popular and have an actual impact on the blockchain. When transparency is available, it facilitates the title transfer process and the overall process of property trading as a whole.
Another critical chunk in the investment property is the payment. The current payment process is cumbersome, involves many parties and governing authorities. Blockchain has the potential to simplify the finance process, including loan application, due diligence, documentation. The immutability and the traceability enable transparency and ease the audit trails.
The implication of blockchain in the property sector remains diverse. The potential application includes streamlined the search process, property administration, and on-chain data storage.
With the act of tokenizing and applying blockchain to the overall process of investment property, the traditionally illiquid market and laborious document processes have the opportunity to rejuvenate. Just as the new ride-hailing startups reform the transportation market and diminish the market power of the incumbent players, akaChain’s blockchain real estate solution expects to achieve a similar outcome. Popularly, incumbent players in the property sector such as Savills, CBRE, and JLL cater to a wide range of services, including valuation, property management, brokerage, and investment management, covering almost every aspect and the lifecycle of a property. A new player with emerging technology will probably start small, but will gradually grow and dominate the market.
- User interaction points
Blockchain remains at the core of this tokenizing solution. The interface to which the investors will interact is either an application or a website, depending on which device they are using to navigate. This tokenizing idea is a new form of investment property brokerage, many questions and concerns will stem when investors look for the listings that they see fit. Apart from the blockchain, to ensure customer satisfaction and slash the manual effort other technology can be considered, such as AI chatbot.
The final touch that makes the platform appealing to the investors is a seamless, up-to-date, and connected search engine. Investment property is highly geographical. Each area is dominated by a different agency or a realtor. With blockchain, our platform can create a permissioned blockchain network with each agency acting as a node, enabling a seamless, smart, and unified search directory.
About akaChain (boilerplate)
akaChain is backed by FPT Software, a globally leading technology, and IT services provider. It is an end-to-end, permissioned, multi-chain network based on the Hyperledger Fabric. Since Establishment in September 2018, akaChain’s product has assisted many enterprises, from SMEs to Fortune 500 firms, to transform with distributed ledger technology. The company provides a broad range of permissioned blockchain-based products and services in multiple sectors, including retail, supply chain, banking and finance, insurance, shopping mall management, etc. to transform with its distributed ledger technology. For more information, please visit https://blog.akachain.io/
Contact us for more information:
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