The advent of crypto and the underlying blockchain tech has spurred excitement amongst many people as they witness how it’s shaking up industries like finance, art, gaming etc. Consequently, these trends have convinced many that this tech can do more in other fields.
How can crypto be leveraged in real estate?
With 58% of real estate brokers already using digital technology and the blockchain market value expected to reach US$67.4 billion by 2026, it’s only a matter of time before crypto gains traction in real estate. On that note, let’s discuss the potential of crypto in real estate and the nuances to consider as innovators and entrepreneurs make inroads in this space:
Tokenization of Properties
One of the most suitable applications of this tech in real estate is the tokenization of properties. A house, commercial building or even an empty lot can be represented on the blockchain and divided into several pieces called tokens, which can be traded like a crypto.
This approach simplifies joint/fractional ownership since smaller investors don’t have to worry about conditions like purchasing a minimum of a quarter of the property to co-own it.
Instead, they can simply buy the number of tokens they can afford. Also, this method improves capital mobility. An investor interested in another property or needing a short-term boost in liquidity doesn’t have to worry about selling their entire stake. Instead, they can sell a few tokens to get the cash they need or exchange them for tokens of another property.
People buy properties but get better economic opportunities or scholarships elsewhere. Such moves can slightly complicate recurring efforts like mortgage and home insurance payments, especially if you don’t know how long you’ll be abroad. But thanks to smart contract technology, you can set up automatic payments using crypto without worrying about the extra cost of cross-border payments, switching currencies and other intermediary fees.
This can be extended to use cases like making Homeowners’ Association payments. It also comes in handy for property management firms that pay varied service providers regularly.
Certification and Transparent Accounting
Cryptocurrencies are underpinned by technology that harnesses the power of encryption and collective consensus on a distributed ledger. This makes it ideal for combatting the falsification of titles, deeds and legal documents tied to property ownership and transfer.
And with the addition of NFT tech, every document can be made unique, and property listing and auctioning can be simplified using NFT marketplaces. In addition, we can use encryption and distributed ledger qualities to make property transaction history more transparent.
This isn’t only about the prices at which it changed hands, as this might be simpler to follow. It’s more about scenarios where a property has been renovated. Suppose the payments related to this work are made using crypto. They are thus easier to verify when dealing with institutional investors who conduct more thorough due diligence in real estate deals.
Several factors affect people’s perception of a property’s value. Some people may be more encouraged to buy as malls, hospitals, schools, and other businesses pop up near a residential area. Others get discouraged when crime goes up or when infrastructure projects associated with noise and other kinds of pollution are started nearby. The same goes for changing climate patterns that intensify each cycle of flooding, wildfires and other disasters.
But even with IoT tech, it’s hard to maintain a near-real-time view of how such developments affect real estate markets. However, everything will change when oracles bring this information onto blockchains, and it ends up on property tokenization and trading platforms.
It will become much easier to see which property-related tokens moved recently and discover patterns in how they are traded. In essence, Cryptocurrency and blockchain technology will create an environment with greater analytics capabilities, giving real estate investors more accurate insight into the fluctuating value of properties in various regions.
What is the way forward?
While it may seem like many of these benefits are still far from being realized, many firms are already developing solutions. These include Figure, Ubitquity, Blocksquare, RealtyBits, CPROP, ShelterZoom, StreetWire, The Crypto Realty Group, Propy Inc, RealBlocks, ManageGo, SMARTRealty, PropertyClub, Vairt, RealT, Republic, SafeWire, Fundament and more.
But adopting crypto in home ownership and the broader real estate space won’t be easy. Innovators need to create understandable and user-friendly front-ends that excel at emulating conventional transaction processes while using blockchain tech in the back.
They must also harmonize their operations with regulators to make ordinary clients feel more comfortable knowing there’s someone to blame when things go wrong. They’ll also need to make their platforms so secure that people who have more trust in the traditional method of tangible documents, stamps, seals and signatures start viewing them as obsolete.
Gerald Ainomugisha is a freelance Content Solutions Provider (CSP) offering both content and copy writing services for businesses of all kinds, especially in the niches of management, marketing and technology.