With the use of blockchain and other technologies of the distributed ledger, real estate transactions will become more comfortable, faster and cheaper, the market will get rid of unnecessary intermediaries, become safer and more transparent, and, as a consequence, more liquid.
Nowadays, no one is surprised at the acquisition of real estate for the cryptocurrency, bypassing banks, this procedure has already become a reality. For example, in 2012 the owner of a villa in Israel sold it for 5000 Bitcoins. Currently, the acquisition of residential and commercial real estate for cryptocurrencies is by no means surprising and is quite common practice in many developed countries. A few years ago in the US, California, a deal was successfully carried out to sell the elite real estate for crypto assets worth $ 1.6 million. In the not too distant future, blockchain technologies will undoubtedly be used not only for secure payment of transactions in the cryptocurrency but also for transferring real fiat money, creating national digital currencies issued by official state banks.
A conclusion of transactions and contracts will also reach the new level – a digital one. At the same time, the participation of third parties, intermediaries and the influence of the human factor will be reduced to zero, since all execution (transfer of ownership from one owner to another) will be provided only by the corresponding virtual protocols of the program. Besides, thanks to these protocols, the possibility of committing and verifying the legality of the transaction will reach a new level – the conclusion of a contract will not be impossible if its conditions do not meet specific established standards.
Although the idea of creating the standalone software contracts had appeared back in the 1990s, the real possibility of designing and implementing them arose only with the development of blockchain-technologies, allowing to ensure the proper level of reliability and security. For example, in September 2016, the British consulting company Deloitte announced that, in conjunction with the administration of Rotterdam (the Netherlands) and the Cambridge Innovation Center, launched an ambitious project to register rental transactions using blockchain.
One of the main features of blockchain-systems is an unprecedented level of reliability and security. To forge an existing entry in a distributed ledger, you will have to hack each of the computers on which the copy of the registry is stored, and their number can be huge (for example, the number of Bitcoin users is estimated at several million for now). You can not delete a record or enter data backdating, which significantly narrows the field for fraud and abuse.
Quite often escrow accounts are required when buying and renting real estate. For example, in the US, landlords take a security deposit from the tenant stored in an escrow account, money from which cannot be withdrawn without the tenant’s consent. Now escrow holders are mainly large banks and notaries, but distributed registries can change the situation. For example – when buying a property at the construction stage, the buyer will be able to deposit money into an escrow account in a blockchain. Already only after the new building is put into operation and the buyer gets ownership, the money deposit is automatically unlocked for the developer with the help of a smart contract.
5. Objects register, transactions and property rights
Information about real estate, transactions, registration of property rights, encumbrances and the status of objects will be recorded in distributed registries, access to which can be obtained from desktop computers and mobile applications. Since 2016, the Swedish Land Register is carrying out a large-scale study, whose purpose is to find out the potential of the detachment to transfer the land register to this technology.
Also, in December 2017, Georgia moved to the implementation of the Real Estate Register on the basis of blockchain-technology.
It is safe to assume that in the foreseeable future each property will be able to receive the so-called “blockchain-passport,” which indicates its technical characteristics. In particular, this will simplify and accelerate the valuation of real estate, because now for each transaction you have to re-order the relevant documents.
In multi-apartment buildings, by voting of apartment owners decisions are often made regarding a shared infrastructure (for example, overhauling or arranging a housing area). Distributed registry technologies will provide reliable remote voting when each owner can make sure that his voice is counted correctly. Technologies blockchain will be in demand in other cases, when decisions in the real estate industry are taken on the basis of voting, for example, shareholders or shareholders.
7.Reduction of transaction costs
Back in 2016, it became known about a major deal based on the blockchain in the financial sector, when the British bank Barclays, the Israeli technological start-up Wave, and the Irish dairy producer Ornua held a $ 100,000 letter of credit. In providing the export of a lot of Ornua butter and cheese to the Seychelles Trading Company in less than four hours – in this case, usually, this process takes 7-10 working days due to the processing of documentation.
Besides, the time for entering into transactions in the real estate market will also be reduced. For the execution of documents instead of weeks and months will go hours or even minutes. Cross-border transfers and conversion of funds will not only be faster but also cheaper; The cost of technical work on the transfer of ownership will also decrease. The transaction will also become cheaper: for example, notary services and bodies registering transactions will be required, while at the moment these services can cost 1-2% of the value of real estate.