Blockchain in real estate: Digitally rebuilding the industry

By Vipul Shah, Managing Director, Parinee Group
April 28, 2022: As technology gets introduced to the realty sector, it has brought in greater transparency in deals, efficiency in the workings, and assured accuracy in terms of due diligence in effecting contracts. While there are many different technologies that are being put to use by the real estate industry, one that promises a secure transaction and distribution of digital information is the blockchain. The technology has got the real estate market which never otherwise conducted high-value transactions digitally to sit up and take note. Till blockchain and real estate got working together, the latter was happy with face-to-face meetings that too often-involved intermediaries in the transaction process. Blockchain has changed this for the real estate business by taking these transactions from an offline set-up to an online space.
Building with Blockchain
Blockchain technology offers numerous applications in the real estate space. Tokenization is one. It is a concept bringing blockchain technology and real estate investing together. The use of smart tokens lets asset or fund owners generate funds more effectively. They get access to assets with a lot more transparency and liquidity. With estimates that the Indian real estate sector could account for nearly 13% of the Indian GDP by 2030, with a market value of USD 1 trillion, real estate tokenization using blockchain is sure to be a big gainer. What blockchain effectively does is that it breaks down a particular property into smaller parts known as tokens which simplify the transaction process. This in turn makes investment a lucrative option for different investors while also increasing liquidity, which has traditionally been hampered due to the existence of multiple parties and a long trail of paperwork.     
By using real estate tokens investors get easy entry, and since the assets have been fractionalized into smaller parts it increases the liquidity of these tokens. Real estate with the use of tokens and blockchain technology can make buying homes simpler, while real estate shapes up as an important avenue for revenue generation. Tokenization also breaks the elitist categorisation that real estate has traditionally been counted into. Blockchain with increased market access is offering a changed mindset and a larger investment pool, making trading in real estate using these tokens a reality.
Another historic change that blockchain technology has made possible to do away with is cheating and fraud that is often associated with land deals. There have been numerous cases of land deals going wrong because of falsified documents, false claims of ownership, forgery, etc. This list of such cases would be an unending story the world over. Disputes over ownership and legal rights are a thing of the past with this technology as it eliminates title fraud.
Blockchain works on security and thus every detail is written into a digital token. There is no paperwork involved and complete transparency is maintained among all parties involved. Tokenisation eliminates dubiety if any and every data stored in the blockchain ledgers are tamper-proof. Ownership or fractional ownership once declared makes it simpler for the investor to easily evaluate old or current transactions. There are also no middlemen or intermediaries resulting in costs coming down and reduction of administrative work.
Real estate businesses, especially those in the commercial real estate space who have taken to using blockchain technology, can expect positive growth, as they have an edge over the others with information and transactions that they will have in real-time. This shift has transformed core operational functions like sale, purchase, leasing, etc. drastically for these businesses.
Solving future challenges
Blockchain is predicted to be used as a foundational technology by the industry and governments world over for 30 percent of the customers by 2030. Having added to over $176 billion of global business value, blockchain is expected to only increase further to $3.1 trillion by 2030. While the goals and benefits for the real estate sector that can be achieved through blockchain are clearly laid out, its adoption could be time taking but a certainty. The government’s move to adopt technology can be seen with the e-registration of properties. Apart from the desire of the real estate sector to enable blockchain in their processes, creating the necessary bandwidth and infrastructure to access the data is also important. The country has a top-class talent pool in technology and blockchain-related aspects that will help it make inroads into different aspects of real estate.
As the world continues to experiment with the use of blockchain in newer areas of real estate, it will take some years before we see this technology being used to its utmost potential. As performance and scalability of blockchain remain key focus areas now, interoperability of networks and data localisation will definitely help the sector grow better. For the Indian real estate industry, blockchain adoption forms an integral part of its future as it concludes transactions seamlessly and faster, offers limited manual intervention, and upgrades the overall efficiency of the age-old system manifold.
Parinee is a Mumbai-based real estate group.