Blockchain will make transactions in real estate easier, cheaper, and faster and eliminate the possibility of title fraud, thanks to its features.
Analysts at Deloitte, one of the Big Four accounting firms, presented the Blockchain in Commercial Real Estate report. The researchers identified several key reasons why blockchain technology could transform the commercial real estate market in the future.
The analysts highlight the following advantages of blockchain as a technology:
- Blockchain allows transactions to be settled almost instantly, reducing the risks of transfer duration and limiting the ability to charge back or cancel transactions.
- Blockchain is based on cryptographic proof, allowing two parties to transact directly without the need for a trusted third party.
- The peer-to-peer distributed network captures a publicly available transaction history. Blockchain is distributed and securely preserves evidence of a transaction.
- Blockchain has an economic model that ensures that the network remains functional for participants and reduces the possibility of external influence on the network.
- Every transaction in blockchain is irrevocable. The ledger contains a definitive and verifiable record of every transaction ever made, reducing the risk of double-spending, fraud, abuse, and data manipulation.
For the commercial real estate market specifically, blockchain can be useful by implementing the following capabilities:
- Common databases. This technology can allow the collation of information about properties from private databases of brokers and agents. This is one of the key technologies for creating a global commercial real estate market.
- The ability for multiple entities to modify the database. It can be owners, tenants, operators, lenders, investors, and service providers.
- Lack of trust among the subjects of the transaction. Participants of transactions and deals may not even know each other, but the specifics of blockchain technologies, their transparency, and digital identification solve this problem.
- Minimum of intermediaries due to automation of all processes and the possibility of transactions by means of smart contracts.
All this contributes to forming a global real estate market, simplifies and speeds up real estate transactions, and eliminates many risks. The Deloitte study shows that 46% of respondents are willing to enter into a contract using a blockchain-based smart contract instead of a traditional paper-based legal contract. Another 40% believe it makes sense to record existing paper contracts on the blockchain.
Moreover, blockchain could virtually eliminate the possibility of property rights fraud. According to some estimates, almost $1 billion is spent every year on title fraud resolutions, which is why a blockchain-based land titling project was launched in Colombia by Peersyst Technology and Ripple Labs.
