Real estate is the largest asset class in the world. Commercial enterprises and real estate professionals are recognizing the transformative impact of blockchain technology to optimize retail and commercial property sales, streamline payments, and increase access to real estate funds and investment opportunities.
In this article, we discuss how blockchain is used in the real estate industry. We’ll also explore some of the many benefits of blockchain-based solutions and the innovative projects working toward integrating them into the elaborate web of processes involved in property ownership.
Smart Contracts Between Tenants and Landlords
Smart contracts are pieces of code that are programmed to move money from A to B, dependent upon certain conditions being met. In the context of the real estate industry, the conditions could be a specific date of the month e.g. on the 1st of every month, the smart contract executes X amount of money to move from the tenant’s wallet to the landlord’s wallet address. Smart contracts are also immutable and cannot be challenged or removed once deployed. Also, as contracts can be written for personal circumstances, certain exceptions can be written into the code. This makes guarantor payments even more secure and transparent. For example, you could program a smart contract to automatically deploy rent payment from a guarantor if the tenant’s wallet didn’t hold sufficient funds on the last day of the month.
Blockchain is often known for its use of cryptocurrency, fungible tokens that are all of equivalent value. In addition to this, the Ethereum blockchain has created non-fungible tokens or NFTs that each represents an individual unique value of just about anything. Including houses!
Commercial and residential properties can be tokenized with a representation and value stored on the blockchain. These NFTs can have specified data encrypted within the token, such as with any specified contract agreements encoded, viewable, and transparent for all buyers. A buyer can sign a secure, digital signature within seconds that verifies their identity, the agreement, and that they’re in possession of sufficient funds before immutably transferring ownership of the asset from wallet address to another.
Tokenized assets can also be split, should the seller wish, allowing for more than one person to invest in a property, with clear transparency of ownership rights. NFTs make it easier for shared-ownership contracts to be created or for a parent wanting to financially help their children purchase their first house.
Blockchain is a global technology that is accessible to anyone, anywhere in the world with an internet connection. Tokenizing real estate on the blockchain can save weeks or months worth of time purchasing a property abroad. Blockchain doesn’t discriminate, making it easier for anyone to purchase real estate from anywhere in the world, with legal ownership rights and financial transfers occurring in minutes.
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