In recent years, we’ve seen blockchain making a tremendous impact on how we envision the future of various industries. Commercial real estate is definitely one of those. Learn how blockchain is redefining global commercial real estate.
While most of the implementation work is still ahead, let’s take a closer look at the practicalities of deploying blockchain in this industry that take place right now.
Digitizing property and land titles
It’s only a matter of time before all the vast reserves of data associated with property ownership are moved to the blockchain. Today, this information is mostly offline. Moreover, there’s a big time lag between when the contract is signed to when it’s recorded by government agencies. And, of course, one needs escrow agents to authenticate and store the records.
In short, this process lacks transparency, efficiency and speed. Blockchain has the capacity to transform it.
Blockchain is redefining global commercial real estate
Sweden’s land registry, the Lantmäteriet, is reportedly showing remarkable progress in this area. The country is about to launch the next trial stage before executing its first blockchain property transaction soon.
Mats Snäll, chief digital officer at Lantmäteriet, told the Wall Street Journal that “from the technology point of view, we are quite ready.” [Source]
Boost asset liquidity
According to JLL,
For investors under pressure to create a diversified portfolio, liquidizing assets can be difficult.
Blockchain technology has the potential to ease this process if all investments are registered through the ledger, simplifying the exchange of shares between investors.
We still have a way to go to reach this level of implementation but the first steps are already taken.
In September 2017, a property was bought via blockchain for the first time. Mike Arrington, the founder of TechCrunch, bought a condominium in Kiev, Ukraine, for $65,000 using the Ethereum blockchain. While the transaction is not considered to be entirely digitized, Arrington commented on Reddit:
“This is the first time that I know of that a real asset other than cryptocurrencies themselves have been transferred on a blockchain.” [Source]
Automated property and cash flow management with Smart Contracts
CRE professionals often use disparate and antiquated systems to track payments and property maintenance costs, to report and plan.
In addition, to ensure a smooth CRE workflow, brokers update at least one ledger once the money is paid or received. They naturally depend on the other parties to transfer the money on time. Due to the large number of parties involved in a real estate transaction, this is not always the case and hence why frequent delays occur.
The emirate of Dubai is on track to move all transactions between landlords and tenants to the blockchain by 2020.
“This is a major step toward cementing Dubai’s position as the world’s smartest city, expanding our online partnerships with all government entities and real estate parties that our customers need to complete their transactions,”
remarked Sultan Butti bin Mejren, director general of the Dubai Land Department.
Rental payments will be executed through a personal identification card, issued by Emirates NBD, a major banking institution in the UAE. The blockchain database will record
“all real estate contracts, including lease registrations, and incorporate personal tenant information”.