Blockchain for Real Estate: Use Cases and Examples

According to Straits Research, the global real estate market is expected to generate $7,142.70 billion by 2031, growing at a CAGR of 7.6% during 2023–2031. Even in developed countries like America, citizens lost money to real estate fraud. According to the 2024 State of Wire Fraud report, at least 10% of Americans are targeted for real estate fraud. 1 in 20 (5%) suffer losses as a result of real estate fraud.

You probably won’t find any connection between real estate and blockchain. At best, you’ll be able to relate to common use cases for Blockchain technology, such as a shared registry, immutability, and security, but nothing unique.

However, when you pay more attention to the long-standing issues facing the real estate industry, using blockchain for the real estate industry seems like the next step in the evolution of real estate technology. In this article, we’ll dig deeper to understand the challenges currently plaguing the real estate industry, especially from a commercial real estate (CRE) perspective.

Current state of the real estate industry

Real estate brokers promise to make the best buyer deals based on their criteria. No matter how reliable and honest these intermediaries are considered to be, they are always subject to the following limitations:

• Transparency. All these intermediaries operate in the market for profit. Their business model allows them to focus on deals that make them more profitable. These deals are not always favorable to buyers. These intermediaries may limit the options visible to the seller or favor more profitable ones. Consequently, there is a good chance that buyers will not find a property that may be more suitable.
• Credibility. Everyone knows the possibilities of internet fraud. With an impressive website and few imposters, buyers can be tricked into buying a property that is not available. The result is lots of lawsuits and losing a significant amount of money.
• Correctness. Forged documents are crucial in deceiving buyers and causing them to buy illegal, not-for-sale, or unsuitable property. These physical documents can be property deeds or bank statements. In addition, with the right contacts, impostors can prove that the forged documents are legitimate.
• Additional costs. The property owner wants to sell the property. The buyer wants to own it. Why should either of them have to pay extra to the middlemen? In many cases, the amount of money they charge does not justify the services they provide, and instead of making better deals, they do more harm than good.

However, the commercial real estate market differs from households. Let`s outline the differences.

Commercial real estate (CRE) market problems

CRE market features include:

• Complex agreements. CRE leasing involves multiple companies, and multiple contracts are signed between them. Any error or inconsistency in any of these documents can disrupt business procedures, resulting in losses for all parties involved.
• Cash flow management. Managing lease payments is difficult since the property is not leased by one business but by several. Tracking everything, ensuring payments are received, obtaining confirmations, allocating service costs between organizations, and more makes the entire process cumbersome.
• Record keeping and security. With so many transactions, recording every transaction is a challenge. It’s not a matter of ensuring everything is recorded but that the records cannot be changed and are only accessible to authorized individuals.
• Lack of real-time data. To get the best property that meets the criteria, you need access to real-time data to capitalize on the latest updates.

Blockchain technology can solve all these problems. Blockchain in e-commerce is already a powerful solution, and this success can be repeated in real estate.

Blockchain in real estate: use cases

A blockchain is a network of distributed databases. To access the information stored in a particular block, a hacker needs to traverse the entire chain of blocks, which requires enormous computing power. Thus, as a result, hacking and altering information becomes disadvantageous for the perpetrator. In addition, this technology supports single writing. This means that new information can only be added. Old information cannot be edited. All these features make the blockchain virtually immutable.

Consequently, storing real estate information on the blockchain guarantees their originality and authenticity. Moreover, any assertions and confirmations can easily happen on the Blockchain network since all parties are online. These assertions and confirmations can be stored with a time stamp for future use.

The distributed database serves as the only source of truth. Any changes to the database are propagated to every node (system) on the network and updated almost instantly in their copy of the database. Here is how blockchain can be useful in real estate.

Smart contracts for optimizing rent payments

These are lines of code written to execute when exposed to a specific data trigger. Smart contracts are a set of predefined rules that cannot be edited once coded (in most cases). For example, if X occurs, transfer the crypto in the ratio 20:30:50 to A, B, and C. In this way, these smart contracts can simplify extremely complex lease payment contracts.

Since each transaction is time-stamped and recorded, keeping track of everything is unnecessary. As a result, the entire process is automated, saving time, effort, and money.

Tokenization for simplifying the land registration process

The real use case for a token is a digital representation of a physical asset. An asset (property) can be called “tokenized” when a token representing an asset is created on the blockchain with a unique identity and cannot be exchanged for another token. Whoever owns this digital token can be considered the owner of the property.

Thus, it becomes easy to prove ownership of the property. In addition, these tokens can be easily traded. This feature is especially useful in buying/selling real estate almost instantly, anytime, anywhere.

Tokenization may not replace the legal documents associated with buying a property (this can only happen if the government fully adopts a blockchain-based digital system). Still, it can act as a fast and reliable system for making the first level of commitment to a purchase.

Unlike the conventional real estate purchase process, the CRE process in blockchain can be as follows:

1. Real estate marketplace. Landlords and tenants will meet in an online marketplace where verified information about the property will be transparently available to everyone, including owner details, geographic location, chain of custody, area covered, and more. The marketplace will be integrated with government systems to ensure the validity of the information.
2. Identity verification. A separate blockchain-based identity verification solution will be integrated with the marketplace. The solution will verify information from multiple sources, such as bank transactions.
3. Immutable agreements. Once both parties decide to go ahead and enter into an agreement, the terms of the agreement will be written in a smart contract.
4. Offline payments. The rent will be credited to the landlord’s accounts based on the terms and conditions stored in the smart contract. All data will be recorded on the blockchain with a timestamp and can be used to analyze the data in real-time.

Tokenization can be a powerful use case in the real estate domain in terms of blockchain technology.

Conclusion

Blockchain technology holds immense promise for revolutionizing the real estate industry, offering transparency, security, efficiency, and cost-effectiveness in transactions and operations. Through the exploration of various use cases and examples, it becomes evident that blockchain’s decentralized nature can streamline processes while mitigating fraud and enhancing trust among stakeholders.

If you want to integrate blockchain technology into your business, our SoloWay Tech team can help you!