Introduction

The Real estate is an incredibly complicated task for anyone who's ever bought land or a home. It's time-consuming, complex, risky and, above all else, it's expensive.

Home inspectors, real estate agents, banks, local governments, everyone needs to check and sign off on your transaction before it can get done. And all of them take a cut. We're going to quickly outline how blockchain technology can make buying and selling real estate much easier.

When buying real estate, the rules can daunt. They vary wildly depending on what city, state or country you're looking to buy in. what type of property you are hoping to buy? And how you're going to buy it?

These complexities and regulations require multiple middlemen to get involved. You're going to be paying a large cut at every turn. Because it's just too complex for most people to navigate alone. That's where the blockchain comes in. If we were to codify local provincial and national housing rules and regulations. On the blockchain, we could use smart contracts to drastically simplify the process.

A prospective seller would just send a location desired price and some other ownership information to the contract. Then pulling from the database of rules and regulations around the sale of real estate. In the seller's location, the smart contract could generate contracts, deeds, tax, records. Anything required to make a sale of the house instantly. A prospective buyer could then meet with the seller to agree on pricing in terms, and then send their digital signature to the contract verifying their purchase, and updating all the documents as required.

Now this would require some backend work having provable and verifiable identities on the blockchain. To ensure that the people are who they say they are, and there can be no disputes regarding signing. Similarly, the land would need to be securely and clearly registered on the blockchain to ensure easy transfer of ownership.

What are the benefits of blockchain in real estate?

Commercial real estate is an important part of world economic property and transaction activity. According to an MSCI report, the size of the professionally managed global real estate investment market grew from $7.4 trillion in 2016 to $8.5 trillion in 2017. Today's real estate market comprises many tacit and independent networks, with transaction friction and ambiguity between existing systems. The Ethereum blockchain presents a practical solution to realize the following industry benefits:

• Tokenization of real estate assets
• Process efficiency for underlying industry operations
• Cost less than process automation
• Access to global asset distribution
• Access to a wider investor pool because of ownership variation
• Access to secondary market opportunities
• Data access to increase transparency and inform better investment decisions and portfolio management

One of the most exciting ways Ethereum has marketed the industry is through the digital securitization of real estate assets, also known as tokenization. Digital assets can represent real estate such as real estate, real estate funds, revenue streams, governance rights, and more. Once these assets are tokenized, they can be broken down into more granular pieces, made accessible to a wider pool of investors, and leveraged to raise capital. Once tokenized, the programmable Ethereum blockchain enables secure and compliant digitization of transactions and processes around these assets, including issuance, trading, and lifecycle management.

In the real estate market, the advice, knowledge, and know-how of real estate professionals will remain important for commercial investors. However, the processing of securities, liability management, document processing, and accounting will inevitably change.

What are the Blockchain Use Cases in Real Estate?

Enterprise blockchain technology is transforming the real estate industry into ten use cases:

1. Asset Management and Real Estate Funds
2. project financing
3. Loan and Mortgage Securitization
4. asset management
5. Land and Property Registries, Sales, and Revaluations
6. urban planning
7. property development and construction
8. Investor and tenant identification
9. payment and lease
10. real-time accounting

How does tokenization affect real estate funds and asset management?

In real estate, tokenization refers to the digitization of securities, alternative assets, and financial instruments. With Ethereum blockchain technology, digital assets can be programmed to include ownership rights, transaction history and rules to ensure the issuance of assets, distribution and transfer regulation are compliant. Simple examples include controls to ensure that tokens can only be transferred to certain counterparties, or not at all during the lock-up period. Digital assets can be customized to meet all types of issuer requirements.

In addition, tokenization reduces costs and speeds up the creation, issuance and exchange of assets, innovating new features, managing dividends, and managing other corporate functions. In-depth customization and rapid issuance allow direct issuance of digital assets according to investor demands, significantly reducing counterparty risk.

The reduced cost allows issuers to reduce the minimum investment amount and expand access to a wider pool of investors. Increased connectivity between digital assets and related networks expands secondary market opportunities and improves liquidity. These benefits to both issuers and investors show that the real promise of blockchain is a future with new instruments and markets.

Mata Capital Product Development Manager Baptiste Saint-Martin explains how blockchain technology is digitizing and optimizing real estate asset management, reducing the minimum investor subscription amount to €1.

How does blockchain affect alternative financing for real estate?

Raising finance for new real estate projects is difficult. Property development firms face interest rates as high as 29% when dealing with banking institutions as single source loan providers. They face challenges with multiple loan sources, as crowd financing can be difficult to administer.

Blockchain makes it easier for developers to access alternative financing models by facilitating investor management and ensuring investment transparency and continuous ROI tracking for investors. Blockchain-based financial products can also be programmed for global distribution. These solutions simplify the investor experience, increase investor confidence, and unlock access to a wider investor pool.

How does blockchain affect loan and mortgage securitization?

The origination and underwriting of loans are unauthorized and dependent on paper documentation. The security structure is left open to interpretation, and protecting the asset from double-pledge requires great effort. Trading and asset servicing decisions are often made based on outdated data. And finally, cash reconciliation in life cycle events typically delays settlement, influencing investor cash flow.

Blockchain provides banking institutions with a single version for verified information, secure data sharing, immutable transaction monitoring and real-time payment settlement. By digitizing a loan or mortgage, it can be programmed to include relevant data such as ownership rights and loan payment history to support future servicing decisions. Smart contracts can collect and distribute payments to beneficiary holders and provide real-time reporting to regulators. It provides efficient life cycle management and instills confidence in secondary markets by providing proof of asset performance to investors.

How does blockchain affect asset management?

Large-scale asset management firms tolerate inefficient oversight of their global portfolios. Blockchain facilitates secure data sharing, streamlines rental collection and payments to property owners, and also provides premium due diligence across portfolios. This increases operational efficiencies and allows for time- and cost-savings. It also generates quite rich data to facilitate better decision-making.

How does blockchain affect land and property registries?

Land titles continue to depend on paper documentation, vulnerable to loss, fraud and mismanagement. In addition, property transfers and permits require lengthy and costly legal processes, sometimes locking down land without use.

Blockchain replaces old paperwork with verifiable digital assets and tracks changes on an immutable ledger that acts as a secure shared source of truth for documents between multiple parties and organizations. Ethereum makes transactions and asset ownership records more accessible – facilitating market transactions, increasing investor confidence, unlocking access to finance, and fostering economic and social community development. The Land Registry Authority of Sweden, together with LentMatteret, banks and industry players, is a fully functioning blockchain based digital land register platform.

How does blockchain affect urban planning?

Property development almost always occurs without valuable input from the community. The public often felt dissatisfied with the planning processes, unable to express preferences for the local community. Blockchain-based planning platforms can include educational resources, token-based participation incentives, and a feedback loop between stakeholders. It will encourage community engagement and better integrate local communities into the property development value chain, improve public confidence, and improve developer services for sustainable success.

How does blockchain impact asset development and creation?

Large construction projects have become difficult to manage with fragmented subcontracting and procurement practices and lack of supply chain transparency. A blockchain platform can make procurement easier for suppliers and subcontractors with reputation management, encouraging higher performance. Smart contracts can automate contract agreements and payment terms to enhance financial management. Blockchain can prove the authenticity of premium goods by associating products with non-fake tokens and using these as digital blockchain certificates. Finally, blockchain can streamline project management by digitizing end-to-end processes. This will enable construction managers to securely track and share project status with key stakeholders and reduce barriers to more efficient project management.

How does blockchain impact real-time accounting?

With asset ownership and cash flows recorded on-chain, investors and asset owners benefit from automated and near-instant accounting. In the future, preparation of annual financial statements, such as balance sheet, statement of cash flows, or income statement will be conducted with the capability of real-time audit. This has enabled many breakthroughs in compliance, regulatory oversight and investor relations.

How does blockchain influence payments and leasing?

Distributed ledger technology enables the signing of leases and payments. It removes the need for manual reconciliation and automates rental and dividend payments to property owners. Smart contracts can automate other types of payments and fees to encourage good behavior from tenants, landlords and service providers.

How does blockchain affect investor and tenant identities?

Blockchain-based digital identity will be powerful in many industries, consumer applications and within the public sector. Mutant blockchain-based KYC/AML processes allow tenant and investor identity to simplify background checks, reduce costs, and increase security. Decentralized identity enables anyone to prove ownership of a property while creating the documents (insurance, proof of identity, credit history) easily qualified by the required parties.