A Need for Change in Real Estate | The Financial Technologist

Real Estate, an industry that dates to ancient civilisations, needs a serious shake up and the answer may not be far out of reach. Blockchain technology, the foundation behind cryptocurrencies like Bitcoin and Ethereum, is rapidly gaining traction across various sectors due to its potential to unlock the next technological revolution. This technology has the capability to transform the real estate industry as we know it by streamlining transactions, reducing need for intermediaries, ensuring transparency and security.  

It allows for the digitisation of property titles and records, enabling faster and more efficient property sales and investments.  In addition, some of the most promising enhancements include unlocking the power of fractional ownership and bringing liquidity to an otherwise illiquid asset. 

 Many companies at the crossroads of real estate and Web3 technology have embraced the potential blockchain brings to the industry. Roofstock onChain, for example, demonstrates the ability to sell full ownership of homes in seconds via NFTs. These owners are able to leverage the home and have full ownership rights as any other home sale would, and this sale takes seconds to complete. Other companies such as RealT showcase how individuals can invest in property ownership with as little as $50.  

This enables everyone a fair chance to become a real estate investor with none of the red tape involved.  The term RWA (Real World Assets) is such a promising phrase in Web3 that some companies, such as Plume network, have built extensive technology solely focused on bringing these types of assets on chain. These companies have the capability to create a public platform where transactions can be executed instantaneously, without the constraints of business hours, and paperwork can be digitised and made accessible at any time. 

Historically, converting real estate assets into cash has been an arduous process, involving the decision to sell, marketing the property, and navigating the closing period. This path to liquidation has proven neither time nor cost-efficient. The arrival of tokenisation has proven the ability to change the landscape. By representing property ownership through digital tokens on a blockchain, owners can bypass the traditional selling rigors. This innovation allows for the rapid conversion of tokenised real estate into cash, significantly reducing the wait time from months to potentially moments. 

Tokenisation also provides a radical change in how capital can be raised for developments. One enticing project is the Tuscany National Token, a hotel and golf resort in Tuscany, Italy that is replacing the traditional private equity offering by selling tokens representing fractional ownership in a development project. It’s democratising the way we invest, how we invest, and what we are now able to invest in. 

 With all the promise blockchain brings we still face issues, the widespread adoption of this technology in a very traditional industry such as real estate has some wondering what it really means to transact in the future. Brokers may feel they are being replaced by “AI” agents, a sentiment shared by other real estate professionals as well such as title, escrow and lending partners. This has caused a friction point inhibiting a desire to learn the technology and how it can complement, and enhance, business strategy.  

The larger of these issues includes the integration complexities at various governmental levels. These obstacles underscore the importance of addressing regulatory, technical, and market acceptance issues to fully realise blockchain's potential in revolutionising the real estate sector. Both real estate and blockchain must be able to adapt to a wide range of legal frameworks capable of meeting various compliance requirements. 

 To conclude, blockchain technology holds significant promise for transforming the real estate industry by reducing reliance on intermediaries, digitising paperwork, and enabling more efficient and transparent transactions. As the industry moves forward, addressing the challenges of adoption and integration will be crucial for harnessing blockchain's full potential to make real estate transactions more accessible, efficient, and secure.