In reality, real estate is an expression that we use almost daily without realising it and without knowing everything that is hidden behind the concept. What is new is to talk about blockchain applied to real estate. But not so fast! Let's see exactly what it means, what it encompasses and how we can make the most of it thanks to technology.
The fact that the real estate market is changing with digitisation is as palpable a reality as the fact that technology is changing with it, because we are moving in a sector in which the relationship between real estate and its investors has evolved to establish digital links through smart contracts.
A few years ago, this reality was unthinkable, but today it is completely changing what is known as real estate investment.
what is real estate?
It refers to everything related to real estate, real estate or real property, i.e. all fixed assets that cannot be transported: unbuilt land, houses, properties, warehouses, offices, factories, mines...
It is common to find this concept in the specialised real estate sections of the media. This Anglo-Saxon term is very broad and encompasses 3 different and well-differentiated categories:
- Residential: This refers to houses, undeveloped land, etc.
- Industrial: mines, business parks or factories, among others.
- Commercial: This refers to logistics centres or warehouses, offices, etc.
However, the concept is widely used to refer to rentals, new homes, construction, etc. And it doesn't stop there. Operations in the sector go far beyond simple buying and selling, given that it also fits with tokenisation and the application of blockchain or blockchain technology.
why are they increasingly related?
Smart contracts: a new way of investing in real estate
The first question that comes to mind is: can the blockchain change the way we buy houses?
The real estate sector has opened the door to blockchain because of the transparency, security and immutability that smart contracts bring to the sector, although there is still a long way to go. Buying a house can become an odyssey, with slow transactions involving different parties: buyer, seller, banks, land registry, etc.
What technology brings to this process is agility and a reduction in bureaucratic procedures, as well as safeguarding sensitive information which, thanks to traceability, is recorded without falsification or modification.
Smart contracts are part of this technology and constitute a code that determines a series of actions and a set of public keys (that of the author of the contract and that of the contract itself, at least). With this contract, the agreed clauses can be fulfilled automatically without the need for third parties to intervene, such as the transfer of money from the buyer to the seller when the terms agreed in the contract are fulfilled.
In short, a contract can be signed with the blockchain. In fact, the first property purchased through this technology was in Ukraine in 2017: "The buyer was Techcrunch CEO Michael Arrington, who purchased a flat for $60,000 in Kiev."(Markets Insider)
The exchange was carried out through smart contracts, using cryptocurrencies on the Ethereum platform and tokens from real estate startup Propy.
but what is happening in Spain, what is the status of blockchain in the real estate sector, and is it possible to buy a house with this technology?
Blockchain technology in the Spanish real estate sector
Although there are still very few cases where a real estate transfer has taken place using this technology, there are more and more advances and initiatives that are making it possible.
Occam Agencia Digital is one of the companies that is beginning to implement this technological revolution. Spain is still far from reaching the top positions in the world in the use of blockchain, but the data show the progress of this technology: "54% of the blockchain activity within the Spanish Real Estate is concentrated in startups; of that percentage, small and medium-sized companies represent 13%, large companies 11% and the rest of the activity is for the Public Administration, with 21%", according to the Vía Célere portal.
The introduction of blockchain in the financial sector, as well as its subsequent application in other industries, is becoming widespread. Its disruption has not escaped the real estate sector. With the introduction of smart contracts, these assets can be traded as tokens.
3 questions and answers on the blockchain application in real estate
Below, we have compiled some frequently asked questions about blockchain applied in real estate:
- how does blockchain technology influence the real estate industry?
It is a great opportunity to search for properties, reduce the intervention of intermediaries, it is an opportunity to reduce errors and forgeries, it facilitates real estate investment through smart contracts, as well as the transaction process.
- what applications can blockchain have in this sector?
It reduces scams, increases transparency, facilitates financial transaction, enables real estate cash flow management and decentralised property registration, etc. In addition, platforms and marketplaces 100% oriented to this technology are being developed that facilitate the process.
- could we say that the future of real estate lies in this technology?
It is very likely, given that blockchain is a revolutionary technology, smart contracts allow the entire process to be controlled and assets can be split into tokens, which makes them much easier to acquire.
Advantages of applying blockchain in real estate
Blockchain technology in the real estate sector is an initiative that is gradually gaining ground and offers multiple advantages for sellers and buyers:
- Notary costs are reduced.
- The time it takes to register a property is almost immediate.
- It increases trust between sellers and buyers.
- It allows online trading platforms and marketplaces to support real estate transactions securely.
- No need for third parties.
- Can take over documentation and payment functions, reducing the involvement of lawyers, banks and notaries, among other professionals.
- It can help codify the practice of fractional real estate ownership.
Blockchain platforms applied to real estate allow sellers to register assets, as if it were a sale of shares, as well as liquidate the asset by selling a token used on the platform. These digital assets represent a percentage of the property and can be exchanged for fiat currency.
do you have questions about blockchain in real estate?
In a world as global and digitalised as today's, technological innovation appears as an indisputable lever for change and growth: either you jump on the bandwagon, or you get left behind.
tell us your doubts, at Occam we can help you solve them through a blockchain consultancy!
