Numerous start-ups are investing in the application of blockchain to the real estate market, devising systems to bring transparency, speed and security to the transactions that take place in this sector.
Blockchain, in fact, can increase profitability in the real estate market, opening the door to a global market that seems opaque to many today. The innovative solutions proposed are usually based on so-called 'cryptographic smart contracts', innovative methods of recording data permanently, efficiently and transparently. This allows all parties involved to easily access transaction history.
Smart contracts take the form of self-executing digital contracts, with the terms of the agreement set between the buyer and seller. The exchange protocols are in an electronic format, which fulfils the essential contractual terms and transfers the information.
Smart contract developers can design the system in such a way that if the terms and conditions are not fulfilled, it does not perform any further transactions until the contract is fulfilled. The process is able to function seamlessly in a decentralised environment, without human intervention, reducing the gap between the physical and digital worlds.
5 applications of blockchain in real estate
The use of blockchain technologies in real estate can be applied to several areas, some closer, others we can only imagine for now. Here we look at some of them.
1. Decentralisation of buying and selling
The first major benefit of blockchain is decentralisation. In real estate, this means disintermediation of the figures involved in the buying 'chain' today. If the process of buying and selling a property took place on blockchain, transfers could not be justified and countersigned in any way in the real world. This means that professional figures such as estate agents or notaries might soon be superfluous.
2. Notarisation in real estate
Notarisation on blockchain is the process whereby (in the presence of an appropriate digital signature and an ecosystem that certifies a certain 'upstream' validity) a document recorded on blockchain is given legal value. This is made possible by Article 8-ter of Law No. 12/2019, which defines that technologies on blockchain and their effects have legal value. Notarisation, for example, could replace the notary's signature in a deed, but for this eventuality we will have to wait for greater adoption of blockchain technologies.
3. Tokenisation of buildings
Tokenisation allows any building to be 'unpacked', allowing one or more portions of it to be bought and sold. Tokenisation of real estate means making the real estate market accessible to less affluent segments of the population and at the same time making the sale of assets more liquid, as they have a lower price and can be traded on online secondary markets (it is sufficient to be in possession of a crypto wallet).
4. Blockchain as storage
It is possible to use the blockchain to register super lightweight files in SVG format, which allow documents to be stored within the chain itself, thus 100% decentralising cadastral archiving. To date, this archiving process has not yet taken hold, but we anticipate that in the not too distant future it may allow for much better management of property records than today.
5. Rental contract management
Smart contracts are applications based on Ethereum, one of the most innovative blockchains. As we have already seen, smart contracts are digitally-programmed contracts that automatically execute terms, without the help of a third party, once contractual conditions are met. In real estate, smart contracts can allow both parties to sign the contract securely and digitally without the help of institutional intermediaries. They also make it possible to automatically and securely manage the payment of monthly rent at an agreed date and time, by withdrawing the agreed sum from the tenant's account and automatically paying it into the owner's account. Finally, smart contracts also make it possible to create a space to store the deposit and manage the related transactions as they become necessary.
Beyond the quantity of projects running on blockchain, it is important to inform oneself and keep abreast of developments in a technology that is already changing many governmental and corporate best practices in the most advanced countries. It is important to inform ourselves but also to reason both at a private and institutional level on the possible implementations of these new technologies, in the common interest of giving a breath of fresh air to the category and finally relaunching the Italian real estate market.