Blockchain Use Case: Real Estate – Deltec Bank Knowledge series

September 20 19:22 2019
Blockchain Use Case: Real Estate - Deltec Bank Knowledge series
Deltec Bank: Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.

There are many industries which are discovering the power of blockchain and the positive ways it will help manage how their business work on both a daily basis and overall.

Real estate is one of the largest asset classes in the world. Let us discover two ways in which Blockchain has the capacity to assist the real estate market and the many people that are buying and selling properties.

Tokenization   

The main idea behind asset tokenization is quite simple, as it allows users to convert the rights to assets such as homes and other real estates, which hold an economic value into a digital token. These token are then able to be stored and managed on a Blockchain network.

One of the most interesting outcomes of tokenization is fractional ownership. Fractional ownership is a method in which several unrelated parties can share the ownership of high-value assets, such as real estate, yachts, and jets. Explained simply, blockchain technology will allow multiple people to buy property tokens to enable easy access to co-owning such items.

Take a look below at some of the other important advantages that Blockchain tokenization offers to help streamline the real estate industry.

  • Tokenization allows users to minimize the risk of real estate purchase, while also allowing the user to expand their real estate portfolio. Instead of your investments being locked into just one single property, you can use the same money to purchase ‘fractions’ in many different forms of real estate.
  • Tokenization can hugely increase the liquidity of real estate. Put simply, this means that Instead of the usual long waiting times to sell a property you can visit an exchange to turn them more quickly into tokens.
  • Barriers to the real estate market may be significantly decreased. Real estate will not simply be attainable by the rich. The everyday citizen will not have the usual long waiting period of saving up, and then required to take out a loan to buy property, you will be able to simply by a share in a home. This will be concluded with a smart contract which has been signed by all parties. This smart contract ensures all parties adhere to strict policies.

Now we have seen how Tokenization is set to improve how a real estate may be purchased in the future, let us take a look below at how smart contracts deployed on Blockchains will be more transparent.

Smart Contracts

What is a smart contract? Simply they are a way of automating contracts with a set of specific instructions written into its code, with the execution of the contract being made when certain criteria are met.

The major advantage of smart contracts is because they are created on a blockchain, the contracts retain transparency and unless privacy features are used, they are immutable and transparent (unless privacy features are used).

Let us look below at some of the advantages of combining Blockchain with smart contracts.

  • Remove middlemen – The most obvious benefit of using smart contracts is the fact it will reduce the requirement for middlemen. Lawyers, brokers, and banks often siphon off big cuts of the money involved in real estate purchases, so smart contracts will allow customers considerably savings during the property purchasing process.
  • Speed up transactions – Another big advantage of using smart contracts, is the speed at which transactions will be completed. As we have previously mentioned, real estate transactions can often take months. This is often down to the go-betweens we spoke about above as all processes involving lawyers, brokers, etc., adds time to the already lengthy process. Although smart contracts will not wholly remove government requirements, but will effectively remove the intermediaries. Smart contracts will also considerably speed up real estate transactions.
  • Easy data access – All the various data regarding property can be saved as a hash file within the blockchain. Once again, this will be a time-saving device by removing the need for intermediaries such as real estate agents. If for instance, you are interested in knowing more about a particular property, the transparency of the blockchains will give you untampered access to all the information you need.
  • Protect from property fraud – Finally, smart contracts can protect owners from property fraud. It is possible to link the digital ownership of your property, documents, and contracts directly to the blockchain. Once inside the blockchain, it is impossible for it to be tampered with or altered.

Future of real estate sector is blockchain and it is a revolution supposed to happen.

Disclaimer:  The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.

About Deltec Bank

Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.

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