Almost everyone has heard about the hype around blockchain technology, and for good reason. This new technology is rapidly being adopted commercially in almost every business sector despite the vast lack of knowledge and understanding thereof by the general public. However, industry leaders have realized the major impact
blockchain, and more so, smart contracts will have on the global real estate market and industries core operations in the not so distant future.
One of the implications we will witness in the foreseeable future is property and land titles being moved and run on the blockchain. And there’s an acute need to do this quickly as only 30% of land rights are registered or recorded worldwide, according to the World Bank. At the same time, moving essential real estate bookkeeping tasks to the blockchain is a brilliant idea any society can benefit from. Let’s take a closer look.
Case in point, Sweden
Sweden’s land registry, the Lantmäteriet, is one of the earliest adopters of blockchain. With initial testing already completed, the agency plans to execute its first blockchain property transaction soon. Mats Snäll, chief digital officer at Lantmäteriet, told the Wall Street Journal that “from the technology point of view, we are quite ready.” When implemented, it is expected to save taxpayers up to €100m by reducing municipal
hours spent on paperwork and lowering the potential for fraud.
Advantages of blockchain
Before you can accurately estimate how significant the blockchain revolution could impact real estate, you must know the key characteristics and advantages it offers.
Security and availability
A blockchain is distributed and consists of thousands of “databases” across the globe that can be hosted by any individual or company. This not only ensures that a blockchain has 100% uptime but also makes it impenetrable by hackers or malicious actors trying to edit or manipulate data.
Blockchain offers near real time transaction settlement across the globe. This drastically reduces inefficiencies and risk associated with escrow, chargebacks and transaction cancellations.
Blockchain enables individuals and companies to transact with any party without lawyers, escrow or any independent trusted 3rd party to facilitate a transaction.
Blockchain provides complete transparency. Every transaction, account, timestamps, value, ownership or any data the blockchain is programmed to store, is openly available to everyone.
Why blockchain is perfect for property titles?
Fraud and transparency
Concerned about your inheritance or recent property purchase? You’re by no means alone as real estate remains a lucrative target for fraudsters.
Blockchain is a more secure way of transferring real estate ownership. Right now, this process is not entirely transparent, and the information can be modified or removed.
On the contrary, blockchain massively reduces the risk of data manipulation. Its records are incorruptible, and no fraudster has the computing power to hack the records stored across the decentralized network of millions of computers.
With property and land titles moved to the blockchain, transactions will be simplified because escrow agents will no longer need to store and validate records. With fewer
parties in the transaction, it’s going to be easier to close deals faster and at smaller costs.
With the current state of systems in use, any information must be checked manually. Most importantly, it takes a long time to verify the parties involved including checking the signatures of the individuals. On the contrary, blockchain is capable of verifying the identity of the individual based on their digital signature and doing so very quickly. A new UK based company called Clicktopurchase is one of the first blockchain real estate agents. They have sold property valued in excess of £200m over the blockchain and report an average transaction time of 11 minutes.
Getting back to Sweden’s experience, it’s obvious there’s huge potential for a positive transformation here. The time from signing a contract to registering a sale can take between three to six months. With the Blockchain system, “it could be hours,” Jörgen Modin, chief solutions architect at ChromaWay, tells the WSJ. Modin added that the buyer and seller don’t even have to be located in the country for the deal to go through.
Just like with any new tech, there are poised to be some obstacles along the way. Blockchain education, the need to change legislation and implementation costs are the most prominent ones. However, the more we utilize blockchain, the easier it is to see that its benefits largely outweigh the challenges associated with it.