In the property space blockchain has the power to be of tremendous benefit. Considering the rise of the trust economy impacting the hotel and housing industries, companies must consider blockchain technologies inevitable entrance in the space. When looking more closely at inflationary rates in the housing market, tokenization of the industry might bring about the preferred prices and flexibility consumers desire.
While home prices are not rising as excessively as in the past, affordability continues to be a central issue for those desiring to live in international cities. Of the major cities globally, housing prices have escalated 35% on average over the past five years. The price decline in NYC is a unique case, occurring due to reduced deductions for local taxes and rising mortgage rates. According to reports, the real price fell 5% on average and even more so for luxury homes. In a survey put together by UBS Group AG, of twenty cities, Chicago was the only undervalued housing market due to fiscal problems and rent rising quicker than home prices.
To help reduce the potential bubble bursting and bringing undervalued homes back to a stable level, smart contracts provide the means for blockchains to meet the stringent legal requirement of regulatory bodies, providing flexible solutions. The digital contract eliminates the need for a broker and real estate agent. Agreements are written directly between the buyer and seller existing on a decentralized blockchain ledger network. Basic tasks that can be automated with the smart contract include signaling rental agreements, paying rent, security deposits and hosting open houses with smart lock technology. No additional fees from banks, real estate agents or other unnecessary payments made in the traditional method. Rental payment can be received quickly and safely while remaining transparent since every smart contract performed on blockchain cannot be removed or edited.
On the issue of security deposits, this can be handled with the smart contract as the terms and conditions are included in the first place. Any damage repair charges can be integrated into the security deposit, to release the amount from your smart contract at the end of the lease.
For those conducting open houses for empty homes, it is most wise to arrange a hassle-free Smart Lock Technology that provides access to the house according to the smart contract between the prospect and landlord. In some cases, having an agent present is sensible for security reasons if the apartment has the homeowners belongings but in the event that the property is empty, it is much more cost effective and efficient to make use of Smart Lock Technology currently being put to market by Rentberry in an effort to push the Smart Property concept.
Clarity of Ownership:
Under the blockchain framework, the decentralized quality ensures the owners themselves will have complete control over their asset information. The digital ledger is designed from inception to be immutable and transparent. A third party carrying funds such as the banks will no longer be of necessity when confirming property ownership, however, the participants voting on the real estate blockchain will take on that responsibility to ensure there is no tampering with information and the homeowner does not need to pay the bank.
Modernizing the Global Economic System:
With the option of using cryptocurrency in the real estate sector, societies will become more comfortable with the currency since it can be used in important large purchases along with smaller investments. If the IRS deems cryptocurrency to be a viable option for real estate tax exemptions, this will get the general public on board quickly. Such a tactic can also work to reduce crimes of tax evasion committed by Americans already paying a high property tax.
To name a few instances where the application is being used it is important to mention New York City, Dubai, and Toronto. NYCREC a real estate fund that tokenized its assets recently announced the deadline for its Regulation S securities token offering STO. Targeting investors outside in its initial phase while Americans will be able to take part in the STO event in the fourth quarter of this year. The key selling point for many investors will be there full right to fractional ownership of the real estate purchased in NYC. Regulation S of the US Securities and Exchange Commission offers a safe harbor from the registration requirements of the securities act.
Though there are concerns offshore investments will open doors to fraud and money laundry, some other companies in the United States are focused on using smart contracts as a way to monitor the investments from internationals. Paul Daftarian co-founder of luxury real estate firm Daftarian, was recently interviewed by Forbes, on their interest to explore blockchain due to the benefit of transaction monitoring efforts in the space. Interest among those firms in the luxury real estate market demonstrates an understanding of the additional benefits such technology can bring to companies that are already succeeding much in the traditional real estate practice.
A project initiated by the innovative team at ConsenSys, Project Pangea has recently rebranded to Meridio. An Ethereum-based land registry and title transfer platform built for Dubai investors. The property owner can sell tokens to individual investors or institutional investors. Allowing individual investors to make real estate investments at a lower cost than what the property owner required previously under the traditional capital-intensive system that is in place. Real estate owners can monitor or update the properties financial reports while managing income the platform generates using the smart contracts to distribute earnings to those token holders. The project has infinite potential to succeed internationally considering the benefit to all parties producing higher liquidity, exposure, visibility, lower required minimum capital investment and reduce costs.
In Toronto, Bunz Home Zone offers a peer-to-peer experience where the real estate agent is taken out of the picture. Considering the inflation of property prices in downtown Toronto, younger professionals have the opportunity to rent new apartments in a cost-efficient manner. The apartment can then be furnished with finds on the Bunz app, where participants can trade goods such as lamps, couches etc. for tokens to a bottle of wine.
With that said, making use of smart contracts and tokenization in the real estate industry will significantly improve solvency, liquidity, operational and capital efficiency. As a natural progression from the trust industry of Uber, Airbnb and the like, tokenization of property and use of smart contracts will catch on quickly once the technology is well understood with simple adoption processes.
Written by Shermineh Saleh Esmati
As the CEO and founder of Cyrus BC Inc. Shermineh provides advisory services to promote the interests of her clients through the application of innovative products. One focus of Cyrus BC is to bring deliverable blockchain initiatives to the attention of investors focused on the security and socio-economic benefits of the technology.
With a background in foreign policy and intelligence analysis, Shermineh has been using her grasp of geopolitics to aid blockchain companies to best pursue growth while respecting international cryptocurrency regulations and blockchain policy. To ensure the expedited adoption of fintech products she is working with Blockchain Intelligence Group, New Economies DLT and building collaborative efforts for AI blockchain projects soon to be announced.
Shermineh has experience advising intelligence agencies, political leaders, management consultancies and human rights organizations. In the pursuit of developing an expertise in international security, Shermineh obtained her bachelor’s degree with a Specialist in Political Science at the University of Toronto and is completing her master’s degree in Government at Harvard University. To further Canada’s efforts in emerging technology she is also a member of the Blockchain Association of Canada and an Advisor to the Open Source Data Committee at the Treasury Board Secretariat in Ottawa, Canada.