The world has witnessed a number of exciting technological innovations in the last decade, ranging from the popularisation of AI as an everyday tool to self-driving cars. This advent of technology has changed business ways by simplifying and bettering traditional processes, taking the world by storm. One such notable game changer for the industry is the introduction of Blockchain Technology.
The rise of blockchain technology in recent years has transformed the way the world carries out transactions. Blockchain technology is known for enhancing trust, traceability, and simplicity of transactions, popularising its usage across various sectors globally, including Real Estate.
Africa’s fragmented and difficult-to-navigate real estate market stands to benefit substantially from all the abilities that blockchain technology has to offer.
How does Blockchain Work?
IBM defines blockchain as a shared ledger that aids the process of recording assets and tracking transactions in a business network. Anything of value can be recorded and tracked on a blockchain network, reducing risk and costs for all parties involved.
Put simply, a blockchain is a number of data blocks containing a timestamp and encrypted information linked together via cryptography to create an immutable chronological record of transactions.
How Blockchain Technology is Changing the Real Estate Transactions Landscape
Transactions for high-value assets like real estate are often conducted offline involving face-to-face engagements with various involved parties. The introduction of capabilities like ‘Smart Contracts’ and ‘Tokenisation’ by blockchain platforms has paved the way to change this.
Here are some ways in which technology blockchain has changed the real estate transaction landscape globally:
Real estate tokenization converts the value of real estate assets into digital tokens on the blockchain to enable their digital transfer and ownership.
Tokens can be used to represent:
- Ownership of part of a property
- Ownership of an entire property
- Equity interest in entities controlling a property
- Interest in debt against a property
By allowing fractional ownership, tokenisation lowers the barriers to real estate investing, opening the doors for global investments in real estate projects that might not have had the same exposure if they were invested in traditionally.
- Smart Contracts:
A key component of blockchain technology for real estate transactions is the ‘Smart Contract’ feature. Smart contracts are contracts that self-execute with preset terms and conditions encoded on the blockchain when specific terms and conditions are met. This significantly boosts the security and trust factor in a transaction since it eliminates the bulk of human involvement and paperwork involved.
- Eliminating Intermediaries:
The real estate ecosystem is marked by significant involvement of brokers, attorneys, and banks, i.e., intermediaries. Blockchain can lead to a shift in their roles and participation, eventually assuming functions such as listings, payments, and legal documentation.
Eliminating intermediaries will result in buyers and sellers saving on commissions and fees charged by them, all while making the process quicker.
- Security and Control:
Blockchain records transactions in a manner that they cannot be tampered with, making it almost impossible to manipulate or forge data. Once a transaction is recorded in the blockchain, it cannot be changed or removed, ensuring authenticity, security, and control over the transaction.
Global Adoption of Blockchain Technology for Real Estate Transactions
The advanced security and traceability features of blockchain technology have ushered its use for global real estate transactions.
Dubai Land Department, a government entity that oversees all the real estate transactions in the city that boasts one of the world’s most prominent real estate markets, became the first government entity to adopt blockchain technology for real estate transactions.
Sweden has also explored the possibility of putting the country’s land registry system on the blockchain.
The increasing trust in blockchain technology is a positive sign of the promising future of blockchain technology for real estate transactions.
African Real Estate and Blockchain
Africa’s real estate market is brimming with investment opportunities, attracting the attention of major global powers but investing in Africa’s real estate market poses a set of unique challenges like the lack of transparency, poor infrastructure, difficulty in obtaining permits and approvals etc.
Given the advantages and features of blockchain technology, widespread adoption can help the continent overcome these challenges and bring ease, simplicity, and transparency to real estate transactions, boosting investor confidence and investments in turn. Blockchain technology holds the ability to change the face of the African real estate market for the better.