Blockchain applications in commercial real estate: Why should integrate?
Having come to our world as the technology behind Bitcoin, blockchain is here to stay and play an important role in many areas. Providing trust, security, and transparency, blockchain is seeing the most rapid growth in the banking and finance sector.
By the way, have you known that blockchain-based finance startups raised $240 million in venture funding during the first half of 2017? Healthcare, supply chain management, insurance, manufacturing, and other industries are also taking advantage of using it. In commercial real estate (CRE), blockchain can help in resolving various challenges, too.
CRE experts have a positive look towards blockchain integration: according to a 2015 World Economic Forum survey of 800 executives and data and communications technology professionals, 57.9% predict that 10% of the global GDP information will be stored on the distributed ledger system by 2025.
The key challenges of CRE industry for blockchain to solve
- Inefficient property search & difficult data access
Today property-related data such as location and address, rental rates, property features, and tenant details, are fragmented across a number of specific platforms. These platforms are generally request user subscription, in many cases – access permission or even fees.
Also, the level of data accuracy may suffer from human intervention, human errors, and paper-driven operations. That’s why property-related information may be incomplete, low-quality, and hard to be found.
When there are different data fragments on different sources, a person has to pass a longer way to find what he or she needs. As a consequence, a decision-making process can take more time and be not effective enough because of prolonged property search and data inaccuracy.
The use of a blockchain distributed ledger system can solve all these issues. By storing the data on the decentralized and safe network, companies will have more control over the information, while it will be more transparent and easy-to-access. Since the data, once uploaded to the blockchain, can’t be changed or removed, we speak about a new level of data security.
- Time-consuming due diligence process
In CRE lease transactions, a due diligence process, implying a thoughtful financial and legal review, takes time and effort. Generally you need physical documents to proof an identity. Also, in many cases you have to look for these documents as they are stored in different places.
They can involve various papers, for instance, you may need to know a property ownership history, repair certificates, and the history of maintenance/construction activities.
Manual paper filing, long paper verification process, and inconvenient document search prolongate a due diligence process and make it quite challenging. Blockchain can help here by establishing digital identities for a property, its owners, and tenants. This way, it will become possible to remove the necessity for physical identity proofs in the commercial retail industry.
- A higher probability of losing records
Another point is the possibility of human errors as a result of massive paperwork, manually performed operations, and storing information in different places. Certainly, it may cause companies and property owners some worries, too.
Representing a decentralized digital data record, blockchain can be used here for recording and storing the property-related information. Once uploaded to the ledger, the data can’t be changed or deleted by anyone.
What’s more, the technology is based on cryptographic algorithms and the data in each block is hashed. These peculiarities make blockchain a safe place to keep and exchange information.
- Complex flow management, property and lease operations
There are various payment and service operations required to be constantly recorded, completed, tracked, and managed.
Moreover, the recorded transaction-related data are periodically checked by property owners, auditors, and other responsible executives, which leads to strict requirements to company’s accounting system and cash flow management. The result are the complexity of the processes and additional costs for requirements compliance.
The integration of smart contracts can help resolve these challenges by providing more simple, secure, and streamlined property operations and transaction flows. What’s important, they enable to ensure higher transparency in lease terms and property management. You can find out more about smart contracts, their structure, and development, in this post.
As you see, blockchain can address many challenges of the commercial real estate industry. When starting the development, consider first, which processes should be improved and then – can be improved using the technology and how. You can also contact a reliable blockchain development company and request a consultation. It’s for free!
Hope, the article has been useful to you. If you have some questions or a project idea, you’re welcome to apply to us! In our company, we deliver Ethereum, Quorum, Hyperledger Fabric, Openchain, Multichain, R3 Corda, and other blockchain solutions.