The adoption and adaption of blockchain technology are gradually gaining momentum in the real estate sector, with special focus on the commercial part of the industry. Blockchain disruption of the CRE is proving to be a welcoming change to both the industry insiders and the investors. DLT integration into the traditional CRE processes has successfully addressed and found sustainable solutions to some of the key pain points, encouraging a positive change beneficial for all the stakeholders.
The use of a distributed decentralized ledger, smart contract development, and creation of tokenized real estate assets have shown potential to streamline existing operations within CRE such as sale, purchase, leasing, financing, and transaction management. This blog will elaborate on the blockchain solutions for real estate from the commercial aspect.
Pain Areas in the Real Estate Industry
To understand how blockchain brings reformation and innovation into the real estate sector, it is essential to acknowledge the problematic areas that need change. The legacy architecture of real estate operations, commercial and otherwise suffers from:
Lack of Accessibility
Real estate might be the largest of all asset classes, but the lack of accessibility to investors has kept it reserved for the rich. The barrier of entry is too high, in both financial and regulatory sense comprising of hurdles like credit score, international bank accounts, financing, accreditation, and access to the proper fund managers and sponsors. The lack of capital appreciation and passive income make real estate investments less desirable to many.
Lack of Transparency
For years, both investors and a certain segment of the industry insiders have been complaining of the abundance of fraud cases in real estate and the lack of transparency. Increasing instances of money laundering, corruption, and tax evasion have intensified the demand for transparent transactions.
High Capital Barrier
Real estate investments require high upfront capital that very few can pay without getting help from alternative financing methods. The need to pay multiple fees for transfer, exchange, brokerage, attorney consultation, etc makes buying property a very expensive.
The simplest of real estate purchase involves several third-party intermediaries like the broker, financier, attorney, asset manager, and more. Their involvement not only makes the process time-consuming but expensive due to fees charged by each entity.
Lack of Liquidity
Lack of liquidity is one of the biggest banes of real estate investments, which causes many to turn away from it. The involvement of third-party intermediaries and inaccessibility along with lengthy transactions all reduces the liquidity of real estate investments.
Seeking Solutions in Blockchain Technology
Blockchain integration into the real estate sector…