For centuries, real estate has been the most preferred investment option by Indians. But who to blame, it is the smartest option as well. With capital appreciation, tax advantages, and inflation protection, financial experts also consider it the most reliable and stable means to build your wealth. But that being said, it’s not the simplest one. High entry costs, lack of transparency, multiple intermediaries, and numerous other bottlenecks make securing a real estate property, which appears to be an appealing opportunity, a daunting task.
But these blockages, in a way, created space for blockchain to transform this sector. Most associate blockchain with just cryptocurrencies like Bitcoin, Ethereum, and Tether, and imagining blockchain in real estate can be puzzling!
In simple terms, just like for any other sector, blockchain diffuses its core features like transparency, decentralisation, immutability, security, and smart contract automation in real estate. But how does the blockchain actually work in the real estate market? Absolutely, there’s much more to it than just technical buzzwords. Let’s explore!
Understanding The Indian Real Estate Market
The real estate market is not just a stable investment option, but it also contributes hugely to India’s economy and provides employment to many. The sector functions by purchasing, leasing, and selling properties. Further, it is divided into four main categories: residential (houses, villas, apartments, etc.), commercial (office spaces, shops, malls, etc.), industrial (factories, manufacturing units, etc.), and agricultural (farms, plantations, and related land).
However, despite being a promising market, buyers, sellers, and investors still deal with the following problems:
- There is no proper infrastructure to track the real estate transactions.
- Lack of transparency makes it easier to get caught in some fraud, either from the buyer or seller end.
- It requires the involvement of multiple legal as well as private parties to finalize the deal, making the process complex.
- Handling extensive paperwork that adds needless stress and delays is intimidating for both buyers and sellers.
- Due to the involvement of multiple intermediaries, it adds additional fees, worsening the already expensive nature of the property investment.
How Does Blockchain In Real Estate Work?
Blockchain dynamics in real estate; we will come to that! But what’s actually blockchain technology? Let’s discuss that first!
Blockchain Technology Explained
It is basically a distributed ledger technology that actually involves a digital ledger used to record information, such as transactions. This ledger is shared among a network of nodes or computers. So, there is no centralized control! All the transactions are stored in the form of blocks that are connected together to form a chain, which can’t be changed or deleted by any party. Thus, the whole network is tamper-proof. Moreover, every node of the blockchain network has complete transparency over the stored data on the digital ledger.
Blockchain Technology In Real Estate
Blockchain in real estate involves the use of a digital ledger, which is distributed among different computers to securely, immutably, and transparently record transactions. The whole ecosystem is maintained without reliance on intermediaries.
Here’s how blockchain in Indian real estate actually operates.
Property Data
Every real estate project involves multiple data collection considerations, such as zoning details, valuation reports, ownership records, property titles, and so much more. This information is required to be stored on blockchain-based systems to create a complete record of each and every property.
Smart Contract Development
To truly make the blockchain solution work, smart contract development is essential, just like in any other blockchain development project. These digital agreements are coded with the required data to automate different processes, such as lease terms, ownership transfers, etc.
Asset Tokenization
Different models that weren’t nearly feasible earlier can be accessed by converting real estate properties into digital tokens. Fractional ownership, for instance, has turned out to be a revolutionary model for property investment. A property can be divided into multiple tokens in order to transfer ownership rights in several shares.
On-Chain Property Registry
Instead of using paper documents or private systems, all the information and transactions related to the properties are recorded on the blockchain network. These registered transactions can’t be changed or deleted and can be verified at any time. In India, states like Telangana and Maharashtra are testing decentralized systems for land registries.
Investors Onboarding
It is much easier to integrate Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols with blockchain-based platforms. It allows for reducing fraud as well as maintaining jurisdictional compliance.
Identity verification
Whereas it was previously difficult for property owners to verify the identities of investors and tenants when selling or renting their properties, blockchain now makes it easier. When using blockchain networks, it is extremely simple to verify details without doubting their accuracy.
Decentralized Marketplaces
Properties converted into real estate tokens are listed on decentralized marketplaces to attract investors and enable buying, selling, and renting processes. These blockchain-based platforms streamline and secure property management.
Payment and Settlement
Regardless of geography, blockchain enables the quick transfer of property rights with payments made via cryptocurrencies or stablecoins. Plus, smart contract automation is used to settle property transactions.
Automated Compliance
With no intermediates involved, the whole ecosystem operates through smart contracts. These smart contract compliance requirements can be mentioned in the smart contracts, like investment limits, tax rules, or any other major requirements.
Blockchain Technology’s Impact on the Indian Property Market
While blockchain integration into the real estate ecosystem is still in its early stages, the following are some of the anticipated impacts on India’s property market:
Quick Transactions
With no middleman involved and a peer-to-peer model of blockchain, real estate transactions are processed in no time. Previously, property investments that took weeks or even months can now be settled quickly using smart contracts.
More Transparency
Blockchain can help to improve transparency in real estate transactions by creating a detailed record that is accessible to all parties, including buyers, sellers, and agents.
Improved security
Benefiting from the inherent security of the blockchain framework, real estate data cited on the blockchain networks is secure from being hacked, deleted, or changed.
Reduced Costs
Blockchain not only simplifies transactions by reducing reliance on real estate agencies or other intermediaries, but it also eliminates the fees they impose for their services. Thus, it allows for making real estate investment affordable.
Easier Compliance
The real estate industry has numerous rules and regulations that are difficult to understand and even follow. However, the use of smart contracts on blockchain makes compliance easier.
More Investment Opportunities
Furthermore, due to the unique model of fractional ownership, small investors can invest in high-value properties by purchasing a small share as tokens. As a result, the market becomes more accessible to a diverse range of investors.
Challenges of Implementing Blockchain in Indian Real Estate
Here are some of the challenges that make blockchain implementation in real estate a little difficult, especially in India:
- There are only a few blockchain development companies in India, such as Webcom Systems, that hold the expertise and resources to implement blockchain in real estate business models.
- There is a great deal of uncertainty surrounding the regulations for the legal implementation of blockchain in Indian real estate.
- It is an old sector, and most major Indian real estate firms still do not hold much trust in blockchain and its capabilities.
- Due to dispersed databases and outdated real estate software, retrieving information and integrating blockchain are a challenge.
Final Take
Where the whole world is benefitting from real estate blockchain development, the Indian market is also investing in this lucrative model. Moreover, as blockchain technology is evolving every single day, it will benefit the real estate sector even more in the upcoming years.
Webcom Systems is the pioneering blockchain development company that is assisting businesses across different sectors in building smart and decentralized solutions. Get in touch now if you are interested in how we are transforming the real estate ecosystem with blockchain capabilities!
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