Aside from financial services, it’s difficult to identify a sector that hasn’t been affected by blockchain’s disruption and its extensive implementation across industries. Cryptocurrencies have had a significant influence on payments, remittances, and the exchange of foreign currencies Initial coin offerings (ICOs) have posed a threat to traditional investment methods such as stock investing, startup loans, and venture financing. Even the food distribution business has been impacted by blockchain technology.

The real estate industry has not been spared from the effects of blockchain disruption. Historically, trading in high-value assets such as real estate only through digital means has not been the standard practice. The majority of offline real estate transactions include face-to-face interactions with representatives from a wide range of various businesses. Blockchain technology, on the other hand, has opened the door to a plethora of new opportunities. The integration of smart contracts into blockchain technology has enabled assets such as real estate to be tokenized and traded in the same manner that cryptocurrencies such as Bitcoin and Ether have done so in the past.

International economic asset and transaction activity in the commercial real estate sector accounts for a considerable share of global economic asset and transaction activity. According to research published by MSCI, the size of the professionally managed global real estate investment market expanded from $7.4 trillion in 2016 to $8.5 trillion in 2017 as a result of the worldwide economic expansion in 2016.

The current real estate market, on the other hand, comprises several siloed and autonomous networks, with transactional friction and opacity across the various systems in place. The Ethereum blockchain provides a realistic approach for realizing the following benefits for the manufacturing industry such as:

  • Tokenization of real estate assets
  • Process efficiency in the fundamental processes of the industry
  • Cost savings as a result of process automation
  • Global asset distribution
  • Due to the fractionalization of ownership, investors have access to a larger range of investment opportunities.
  • Secondary market opportunities

The availability of data helps to promote openness while also allowing better investment choices and portfolio management. In the real estate market, the digital securitization of real estate assets (also known as tokenization) is one of the most exciting ways that Crypto finance may be able to assist the market. Real-world assets such as real estate, real estate funds, revenue streams, governance rights, and other forms of assets may be represented digitally via digital assets, which are digital representations of real-world assets.

Following tokenization, these assets may be broken into smaller parts, made more available to a larger pool of investors, and leveraged to generate further funds. As soon as these assets have been tokenized, programmable blockchains allow for the secure and compliant digitalization of the transactions and activities that surround them, including the issuance of assets, trading of assets, and asset lifecycle management.

Real estate professionals’ advice, expertise, and know-how will continue to be crucial to company buyers of commercial real estate in the coming years in the commercial real estate market. As a consequence of this change, the processing of securities, the management of liabilities, the processing of documents, and the accounting will all be altered.

Why Crypto Finance?

Traditionally, real estate technology has been largely focused on the creation of listings and the connection between buyers and sellers. However, blockchain presents new ways to exchange real estate and has the potential to enable trading platforms and online marketplaces to provide a more complete level of support for real estate transactions.

Some of the responsibilities that new platforms might possibly take over include listing, payments, and legal paperwork. When middlemen are removed from the transaction, buyers and sellers will get a greater value for their money since they will save on commissions and fees that are paid by these intermediaries. This also expedites the process by removing the back and forth between the mediators and the parties involved. Real estate has long been seen as an illiquid asset due to the length of time it takes to sell a property.

With cryptocurrencies and tokens, however, this is not the case, since they may potentially be readily traded for fiat currency. Real estate, on the other hand, may be readily turned into symbols of ownership. A seller does not have to wait for a buyer who is willing to acquire the full property in order to get any monetary value from their investment. By allowing for fractional ownership in real estate, blockchain reduces the barriers to entry into the real estate investment market. Most enterprises need a big number of money up front in order to secure a piece of real estate. Another option is for a group of investors to combine their resources in order to acquire a bigger property. In order to acquire and sell tokens on the blockchain, investors would simply utilise trading software to purchase and sell even fractions of tokens as they see appropriate.

They would also be able to escape the difficulties of property administration, such as upkeep and leasing, if they chose to invest in fractional ownership. It is possible that the openness afforded by a decentralized network would aid in the reduction of the costs associated with real-estate transactions. Inspections, registration fees, loan fees, and taxes are some of the additional expenses associated with real estate, in addition to the savings achieved by avoiding the professional fees and commissions charged by real estate intermediaries. These costs change significantly depending on the jurisdictional location in which they are offered. As platforms automate and combine these procedures, the need for intermediaries, such as brokers, may be reduced or even removed from the equation.

Despite the fact that hundreds of billions of dollars are invested in global real estate, it is controlled by the wealthy and large corporations. A greater number of people may be able to enter the market as a consequence of the development of blockchain technology, which makes transactions more transparent, secure, and egalitarian in nature. Real estate transactions might become truly peer-to-peer in the future, with blockchain-powered platforms taking care of the bulk of the legwork and administration.

Tokenization and Real Estate

When it comes to the real estate market, tokenization is a phrase that describes the digitization of securities, alternative assets, and financial instruments, among other things. By utilizing blockchain technology, digital assets can be created that incorporate ownership rights, transaction history, and rules to ensure that asset issuance, distribution, and transfer are all compliant with applicable regulations. Blockchain technology has the potential to transform the financial industry. Controls to guarantee that tokens may only be transferred to specific counterparties, or that they cannot be transferred at all during a lock-up period, are simple examples. Digital assets may be tailored to satisfy the needs of a wide range of different issuers.

Additionally, tokenization lowers the costs and boosts the speed of generating, issuing, and trading assets, as well as the development of new features, the administration of dividends, and the management of other business operations. The ability to customize digital assets in great detail while still issuing them quickly allows issuers to adopt digital assets directly to investor requests, therefore considerably lowering counterparty risk.

Reduced expenses enable issuers to lower the minimum investment amounts required and so get access to a larger pool of potential investors. The increased connection between digital assets and their accompanying networks broadens the scope of secondary market opportunities and increases the liquidity of digital assets. With these advantages for both issuers and investors, blockchain demonstrates that the actual potential of the technology is a future with fundamentally new products and markets.

Financing and Real Estate

Raising capital for new real estate developments is a challenging endeavor. When property development companies combine with banking institutions as single source loan providers, they may anticipate interest rates to go as high as 29 percent.

For developers, blockchain makes it easier to access alternative financing models by streamlining investor administration. For investors, blockchain ensures transparency in investments and continual return on investment tracking. Financial goods based on blockchain technology may also be built for worldwide distribution. These solutions streamline the investor experience, boost investor trust, and provide access to a larger pool of potential investors.

Mortgaging with Crypto Finance

Loan origination and underwriting continue to be conducted in an ad hoc manner and rely heavily on paper paperwork. Security structure is left up to interpretation, and significant effort is necessary to prevent assets from being double-pledged in the event of a default. Trading and asset servicing choices are frequently made on the basis of out-of-date information. Finally, cash reconciliations across lifecycle events can result in settlement delays that have a negative impact on investor cash flow.

In the case of banks, blockchain technology may be advantageous since it offers them with a single version of verified information, secure data interchange capabilities, immutable transaction monitoring, and real-time payment settlement capabilities. It is possible to encode important data such as ownership rights and loan payment history into a loan or mortgage once it has been digitized, which may then be used to assist future servicing choices. Using smart contracts to collect and distribute payments to beneficiary holders while simultaneously delivering real-time information to regulatory organizations is a viable option. This allows for more effective asset lifecycle management while also increasing investor trust in secondary markets by giving proof of asset performance to investors.

Crypto Finance and Property Management

Large-scale property management companies are subjected to ineffective control of their global portfolios of properties and properties in development. Blockchain enables safe data exchange, accelerates rental collections and payments to property owners, and delivers superior due diligence across a portfolio of properties. This improves operational efficiency while also allowing for time and cost-saving opportunities. It also creates far more detailed data, which allows for more informed decision-making.

Crypto Finance and its impact on investor tenant relationship and payments and leasing

Digital identities based on blockchain technology will be extremely useful across a wide range of companies, consumer applications, and the public sector. Mutualized blockchain-based KYC/AML procedures that use tenant and investor identities can speed background checks, cut expenses, and boost security. While enabling anybody to verify ownership of property, decentralized identities also make crucial papers (evidence of insurance coverage, proof of identification, proof of credit history) easily shared with the appropriate parties.

Moreover, Leases may be signed and paid on the blockchain thanks to distributed ledger technology. This eliminates the requirement for manual reconciliations, as well as the necessity for property owners to manually process rental and dividend payments. Smart contracts can also automate various forms of payments and fees in order to motivate tenants, landlords, and service providers to behave in a responsible manner.

Due to the fact that property ownership and cash flows are documented on-chain, investors and asset owners benefit from automated and near-immediate financial reporting. Eventually, the creation of yearly financial statements such as the balance sheet, statement of cash flows, and income statement will be done in real-time, with the possibility of real-time audits being performed on the financial statements. Multiple breakthroughs are possible in the areas of compliance, regulatory supervision, and investor relations as a result of this.