The global cryptocurrency market is worth about $2.5 trillion, slightly less than the size of the Indian economy. The sheer amount of wealth that crypto has amassed over the years also underscores how digital currencies are gaining popularity worldwide. Although bitcoin is the current leader of the virtual currency world with about 42% of the market share, research suggests that there are about 14,500 cryptocurrencies active in the world.
Now that we have entered the crypto boom, it is natural that everyone from business owners to technology enthusiasts to property developers is mulling over the potential of digital currencies in facilitating real estate transactions.
Real estate has proactively warmed to the idea of technology in recent years, reversing the longstanding agnosticism it exhibited several years ago. Credit for this also goes to the multiple iterations of the lockdown that have helped kick-start the digitization of real estate services in the country. Today, real estate leaders are actively investing in cloud-based technologies, AI and ML-based analytics platforms, digital walkthroughs and virtual reality, marketing automation, and much more.
Blockchain, the parent technology of cryptocurrency, has shown some limited but profound applications in real estate worldwide. Based on DLT (Distributed Ledger Technologies), blockchain can provide a seamless encrypted platform to enable secure and transparent real estate transactions, especially in fractional ownership of commercial assets, rental properties, vacation homes, etc. Through tokenization of real estate assets, it can also facilitate cross-border transactions .
Blockchain can provide a robust platform for digitizing important information related to real estate purchases such as deed history, transaction history, legal documents, technical information, maintenance track record, etc. This simplifies an otherwise cumbersome process. In a huge and versatile industry like real estate, the integration of blockchain will also reduce processing times and provide instant validation 24/7, increasing the authenticity of data.
Crypto Technologies in Global Real Estate
Not only blockchain, but also digital currencies are slowly and gradually gaining ground in the real estate sector. In some of the international cities, it has been proposed to pay real estate duties and taxes through digital currency. Recently, some big deals have been struck in cryptocurrencies in properties, yachts and luxury items.
According to media reports, retail apartments in Manhattan worth $29 million are being sold exclusively via bitcoin. These properties are listed on BitPay, a payment service provider for bitcoins, and can be purchased exclusively using bitcoin. The paid bitcoins are converted into USD and transferred to the developer’s account. It is claimed that the entire transaction can be completed in a matter of days, in stark contrast to the usual time frame for processing such deeds, which takes approximately 60-90 days.
Meanwhile, the presence of cryptocurrency is not new in the global real estate industry. In 2019, properties in In Iloilo, Philippines were sold using bitcoin and Litecoin. The fact that 32% of BitPay’s revenue in October comes from luxury property, gold and yacht transactions further underscores the potential implication of bitcoins in real estate transactions.
The way forward
Blockchain and cryptocurrencies can be potential levers to completely rethink real estate transactions. The Multiple Listing Services (MLS) currently prevalent in real estate may gradually shift to a DLT-enabled BlockChain platform. This can help build a robust system where every real estate transaction and lease can be tracked in real time by key stakeholders such as brokers, investors and buyers. This could usher real estate into an era of unprecedented transparency.
Blockchain can also give an edge to ongoing data analytics in real estate. Key data categories such as historical trends, neighborhood information, price trend analysis, future price forecasts, etc. can be embedded into the system to give buyers sharp insights and help them make unbiased and informed decisions. Likewise, it can help with credit checks of buyers and enable developers to make safe buying decisions. This can really democratize real estate investment and provide additional security.
Despite so much inherent power, reimagining a world where real estate transactions take place via digital currencies like bitcoin or Ethereum is still far-fetched. While we are in the midst of the cryptocurrency hype, some of the inherent weaknesses of digital currencies cannot be overlooked.
Digital currencies do not create cash flow and their valuation is mainly subject to speculative forces. They are also prone to hacking attacks and online fraud. Crypto enthusiasts praise the absence of banks and central authorities. Although the lack of regulatory bodies can be dangerous at times and an inviting cause for fraud. So the bottom line is that while blockchain-based technologies will see greater participation in the real estate cycle, we won’t see a wider use of cryptocurrencies in real estate transactions anytime soon. However, despite these inherent challenges, their limited application in alternative assets such as rental properties, vacation homes, etc. will continue to increase.
Disclaimer: Sahil Kapoor is the national head of 360 Edge. The views expressed in this article are those of the author and do not represent the views of this publication.
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