Kirill Bensonoff, an Entrepreneurs’ Organization (EO) member in Boston, is the co-founder of New Silver, a fintech company with a mission to improve local communities by providing fast, convenient, and flexible capital to real estate investors using data and technology to streamline the process. We asked Kirill to share his expertise on how blockchain technology is impacting the real estate industry.
Blockchain technology can be applied to real estate in two broad ways through the use of smart contracts and tokenization:
- Smart contracts are automated agreements that execute themselves according to the conditions outlined up front. They create a level of automation and efficiency that can make transactions smoother and quicker. When it comes to real estate, blockchain technology can speed up transactions by automating actions such as property ownership transfers, based on the completion of inspections and payments.
- Tokenization converts tangible assets of the real world into digital tokens on the blockchain. Tokenization has introduced a level of liquidity that the real estate industry has never before experienced.
Together, smart contracts and tokenization are shaking things up in the real estate industry. They empower individuals to own fractions of real estate while facilitating smoother and more efficient transactions. These technologies tokenized billions of dollars’ worth of property on the blockchain in 2021.
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Five Ways Blockchain Technology Is Being Used in Real Estate
There are a number of ways that blockchain technology is changing the real estate environment:
1. Blockchain for financing real estate transactions
Typically, raising capital for real estate projects using loans can be a lengthy process because of the long hours involved in paperwork and laborious loan closing processes. Blockchain technology streamlines the process to provide faster, secure financing through alternative methods. For instance, tokenized shares can be sold to finance the purchase of a building for commercial purposes.
2. Blockchain for asset management
Real estate assets can be recorded on the blockchain, which offers a transparent, secure means for managing these assets. That brings transparency to the system because all parties involved can view the information with high security, as blockchain information can never be tampered with unless all concerned parties agree upon it. Blockchain technology enables real-time tracking of assets, and therefore, the whole journey of an asset is traceable.
3. Blockchain for property management
Blockchain technology makes it easier to share data, streamline rental collections, or even fast-track the due diligence process. It verifies tenants faster and stores all the information about each property in an easily visible way for all parties.
Some property management companies have begun to create smart lease agreements using blockchain technology, whereby rent is paid automatically, leases are renewed, and even security deposits are refunded electronically when the right conditions have been met.
4. Blockchain for land and property registries
Blockchain technology may expedite the procedures involved in land and property registries. The technology creates a secure and shared source where documents can be exchanged and saved between several parties. Property records can be verified instantly, and digital titles and deeds can be used instead.
5. Blockchain for construction and property development
Construction and property development typically require the management of a large number of subcontractors and various supply chain processes. Now, all of those processes can be conducted in the digital realm via blockchain technology, which means that projects can be managed more effectively. Smart contracts can manage and automate agreements more efficiently. For example, real estate companies can use blockchain technology to keep track of the origin of construction materials, monitor project milestones, or even ensure compliance with regulations.