The global cryptocurrency market is worth around USD 2.5 trillion, which is slightly less than the size of the Indian economy. The amount of wealth that crypto has acquired over the years also underscores how popular digital currencies are becoming around the world. Although bitcoin is the current leader in the virtual currency world, with a market share of around 42%, research shows that there are approximately 14,500 cryptocurrencies active in the world.
As we enter the crypto boom, it is natural that everyone from business owners to technology enthusiasts to property developers are considering the potential of digital currency in facilitating real estate transactions.
In recent years real estate has actively warmed up to the idea of technology, reversing the long agnosticism shown a few years ago. The credit also goes to the multiple iterations of the lockdown that helped accelerate 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 more.
Blockchain, the core technology of cryptocurrency, has shown some limited but profound applications in real estate on a global scale. Based on DLT (Distributed Ledger Technologies), blockchain can offer a seamless encrypted platform to facilitate secure and transparent real estate transactions, especially in partial ownership of commercial properties, rental homes, holiday homes, etc. Through tokenization of real estate assets, it can also facilitate cross-border transactions.
Blockchain can provide a robust platform to digitize critical information related to asset purchases such as deed history, transaction history, legal documents, technical information, maintenance track records, etc. This simplifies the otherwise cumbersome process. In a vast and multifaceted industry such as real estate, the integration of blockchain will also reduce processing times and offer 24/7 instant verification, thereby promoting the authenticity of data.
Crypto Technologies in Global Real Estate
Not only blockchain, but also digital currencies are slowly and gradually making their way into the real estate industry. In some international cities, it has been proposed to pay property fees and taxes through digital currencies. Recently, some sizable deals in properties, yachts and luxury goods have been concluded through crypto.
According to media reports, $29 million worth of retail condos in Manhattan are being sold exclusively through bitcoin. These properties are listed on bitcoin payment service provider Bitpay, and can be purchased exclusively with the help of bitcoin. The paid bitcoins will be converted into USD and transferred to the developer’s account. It is claimed that total transactions can be concluded within days, as opposed to the normal time frame for processing such tasks, which takes around 60-90 days.
At the same time, the presence of cryptocurrencies in the global real estate industry is nothing new. In 2019, assets in Iloilo, Philippines were sold with the help of bitcoin and litecoin. The fact that 32% of Bitpay’s October revenue comes from luxury property, gold and yacht transactions further underscores the potential implications of bitcoin in real estate transactions.
road ahead
Blockchain and cryptocurrencies could be potential levers to completely reimagine real estate transactions. Multiple Listing Services (MLS) currently prevalent in real estate may be gradually migrated to a DLT enabled blockchain platform. This can help in creating a robust system in which every real estate transaction and rental deal can be tracked in real-time by key stakeholders such as brokers, investors and buyers. It could usher in an era of unprecedented transparency in real estate.
Blockchain could also advance ongoing data analytics in real estate. Key data categories such as historical trends, neighborhood information, price trend analysis, future price projections, etc. can be embedded in the system to provide sharp insights to buyers and help them make unbiased and informed decisions. Similarly, it can help buyers to conduct credit checks and enable developers to make safer buying decisions. It can really democratize real estate investing and bring in additional layers of security.
However, despite so much inherent strength, re-imagining a world where real estate transactions are taking place on digital currencies such as bitcoin or ethereum is still far-fetched. While we are in the midst of cryptocurrency hype, some of the inherent weaknesses of digital currencies cannot be ignored.
Digital currencies generate no cash flow and their appreciation is primarily subject to speculative forces. They are also prone to hacking attacks and online fraud. Crypto enthusiasts appreciate the absence of banks and central authorities. However the lack of regulatory bodies can be dangerous at times and an inviting ground for fraud. So, the bottom line is that while blockchain-based technologies will increase participation in the real estate business cycle, we don’t see widespread use of cryptocurrencies in real estate transactions very soon. However, despite these inherent challenges, their limited application in alternative properties such as rental homes, 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 stand of this publication.
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