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How is Blockchain technology Shaping the Future of Commercial Real Estate?
How is Blockchain technology Shaping the Future of Commercial Real Estate?

March 22, 2021

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Real Estate is notoriously famous for being slow when it comes to innovation and technological advancements. In every list of industries that are constantly evolving through new-gen technologies, you will find real estate to either be absent or by the end. 

However, the growing instances of inaccuracies-driven fraud, lack of transparency, and inefficiencies are now demanding the sector to reform. While still slow to technological adoptions, there is one technology that is emerging as a solution to several commercial real estate limitations - Blockchain technology. 

The technology once deemed pivotal to the fintech domain is now crossing several strides to make an impactful mark in the real estate industry.

In this article, we are going to deep dive into the role of blockchain technology in the real estate domain, particularly in the commercial space. 

 

Why Does the Commercial Real Estate Space Needs Blockchain?

 

A. Absence of a shared database 

Common databases are necessary for the purchase or leasing of property transactions. Between multiple listing sites and every property dealer carrying their own private database of properties and prospective buyers, the commercial real estate space is made of several unaccounted data, spread across multiple sources. 

 

B. Multiple stakeholders each having their version of platforms 

 

Every stakeholder of the commercial real estate space - tenants, owners, property dealers, lenders, service providers, etc. have their individual platforms where they workaround. This means that there is a minimum of three versions of data around one commercial space - all operated as silos with little to no link with each other. 

 

C.  Multi-party dependency for performing transactions

 

The sell-off or lease of a commercial real estate calls for multi-party involvement. The owner, tenant, insurance provider, property dealer, registration office, there are multiple bodies involved in the commercial real estate buying or lease process. The more the stakeholders, the greater are the chances of inaccuracies emerging out of multiple communication platforms. 

 

Benefits of Using Blockchain Technology for Commercial Real Estate

 

The pros of blockchain technology in the commercial real estate market go beyond creating transparency. All the features of the new-gen tech come together to make the domain efficient and predictability friendly. 

 

1. Making commercial property search efficient 

 

The present MLSs (multiple listing services) that offer buyers and brokers access to property-related data like rental rates, locations, and capital value, continue to be fragmented and highlight inaccurate data because of a lack of standardization. 

A blockchain-driven MLS can enable data to get distributed across peer-to-peer networks which would enable brokers to have more control over data that is verified on the account of property features and history. 

 

2. Effective due diligence and pre-lease evaluation 

 

The commercial real estate market is filled with tasks that call for verification of proof of identity and physical documents like the ownership history, income of the owner/tenant, maintenance records, etc. 

The verification process can be an extensive task in itself, prone to inaccurate data. A blockchain-based verification process can speed up the pre-transaction as sales activities like financial evaluation, underwriting, getting a mortgage commitment, etc. 

 

3. Improved quality of data for predictive applications 

 

Because of a lot of fragmentation and localization in the market, there is an absence of insightful real-time data available to real estate owners and property dealers. This absence prevents them from taking real-time decisions and analyses. 

Blockchain technology offers high transparency around commercial real estate transactions through an open and shared database which all the involved parties workaround. The fact that all the data gets updated on the blockchain in real-time, the stakeholders can easily take preventative actions. 

 

4. Transparent cash flow management

 

In a typical commercial real estate transaction, there are hundreds of payments that have to be executed, tracked, and recorded on a constant basis. In addition to this, all the payment details are to be checked constantly. 

Blockchain, through the smart contracts functionality, offers easy, transparent, and efficient management of cash flows. The contract comes with rent or bond statements designed for maintaining automated payments between owners and tenants. A smart contract of this sort ensures that there are zero defaults. 

 

Parting Notes 

The role of blockchain technology in the commercial real estate space is growing at an expedited speed. A number of businesses are entering the space to make the sector efficient and transparent. 

Will it be a constant or simply a fashion item is yet to be seen, but what we can tell sitting today that blockchain will have to be linked with other new-gen technologies like AI, IoT, etc. to become a key contributor to the commercial real estate transformation journey. 

 


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Jason White
Content Writer

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