The blockchain is a digital, decentralized register in which transactions are entered via a peer-to-peer network.
What are the opportunities for the real estate industry?
One possibility is tokenization:
Real estate is a so-called illiquid asset, meaning it is an asset that cannot be quickly converted into cash without significant effort. A small-scale sale is also not possible, as with a stock portfolio, for example.
A solution is a tokenization. To put it simply, it divided real estate property into small units called tokens. The buyers of these tokens are now entitled to this respective share. Thus, a real estate portfolio can be diversified, it is thus possible to participate with various tokens in different real estate and real estate types, such as residential real estate or commercial real estate, even across countries. It secures the underlying processes on a blockchain.
However, there are still many organizational and legal challenges to overcome.
For example, while each token holder is entitled to its claim of rental income in the case of rented real estate, it also has a number of obligations arising from real estate ownership. Property tax is due, and there are management, insurance, and repair costs to be paid for the real estate. This would be possible with smart contracts, i.e. coded contracts that run automatically according to a certain scheme, for example on the Ethereum Blockchain.
There are still many unanswered questions.
However, since innovation in this area is very high, and the advantages of implementing these technologies outweigh the disadvantages after processes can be organized faster, more cost-effectively and with less bureaucracy, a long-term implementation is to be expected.