What are the Benefits of Blockchain in Real Estate?
Commercial real estate constitutes a significant portion of world economic asset and transaction activity. According to an MSCI report, the size of the professionally managed global real estate investment market increased from $7.4 trillion in 2016 to $8.5 trillion in 2017. Today’s real estate market however, consists of many siloed and independent networks with transactional friction and opacity between existing systems. The Ethereum blockchain presents a practical solution to realize the following industry benefits:
- Tokenization of real estate assets
- Process efficiency for underlying industry operations
- Reduced costs from process automation
- Access to global asset distribution
- Access to broader investor pools due to ownership fractionalization
- Access to secondary market opportunities
- Data accessibility to increase transparency and inform better investment decisions and portfolio management
One of the most exciting ways Ethereum benefits the industry is through the digital securitization of real estate properties, also known as tokenization. Digital assets can represent real-world assets such as real estate, real estate funds, revenue streams, governance rights, and more. Once these assets are tokenized, they can be divided into more granular pieces, made accessible to a wider pool of investors, and leveraged to raise capital. Once tokenized, the programmable Ethereum blockchain enables the secure and compliant digitization of the transactions and processes around these assets, including issuance, trading, and lifecycle management.
In the real estate market, the advice, knowledge, and know-how of real estate professionals will remain crucial to commercial buyers. However, the processing of securities, liability management, document processing, and accounting will inevitably change.