Is the Time Ripe Enough for Crypto in Real Estate?
The global cryptocurrency market is valued at roughly $ 2.5 trillion, slightly less than the size of the Indian economy. The sheer wealth that crypto has amassed over the years also underscores how digital currencies are becoming increasingly popular around the world. Although Bitcoin is currently the leader in the virtual currency world with around 42% of the market share, research suggests that around 14,500 cryptocurrencies are active worldwide.
As we have entered the crypto boom, it goes without saying that everyone from business owners to technology enthusiasts to real estate developers is thinking about the potential of digital currency in making real estate transactions easier.
Real estate has proactively warmed up to the idea of technology in recent years, reversing the lingering agnosticism it displayed a few years ago. This is also due to the multiple iterations of lockdown that helped trigger the digitization of real estate services in the country. Today, leading real estate companies are actively investing in cloud-based technologies, AI and ML-based analysis platforms, complete digital solutions and virtual reality, marketing automation and much more.
Blockchain, the mother technology of cryptocurrency, has shown some limited but profound uses in real estate around the world. Based on DLT (Distributed Ledger Technologies), blockchain can provide a seamlessly encrypted platform to enable secure and transparent real estate transactions, especially in the case of partial ownership of commercial assets, rental houses, vacation homes, etc. By tokenizing real estate assets, it can also facilitate cross-border transactions.
Blockchain can provide a robust platform to digitize important information related to real estate purchases, such as: In a huge and diverse industry like real estate, the integration of blockchain will also reduce processing times and provide instant 24/7 validation, increasing the authenticity of the data.
Crypto Technologies in Global Real Estate
Not only blockchain, but digital currencies are slowly and gradually gaining ground in the real estate industry. Some of the international cities have proposed paying real estate fees and taxes through digital currencies. Recently, some big deals in real estate, yachts and luxury items have been closed through crypto.
According to media reports, $ 29 million worth of condos in Manhattan are sold exclusively through Bitcoin. These properties are listed at BitPay, a Bitcoin payment service provider, and can only be purchased with the help of Bitcoin. The paid bitcoins are converted into USD and transferred to the developer’s account. It is claimed that the entire transaction can be completed in days, a stark contrast to the usual timeframe for processing such documents, which takes around 60-90 days.
Meanwhile, the presence of cryptocurrencies in the global real estate industry isn’t new. In 2019, properties in Iloilo, Philippines were sold with the help of Bitcoin and Litecoin. The fact that 32% of BitPay’s revenue in October came from luxury real estate, gold and yacht transactions underscores the potential importance of Bitcoins for real estate transactions.
The way ahead
Blockchain and cryptocurrencies could be potential levers to completely rethink real estate transactions. The Multiple Listing Services (MLS) currently widespread in the real estate sector can be gradually transferred to a DLT-compatible BlockChain platform. This can help build a robust system where every real estate transaction and lease can be tracked in real time by key stakeholders such as brokers, investors and buyers. This can usher real estate into an era of unprecedented transparency.
Blockchain can also be one step ahead of ongoing data analysis in real estate. Key categories of data such as historical trends, neighborhood information, price trend analysis, future price forecasts, etc. can be embedded in the system to give buyers concise insights and help them make unbiased and informed decisions. Likewise, it can help with the credit check of buyers and enable developers to make safe purchase decisions. This can really democratize real estate investing and add extra security.
However, despite so much inherent strength, it is still a long way to go to reimagine a world where real estate transactions take place via digital currencies like Bitcoin or Ethereum. While we are in the middle of the cryptocurrency hype, some of the inherent weaknesses of digital currencies cannot be overlooked.
Digital currencies do not create cash flow and their appreciation is primarily subject to speculative forces. They are also vulnerable to hacking attacks and online fraud. Crypto enthusiasts praise the lack of banks and central authorities. Although the lack of regulatory authorities can be dangerous at times and can be a welcoming ground for fraud. The bottom line is that while blockchain-based technologies will see increased involvement in the real estate business cycle, we won’t see wider use of cryptocurrencies in real estate transactions anytime soon. However, despite these inherent challenges, their limited application to alternative assets such as rental apartments, vacation homes, etc. will continue to grow.
Disclaimer: Sahil Kapoor is the national director of 360 Edge. The views expressed in this article are those of the author and do not represent the point of view of this publication.
Read all the latest news, breaking news and coronavirus news here.