Unlocking The Value Of Distributed Ledger Technology (Blockchain) In Real Estate

My last article discussed how distributed ledger technology (DLT)[1] and blockchain[2] are revolutionising the traditional and alternative asset management sectors, and producing real use-cases specifically in the private equity industry. But what potential does DLT hold for the real estate industry, and how could it help overcome the very specific challenges of this sector?

Real estate investments are usually seen as alternative investments in the asset management world. However, "alternative" may no longer really indicate a niche market that generates high returns with very exclusive accessibility. This asset class has nowadays become a lot more accessible and mainstream to institutional investors even though it is still not very liquid. This is forcing the real estate industry as well as investment managers in this asset class to look for scalability, some kind of retailisation, and operational efficiency.

What are the challenges of the real estate market?

The property sales process is slow and costly. It requires third party verification through escrow and title companies to make transactions more secure and reduce chances of being hit by fraud.

Transparency in this market is also an issue. Properties are registered on very different ownership registration systems in different countries, which can obfuscate the big picture.

Investing in property and property management experiences pose still other challenges. Once the properties are purchased, the management must deal with a huge number of cash-flow streams. Additionally, the real estate investment property manager and the accountant are usually separate from each other and rarely use the same systems, which makes the process slow and cumbersome.

All in all, it is clear that, with high demand and shrinking margins, the industry is looking for operational excellence and efficiency. So, the motivation is there—but why hasn't this market come up with the quick-and-easy, plug-and-play solutions that other industries have found?

Blockchain is the answer

As to why, I'm not completely sure. Probably, as in other industries, developers must be extra careful about design and testing when the platform in view must handle large financial transactions and gain people's trust. But as to the opportunities available, they are many, the key ingredients being automation and digitalisation. Processes can be streamlined, systems globally connected, and manual involvement lessenedall possible with...