The leading professional services firm, Deloitte, have stated their belief in the blockchain and how it could revolutionise the commercial property sector by utilising blockchain-based smart contracts.
Blockchain technology is a digitised, decentralised and distributed ledger that unalterably records and shares information. Using this technology allows users to confirm transactions without a need for a central clearing authority. Already, the technology is being aimed at potential applications such as fund transfers, settling trades and voting.
But Deloitte are looking at the use case within property. According to firm, there are 6 benefits that can revolutionise the market.
The blockchain allows for recorded transactions to be stored in near real-time. This reduces risk, removes friction of the payment process, and limits the ability to chargeback or cancel transactions.
Blockchain uses cryptographic proof, which allows two individuals to settle a transaction directly with each other without the need for a trusted third party. This is also recorded and able to be viewed after the fact.
The peer-to-peer distributed network records a public history of transactions. As the blockchain is distributed and highly available, it retains a secure source of proof that the transactions occurred and can be used as evidence after the fact.
As the blockchain contains a certain and verifiable record of every transaction ever made, risks of double spending, fraud, abuse and manipulation of transactions can be mitigated.
With these added benefits, Deloitte have detailed a previous research paper that backs their findings: “According to a 2015 World Economic Forum survey of800 executives and information and communications technology sector experts,57.9 percent of the respondents believe that 10 percent of the global GDP information will be stored on blockchain technology by 2025.”
The exhaustive security features included with blockchain technology are certainly benefits, but it leaves people questioning what else can be provided other than recording secured transactions. Due to this, Deloitte have provided the use-cases when considering the blockchain for leasing and purchasing property.
Need for a common database
Shared databases are a necessity for leasing, purchasing and sales transactions. A key example explored by Deloitte are multiple listing services, which would collate property-level information from private data bases of brokers and agents under one umbrella.
Multiple entities can modify database
Managing properties involves several entities: owners, tenants, operators, lenders, investors and service providers. The blockchain would allow one portal for all to access and modify, creating ease of access.
Lack of trust among entities
Participants in leasing and purchase and sales transactions are new to each other and could be over cautious in due diligence and may even have date integrity concerns. The blockchain can help to reduce this risk through digital identities and more transparent record keeping systems for property titles, liens, entitlement, financing, and tenancy.
Opportunity for disintermediation
Trusted intermediaries such as title companies can be disintermediated through the blockchain, this is due to increased security and transparency in title management and auto-confirmation through government land registries.
Many property transactions have conditional clauses and can be executed through smart contracts. A purchase could be dependent on loan approvals or title clearances.
With the benefits of blockchain technology, the property market could become easier to access with less exposure to risk on both investors and developer’s side. It may be a few years before being fully realised, but with backing from firms such as Deloitte, it could definitely be a possibility.