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How Real Estate ICOs Have Solved the Main Problems of Real Estate Market

This article explains how blockchain will solve 4 main problems of the real estate industry and what 3 criteria define if an ICO will be a success.

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Cryptoassetsrank.com Published on Jul 17, 2018
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This article explains how blockchain will solve 4 main problems of the real estate industry and what 3 criteria define if an ICO will be a success.

4 problems of real estate industry

Fraud. Buying real estate is an expensive and complex procedure, that is why it attracts a lot of swindlers. They forge documents, sell the same property to several people, lie about the condition of an apartment and lend apartments, the owners of which have gone away on vacation.

Bureaucracy. To reduce the risk of fraud, the buyers and sellers of real estate use the services of four intermediaries:

  1. The state issues licences, maintains the Property Register, documents the transfer of ownership right from the seller to the buyer, confirms the right of ownership.
  2. Notaries check the documents and the property history.
  3. Real estate agencies and real estate agents help to find a reliable buyer or seller, check the counterparties and the property history.
  4. Banks serve as intermediaries for money transfers.

When closing a deal, most of the documents circulate through all the intermediaries who must check and verify them. The more expensive and complex a property, the longer is this procedure.

Excessive price. The services of each intermediary cost money, that is why the final price of the deal gets 5–10% higher. Execution of documents, references and permits is not free either, which increases the cost of the deal even more.

Corruption. High price, complexity and bureaucracy provoke the growth of corruption because a public official can speed up or slow down the issue of each permit, document or stamp.

PropTech 3.0: blockchain technologies in real estate

Startups in the field of real property that use innovations to develop the industry are called Property Technology, or PropTech in short. In PropTech there are three generations of technologies:

  1. Marketplaces and VR.
  2. AI and Big Data.
  3. Blockchain.

Blockchain is considered a brand new generation of Real Estate Technology because it dramatically improves the key trends of this industry.

Registration

As an experiment, in 2016 the Swedish Land Registry began to use blockchain and smart contracts for real estate operations. The preliminary results have shown that application of these technologies for the state registries will:

  • increase the data storage reliability — they will be under protection of cryptography and distributed ledger;
  • protect the documents from backdated corrections — in blockchain backdating is impossible;
  • make it easy to issue copies of references and permits — it will be possible to get them by connecting to blockchain.

During the experiment the ChromaWay company practices were used, which helped to transfer the real estate data from the usual Microsoft, PostgreSQL and Oracle databases to blockchain. This work was of such high quality that now ChromaWay will be transferring the Indian real estate registry to blockchain at the invitation of the Indian Minister of Information Technology.

Similar projects have been launched in other countries.

You can learn about them in our ICO rating filtered by the Real Estate parameter. It contains current startups at the stage of initial coin offering that are looking for investors to finance their ideas.

Document flow

The property purchase and sale deals in any country are registered at a registration chamber. This is an agency that keeps the data on the property rights and verifies them during examination. Apart from the chamber, banks, agents, notaries and insurance agents take part in the deal. The longer the chain of intermediaries, the more time is needed for the documents to pass through them.

Purchase and sale deal via blockchain at Propy

Blockchain makes this process easier because the data kept in it is seen by all the parties of the deal. Each party can see the required documents at any time and be sure that they are 100% authentic without any additional verifications.

You can facilitate the document flow with the help of ATLANT, BREM, Crowdvilla, Masterchain and Propy. On these sites P2P property purchase and sale contracts are concluded. Consensys, Factum and Bitfury deal with real estate mortgage.

In the USA registration of property sale and purchase deals with the help of blockchain is tested in South Berlington, Vermont. At the beginning of 2018 the city authorities launched a joint project with the Propy platform to check the usefulness and reliability of the new technology. If the experiment is a success, all real estate deals in South Berlington will be done via blockchain.

Construction tokenization

The most difficult part in any construction project is to get the first 20% of funding. Because of this threshold, the developers have to engage in exhausting negotiations, pay large fees, mortgage their own immovable property, i.e. do everything to persuade investors in their reliability and construction project potential.

Scheme of investment into BitRent construction startup at an early stage

If this process is transferred to blockchain and the ICO experience is applied, it will be much easier to raise the funds. The developer will just launch a separate ICO with its tokens for each new construction project and sell them at financial markets. It will help to minimize the threshold, which will increase the number of investors.

Such fundraising algorithm for construction projects can be implemented with the help of Etherty, BitRent, CasaToken and XRED. These sites are also suitable for crowd investing into real estate.

Renting

On the rental market blockchain is used:

  • to control the rental market. Similar practice is tested by the authorities of China and India.
  • to provide landlords and tenants with a site for concluding P2P deals. This is done by Etheera, ATLANT, Airbnb, Propy and Blandlord. At these sites you can conclude a rental agreement with the help of a smart contract and pay it with local cryptocurrency.

Success factors of real estate ICOs

All successful startups in this field have three common features:

  • they cover the real estate industry as a whole and not its individual areas;
  • they are supported by the state;
  • they are targeted at the international market.

ATLANT, Propy and Etheera correspond to these criteria, that is why these platforms are popular among investors and real estate industry participants.If you want to invest in real estate startups, look for the projects with similar characteristics in our ICO rating.

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