A lot goes into buying or managing a real estate property. The introduction of property technology or proptech has revolutionised the industry, introducing more straightforward and efficient processes for buying, selling, renting, managing, and documenting real estate deals.
Current proptech trends highlight a booming sector buoyed by novel innovations and disruptive services, meeting consumer desires and solving challenges affecting real estate in Southeast Asia. The industry has a favourable environment for investment, with companies such as PropertyGuru receiving millions in investor funds in 2021. Leasing and rental prices are still low due to the impact of the COVID-19 pandemic on the region.
Moreover, factors such as the rising population numbers, digital transformation of Southeast Asia, and the increase in smartphone penetration show there will be greater demand for housing and a need for internet payment solutions, which bodes well for proptech.
Exploring the rise of blockchain-focused VC trends in Vietnam
Property technology helps manage co-working spaces, virtual house tours, online listings, data collection and analytics, licensing, and streamlining services to protect the environment. Other benefits include providing transparency to real estate transactions and using promotional tools to sell the property.
Blockchain in real estate is an emerging trend boosting the industry further. Here are several ways in which it is influencing the real estate sector:
Reducing real estate expenses
Blockchain technology makes it easier for people to verify information and property ownership details through its publicly available ledger, removing the cost of paying a title company. The buyer and seller can sign up for a smart contract, a computer program stored on a blockchain that automatically performs legally-binding transactions or documentation in real-time, according to the terms agreed upon by the signatories. Since these agreements meet the officially permitted standards of real estate transactions, the buyer and seller can save money on legal fees.
Additionally, if the buyer and seller are comfortable using cryptocurrencies for the sale, there is no need to go to a bank to set up an escrow account. The seller can view the blockchain ledger to determine whether the buyer has sufficient funds in their crypto wallet to finalise the purchase.
Boosting speed and efficiency in real estate
One of the most frustrating parts about real estate is how long it takes to complete a deal. Property reviews need agents, and agreements need lawyers, transactions need banks, plus other processes that delay the whole deal.
Blockchain’s solutions remove all the intermediaries, leaving only the primary beneficiaries to agree. Smart contracts, for example, can accelerate the entire process by automating payments and recording all agreements in real-time.
Tokenisation and part ownership of property
Property owners can use blockchain technology to turn their tangible assets into digital tokens, creating a fractional ownership model where people can buy the tokens, own a part of the asset, and earn a share of the rental income. Companies like Realbox have launched a real estate tokenisation platform, enabling investors to participate in the market. These types of platforms help to increase security, liquidity, and transparency in real estate deals.
The tokenisation model also has a social impact, as it democratises access to the real estate market, often seen as a playground for the wealthy or upcoming middle-class citizens. Non-fungible tokens (NFTs) – digital representations of tangible assets – enable people to make money on real estate exchange markets, speculating and trading intangible assets.
Verifiable documentation and data analysis
The blockchain ledger makes it simpler to search for property online, removing the overreliance on brokers who might charge high prices for their services. Using blockchain provides transparent and reliable documentation of full and fractional ownership, making it easier for a buyer to decide whether to buy the property. It prevents the likelihood of listing services from providing one-sided or paid recommendations to potential buyers.
Furthermore, blockchain reduces the costs of underwriting and other property agent services by delivering all the information to the customer. Smart contracts record all rental, purchase, tokenisation, and leasing agreements on the blockchain.
The traditional methods in real estate were complicated, confusing, overwhelming, and time-consuming. However, the current proptech trends show that the industry can evolve and adopt simpler and more efficient technologies to improve customer experiences and generate higher revenues. A global 2019 survey found that over 80% of commercial real estate capital investors expected proptech to have a significant or moderate effect on the sector, which had received $18 billion USD investor funding in the previous year.
Blockchain in real estate is a game-changer as it provides much-needed solutions for verifiable documentation, fractional ownership, digital payments and is streamlining the expensive and inefficient real estate sector. Governments should encourage local and foreign investors to fund Southeast Asian real estate companies to tap into a large market that is adopting the modern digitised approach of proptech.