For the masses to become active participants in the real estate sector and the system to be truly inclusive, a push towards fractionalized asset ownership is visible across the globe.
The concept of a combination between real estate and blockchain is the next big talk of the decade, and there’s a lot of room for improvement.
The Financial Crisis
The financial crisis of 2007–2008 resulted in a meltdown of the global economy. The housing market crashed, stocks plunged, people lost their life savings, and billions of dollars of taxpayers’ money were spent to bail out the global financial system. This was a final blow to the trust in centralized financial institutions.
At the same time, brewing underneath the layer of this global fiasco of the economic system was a novel approach to solving the problems of this system. An internet-native cryptographic network validated by thousands of decentralized participants, to store and exchange financial value, had evolved.
The Case for Cryptos
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions. This decentralized and digital transaction validation protocol can perform and enable thousands of interactions each minute without the intervention of any governance body. Additionally, its robust ledger system publishes its total and individual account balances several times an hour and distributes it within the whole network just like a newspaper would, such that the ledger becomes immutable once published. Without a doubt, the monopolistic contractors of the financial system were offended.
The push towards crypto was further fueled by the waning trust in traditional institutions from Gen Z and tech-savvy millennials, who have witnessed two economic depressions and a global pandemic in their lifetimes. Today, the combined crypto market is valued at over $2.5 trillion globally. Realistically speaking, crypto is an experiment that has shaken the world’s economic order. While this experiment has its believers and naysayers, it has proven one thing; the underlying technology that enabled this revolution, blockchain, cannot be ignored.
The Need for Proptech 3.0
Real estate assets have been one of the biggest stores of global wealth. Current global real estate assets are valued at above $280 trillion (more than 75 percent of global wealth). Additionally, it is managed, used, and owned by millions of individuals and corporations across the world and regulated by central governments – a truly decentralized ownership structure. Some in the blockchain community believe this asset class to be the pinnacle of the crypto revolution.
Using simple digital tools and the immutable ledger system, players in the property technology space are building revolutionary tools to address the challenges in the real estate system and create unprecedented ease of use. The digital ledger system enables not only the validation of existing customers but also seamlessly enables transfers of land records with the simplicity of sending a message over the internet protocol.
Real estate regulatory bodies across the world are rushing to enable such solutions, with Dubai being a frontrunner in the game with its 2020 blockchain vision. Additionally, transparent financial records, transactional history, and digital rental distribution systems are adding value for all stakeholders. With the enablement of an immutable ledger, it is increasingly difficult for independent players to use real estate for tax evasion and money laundering.
Moving forward, for the masses to become active participants in the real estate game and the system to be truly inclusive, a push towards fractionalized asset ownership is visible across the globe. Without a robust decentralized ledger, such records are almost impossible to manage.
Real estate, currently existing only as a store of value for a few in the financial arena, may become a tool for the masses and be used additionally for regular exchange of value transactions. An asset class that stores wealth, earns income and appreciation, drives industries and creates millions of jobs, and may be used for instant liquidity for its holders, fulfilling the dream of a decentralized and manipulation-free sustainable monetary regime.
The Road Ahead
It is not surprising that entrepreneurs and venture capitalists see the real estate industry to be ripe for disruption. Aiming to seize the opportunity and be a part of this disruption, the number of PropTech start-ups has grown substantially in recent years. From Zameen to Graana to Ilaan, we see a new generation of real estate entrepreneurs emerging, who claim to challenge the status quo.
One such start-up, DAO PropTech, is a revolutionary end-to-end digital platform connecting suppliers, investors, and users of contemporary real estate assets. It is utilizing blockchain technology to bring much-needed transparency, affordability, and inclusivity to the real estate sector of Pakistan. We spoke to its Co-founder & Chief Technology Officer, Abdullah Khan, about cryptos, the future of PropTech, and the real estate industry in Pakistan. He remarked,
Crypto’s Achilles heel will always be its lack of legal legitimacy. We believe this system based on anarcho-capitalism is not viable since societies currently cannot function without any governance structures at all. While cryptos will always remain at odds with the governments, as they pose a threat to the existing monetary system, they have proved blockchain technology to be the next big revolution in data recording and transparency. Backed by blockchain, real estate can not only be tokenized but transactions can be sped up, removing the high barriers to entry, and providing faster liquidity. This opens up the real estate arena to a new generation of investors; young professionals and middle-class workers, for whom real estate investing was but a dream. Real estate transactions recorded on blockchain also give a fool-proof record-keeping mechanism that cannot be tampered with, giving the power back to the people. We envision the real estate market becoming more data-driven; Investors and owners leveraging data to make informed decisions. PropTech has the potential to disrupt real estate; one of the world’s oldest and largest industries. We should expect to see many new PropTechs and PropFinTech’s emerge.
Cryptocurrencies represent the dawn of a new era where all value is represented in distributed ledgers. However, it doesn’t mean that crypto is without its problems. Blockchain, on the other hand, can play a pivotal role in solving the new age problems in many industries including the real estate sector.
The first step towards this advancement is an in-depth understanding of the advantages that blockchain comes with. We are at a crossroads towards disrupting and reshaping the real estate industry by providing legitimacy and transparency in real estate transactions. By adding these core features into a digital platform, investing in real estate would be much easier, faster, and secure to the extent of providing brokers, buyers, investors, and even suppliers to track developments in real-time, paving the way for a future where real estate becomes a force for financial liberation of the masses.