Is Now The Right Time For Crypto In Real Estate?

Is Now The Right Time For Crypto In Real Estate?

2021-12-26 | Selina Mathew

Is Now The Right Time For Crypto In Real Estate?

The global cryptocurrency market is worth approximately $2.5 trillion, which is slightly less than the size of the Indian economy. The massive amount of wealth amassed by crypto over the years also demonstrates how digital currencies are gaining popularity around the world. Despite the fact that bitcoin is the current leader in the world of virtual currency, with approximately 42 percent of the market share, research indicates that there are approximately 14,500 cryptocurrencies active in the world. As we enter the crypto era, it is natural that everyone from business owners to technology enthusiasts to real estate developers is considering the potential of digital currency in facilitating real estate transactions. In recent years, real estate has proactively warmed up to the idea of technology, reversing its previous agnosticism. The credit for this also goes to the multiple iterations of the lockdown, which aided in triggering the digitization of the country's real estate services. Real estate executives are actively investing in cloud-based technologies, AI & ML-based analytics platforms, marketing automation, digital walkthroughs and virtual reality, and other technologies. Blockchain, the parent technology of cryptocurrency, has demonstrated some limited but profound applications in global real estate. Blockchain, which is based on DLT (Distributed Ledger Technologies), can provide a seamless encrypted platform to facilitate safe and transparent real estate transactions, particularly in fractional ownership of commercial assets, rental homes, vacation homes, and so on. It can also facilitate cross-border transactions by tokenizing real estate assets. Blockchain technology can provide a strong platform for digitising key information related to property purchases, such as legal documents, deed history, transaction history, technical information, maintenance track record, and so on. This streamlines what would otherwise be a time-consuming process. In a vast and multifaceted industry like real estate, the incorporation of blockchain will also reduce processing times and provide 24/7 instant validation, thereby increasing data authenticity. Crypto in Global Real Estate Not only blockchain, but digital currencies are slowly but steadily gaining traction in the real estate industry. It has been proposed in some international cities to pay property fees and taxes using digital currencies. Recently, a few large-scale transactions in real estate, yachts, and luxury items have been completed using cryptocurrency. According to media reports, retail condos in Manhattan worth USD 29 million are being sold solely through bitcoin. These properties are listed on BitPay, a bitcoin payment service provider, and can only be purchased with bitcoin. The bitcoins received will be converted to US dollars and transferred to the developer's account. It is claimed that the entire transaction can be completed in days, which is in stark contrast to the typical timeframe for processing such deeds, which is 60-90 days. Meanwhile, the presence of crypto in the global real estate industry is not new. In 2019, properties in In Iloilo, Philippines were sold using bitcoin and Litecoin. The fact that luxury properties, gold, and yacht transactions accounted for 32% of BitPay's October revenue underscores the potential role of bitcoins in real estate transactions. The Future Ahead Blockchain and cryptocurrencies have the potential to completely transform real estate transactions. Multiple Listing Services (MLS), which are currently used in real estate, can be gradually replaced by a DLT-enabled BlockChain platform. This can aid in the development of a robust system in which key stakeholders such as brokers, investors, and buyers can track every real estate transaction and rental deal in real-time. This has the potential to usher in an era of unprecedented transparency in real estate. Blockchain can also help with ongoing data analytics in real estate. Similarly, it can aid in buyer credit checks, allowing developers to make sound purchasing decisions. This has the potential to truly democratize real estate investments while also adding layers of security. Despite this inherent strength, imagining a world where real estate transactions are conducted using digital currencies such as bitcoin or Ethereum remains a pipe dream. Despite the fact that we are in the midst of the cryptocurrency hype, some of the digital currencies' inherent flaws must not be overlooked. Digital currencies generate no cash flow, and their appreciation is primarily determined by speculative forces. They are also vulnerable to hacking and online fraud. The absence of banks and central authorities is lauded by crypto enthusiasts. Though a lack of regulatory bodies can be dangerous at times and an inviting environment for fraud. So, while blockchain-based technologies will see increased participation in the real estate business cycle, we do not expect to see the widespread use of cryptocurrencies in real estate transactions anytime soon. Despite these inherent challenges, their limited application in alternative assets such as rental homes, vacation homes, and so on will continue to grow.

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