Crypto and real estate: how are they linked?
The popularity of cryptocurrency has skyrocketed in recent years, with news media telling the stories of crypto projects and businesses in different industries increasingly accepting crypto transactions. In the real estate sector, crypto has seen a slow adoption, as landlords considered it too risky to secure property transactions with digital assets that are volatile by nature. And it’s understandable, given that Bitcoin price is constantly fluctuating.
However, the potential of cryptocurrencies is hard to ignore, and landlords are starting to take notice of it, too. Not only can digital currencies boost accessibility to homeownership, but they can also facilitate the home-buying process. Traditional transactions in real estate are time-consuming and susceptible to fraud. Luckily, using cryptocurrency opens the industry up to more buyers who might otherwise not be eligible for different reasons.
How are cryptocurrencies impacting the real estate market?
Integrating cryptocurrency in real estate eliminates intermediaries, helping streamline property transactions. Smart contracts can be used in the process to ensure that both the seller and buyer fulfill their obligations, reducing disputes and ensuring payments are made on time. Moreover, using blockchain technology in the real estate sector boosts efficiency and transparency, allowing all parties to access transaction data. Let’s take a look at some of the benefits digital currencies bring to the real estate market.
Faster transactions
Adopting crypto in real estate offers increased speed and cost savings, which are considerable advantages. This is because conventional procedures translate into a slow period (weeks or months) for the completion of transactions. In contrast, crypto transactions are finished only in a few minutes or hours, so the difference is significant. Digital currencies are an appealing option for real estate transactions because the transaction fees are either very cheap or non-existent.
Increased security
Security is paramount in real estate transactions, as fraud is widespread, especially when several parties are involved in the process. Fortunately, cryptocurrencies can help mitigate this risk, enabling a safe and transparent way to transfer ownership. Given that the blockchain is immutable, it is impossible to change or eliminate a transaction once it has been already validated on the digital ledger. This can go a long way in boosting real estate transactions’ security.
Higher liquidity
In real estate, selling or transferring a real estate investment that was carried out traditionally can be difficult. Because of this, investors can struggle to exit their investments. Fortunately, cryptocurrencies make real estate investing more liquid. Using a digital wallet allows ownership to be easily transferred, facilitating the buying and selling of real estate investments. Improved liquidity can be an appealing feature for a wider group of investors, motivating them to invest in real estate.
International business
Digital currencies create opportunities for international real estate deals. This can be difficult and expensive when using conventional techniques, at the same time requiring extra documentation. Regardless of the parties’ location, digital currencies enable the efficient execution of transactions. As a result, it becomes easier for international investors to purchase and sell real estate investments.
Are NFTs a revolutionary technology for the real estate sector?
Real estate involves many complexities, especially regarding property transactions. But NFTs' recent developments can make a difference in the sector by boosting its transparency and efficiency. NFTs (non-fungible tokens) represent unique digital assets that can take the form of music, art, and even real estate. While the technology has some limitations, it has several applications in the real estate sector, which we will explore below.
Property listings
With NFTs, brokers and real estate agents can create digital property listings containing essential property information, including descriptions, videos, and pictures. This increases the property’s accessibility to potential buyers, expanding the process of purchasing and selling property on a global scale.
Fractional ownership
NFTs enable property fractional ownership, enabling investors to buy a percentage of a property as an NFT. This allows individuals to invest in real estate without requiring large sums of capital. Moreover, smart contracts enable the automation of revenue distribution and ownership, enhancing the efficiency and transparency of the process.
Rent and lease agreements
Another application of NFTs is for rental and lease agreements, helping eliminate physical documents from the equation and ensuring the efficiency and security of the process. Using smart contracts results in the automation of the payment process. As a result, intermediaries are no longer needed, and rent is paid on time.
Property valuation
NFTs can also play a role in property valuation. By building an NFT representing a property, the property’s actual and future value can be tracked, giving brokers and real estate agents valuable insights into the market.
Property development
Developers can utilize NFTs as a symbol of their projects, enabling investors to buy a percentage of the development in the form of an NFT. This offers developers an alternative option for making money while increasing access to property development investments.
What are the challenges in adopting crypto in real estate?
While crypto adoption can bring innovation in the real estate sector, some limitations should be discussed. Unless these challenges are addressed, it can be difficult to implement blockchain and digital currencies fully.
Regulatory frameworks
There is uncertainty around legal frameworks both at a national and international level, representing an obstacle in adopting blockchain into real estate. The regulations regarding the use of digital currencies differ depending on the country, so making blockchain a standard adoption in real estate can pose some challenges.
Lack of standardization
Standardization is missing from the real estate sector, so developing uniform blockchain solutions suitable for all parties can be challenging. The real estate sector involves different stakeholder groups, including buyers, investors, government agencies, and agents, each with their own requirements and processes.
Complexity and cost
Implementing crypto can be costly and also a lengthy process. To integrate digital currencies, staff expertise is an essential requirement, along with significant IT infrastructure. However, this can represent a challenge for organizations that lack the necessary resources.
The bottom line
Digital currencies have impacted many industries, and the real estate market makes no exception. They offer many benefits, such as reducing fraud, increasing liquidity, and speeding up transactions. Although some issues need to be addressed, it will be exciting to see how cryptocurrencies will transform real estate in the long run as their adoption is increasing in the industry.
