If you’re interested in technology and artificial intelligence, you have probably heard of blockchain technology. It is a revolutionary and highly advanced mechanism designed to create shared networks of secure databases. It enables peer-to-peer transactions between stakeholders in a simple, secure, and transparent manner.
Blockchain technology has become integrated into several industries, such as banking, healthcare, supply chain management, and more. And now, it is becoming part of the real estate industries worldwide and in the UAE. And since the UAE government’s mission is to establish Dubai as a futuristic smart city, utilising blockchain technology in the real estate market is an essential step in developing the sector and taking it to the next level of innovation.
Are you interested in the future of real estate in the UAE and especially Dubai? Do you want to know more about blockchain and real estate? Continue reading to discover the answers and more about blockchain technology!
Understanding the Basics of Blockchain Technology
Generally speaking, blockchain technologyis a unique database operating like a long, secure chain, into which a new unbreakable loop is created whenever a stakeholder integrates a new piece of information. The loop exists within the chain – a decentralised structure, ensuring all parties have access to the relevant information.
While blockchain was established to enable cryptocurrency transactions, it has evolved into a versatile system for storing data. One of blockchain’s main functions at the moment is driving secure data verification, so it cannot be modified or corrupted using fraudulent means.
The following steps demonstrate how blockchain technology works:
- When a peer-to-peer transaction or exchange occurs, the relevant data gets integrated into a block.
- The block receives approval after being authenticated by more than half the nodes making up the blockchain.
- Each block joins the chain with the hash code of the previous block’s header. This process ensures that intruders cannot dismantle the chain or fraudulently modify the information.
The above flow depicts the general and basic operations of this system. A blockchain ecosystem can also include programs like smart contracts to complete transactions with automated mechanisms.
But how is blockchain technology relevant to real estate? And how can it benefit the sector?
Blockchain and the Real Estate Sector
Blockchain technologycan play a significant role in real estate exchanges. Traditionally, high-value transfers like property sales have relied on offline interactions. For example, say you want to explore properties for sale in Dubai; you will contact a top developer’s team to look at the available options and choose a studio apartment or a commercial property to purchase.
This seemingly simple process requires and relies on continuous mutual authentication. Meaning that you will verify the developer’s rights to the property for sale. In turn, the developer will ensure that you have the requisite funds and legal standing to purchase the asset.
These verification processes require tedious paperwork and complex formalities, and this is where blockchain technology’s role comes in. It can simplify these steps and enable “trustless” transactions.
In the context of blockchain technology, trustlessness means that you do not need to place your sole trust in any stranger, institution, or third party for a payment system to function and for a transaction to be carried out. To put it simply, blockchain eliminates the need for an intermediary.
But what does that mean for the property market? What are the advantages and benefits of this integration?
Advantages of Using Blockchain for Real Estate Applications
The following are the advantages of using blockchain technology for real estate applications and transactions more specifically:
- Process Simplification: Blockchain technology supports peer-to-peer transactions between a developer and the buyer without involving middlemen. This aspect can reduce the excess time and costs incurred due to intermediary involvement in real estate sales.
- Automated Transactions: Smart contracts are unique programs utilised on the blockchain, executing transactions when stipulated conditions are fulfilled, enabling automation in conditional real estate transactions.
Another use for smart contracts in real estate occurs in the escrow system. Third-party escrow agents are the ones to hold assets while the financial transactions are ongoing between the developer and the buyer, but with blockchain, smart contracts replace these agents, carrying out their function and transferring deeds and titles.
- Transparent Record-Keeping: Blockchain is an immutable ledger of authenticated information. In other words, it is a centralised database benefiting all stakeholders by ensuring transparent and secure data storage thanks to its structure and flow of operations.
- Asset Tokenisation: Real estate tokenisation is the process of fractionalising real estate property into tokens stored on a decentralised database, which is none other than a blockchain. This enables people to use tokens to represent valuable assets in the real estate space, increasing the liquidity of these physical assets.
As a result, the tokenisation process encourages investments in the real estate market, especially since real estate tokens can be easily and securely transferred through the blockchain. This aspect allows investors to diversify their investments and portfolios and minimise risks.
The Future Plan for Real Estate and Blockchain Technology
The Dubai Land Department (DLD) has started a blockchain database to document and record real estate contracts like lease agreements. Additionally, it has connected this ecosystem with the Dubai Electricity & Water Authority (DEWA), the telecommunications system, and other property-related bills. This initiative is the first step toward the complete integration of blockchain in Dubai’s real estate market.
Moreover, the blockchain’s real estate platform incorporates personal tenant databases, allowing tenants to make payments electronically without needing to attend to any governmental institutions.
To conclude, Azizi Developments, one of Dubai’s top real estate developers, has started working towards applying blockchain for scalable, secure, and immutable transactions. This technology will link private and government stakeholders to facilitate seamless management and secure transactions.
Explore residential and commercial properties developed by Azizi Developments to find out more about their future-focused offerings!