Proptech in Web3: An Ideal Match?
Real estate and Web3, seemingly an ideal match. One, an asset class that skirts the line between tangible physical object and securitized asset class, the other an infinite ledger capable of registering, transacting and allocating resources to the correct parties with limitless potential of logical conditions. So where’s the catch?
For context, lets dive into the components of how real estate has traditionally been transacted:
1) Traditionally done through realtors/middleman agents, the marketplace (known as the Multiple Listing Service) is gatekept from the general populace simply from lack of a real estate license. For the majority of these properties “on market” as the industry term goes, you would have to be represented by a realtor to access those properties.
2) Once a property is located, you must get it “under contract” indicating you are intending to purchase this property. Oh and did I mention that you would’ve needed to ask a bank to write you a letter proving that you do indeed have the funds to purchase a property (pre-approved at some fixed range calculated by an internal formula), all just to make an offer to the seller.
3) Once your property is secured, assuming the seller has accepted your barely above asking offer, fret not. There is still title insurance and other closing costs that come into play along with your regular routine inspection clauses to make sure you’re not buying a house that will fall down around you in the next 5 years.
If you’re exhausted already, you should be. I neglected to mention all the intermediaries that also want a piece of the pie i.e. your escrow agents, lawyers, and insurance brokers.
Now how can the blockchain help?
1) Lets talk Smart Contracts.
Smart contracts are self-executing contracts with the terms of the agreement directly written into code. Wow, its almost like writing an enforceable contract but without the need for a lawyer or escrow!
Applies to rentals, purchases or even maintenance. If you’ve ever rented in New York and have tried to get your security deposit back, you’ll understand this one…
House inspection clears, funds change hands (automatic transfer to wallets) upon acceptance of smart contract execution and voila, you now own a house. But Jeff, you may ask, how would we tie the house to a smart contract? Which leads us to….
2) Tokenization of Real Estate
Represent the ownership of real estate as digital tokens. No more paper titles that you have to trek down to the country registrar to reissue because Fred lost it some 20 years ago in the fire. Houses are already securitized assets any way, just ask Blackstone.
3) DeFi Lending and liquidity pools
Now, once these properties have tokens. That now means they can be collateralized, same way you can already put up your house for a loan at the bank. Except now in decentralized lending platforms, loans can be given by the community rather than just limited by a banking institution. Power to the people, am I right.
Imagine you can stake your property tokens in some sort of rental revenue pool. Now as your properties are rented out, rental revenue is paid out as rewards to the stakers participating in said pool.
4) Transparent Transactions
Can’t stress this out, no more inheritance disputes. No more arguing over who Mom left the house to. The transactions are immutable and transparent.
Buying a house is already a headache. Let’s just make it easier.
