Overview

The property rental sector is much of ‘a pen and paper’ sector, where almost everything is done via a long chain of intermediaries and a lot of paperwork. The process of rentals is time-consuming and tiring but nothing has been done in the sector. This sector often relies on archaic methods for doing business and keeping records. Technology has now begun to reshape the process of globalisation. Everyday IT sector is developing new technology faster and more reliable than the previous one. One such technology is the blockchain technology. Many sectors have discovered a sheer amount of positive utility of blockchain in their space.

This technology is being evolved for various other sectors including the rental sector. For this sector especially, it can prove to be a revolutionary and solve many of its existing problems.

Problems of Rental

A Distant Dream for Many

Investments in real estate require a good amount of capital, not everyone can afford the same. This sector has always had too many barriers like citizenship, credit score, high interests, and financing etc

Not of Transparent Nature

This sector severely lacks transparency, there are depths of corruption and dishonesty in this business. A high degree of transparency is required to combat fraud cases, tax evasion and money laundering.

High Feels

A lot of intermediaries are involved in this sector therefore at each level there’s a cost involved making it super expensive. Fees like broker fees, transfer fees, attorney fees, investment fees and taxes etc.

Lack of Liquidity

Liquidity can be defined as to how quickly can an asset be turned to cash. Real estate are fixed and long term investments, no one buys it with the sole purpose of selling it in the near future. They are very difficult to liquidate primarily due to ups and downs in the market and there can be high chances that when a person is willing to sell their property might not even be a buyer.

Pricing Commitments

Investors should have a heavy capital upfront to invest in rentals. At times, they have to opt for expensive financing options to retain the deal.

Transaction Speed

The transaction speed of real estate may be simple to sound that is transferring of one property to the name for other. But it actually consumes a lot of time, one can expect that they will find a suitable property in six months but they definitely do require another six to complete the paperwork and payment procedures. Such delayed process also results in a high fee structure.

How Blockchain can help in rentals

A blockchain, in simple words, is a time-stamped series of immutable data, stored in a decentralised ledger system that is accessible to all involved parties. The blockchain can bring many changes to the rental sector but the chief utilities are smart contracts and tokenization.

Smart Contracts

Smart contracts are self-executing contracts. These automated contracts have a special system, where there are specific instructions written in their codes, that are executed only when certain conditions are met.
These contracts will cut off the middlemen and their share making the process cheaper. This will also help in bringing transparency as they cannot be tampered or altered. It will also reduce the time consumed by paperwork in the whole process.

Tokenizaation

A token is a digital representation of asset, value or a function present in the real world. Blockchain technology will help in creating real-world tokens of the rental. Tokenization not only increases the liquidity of the asset but also helps in trading these assets without involving any third-party.
This will facilitate fractional ownership of property and save costs by excluding middlemen.

Better Financial Evaluation and Due Diligence

Physical paperwork and a manual verification process can involve the providers and are more likely to welcome errors in the process. Digitization of the process will make it cheaper, more secure and more efficient and will fasten the due diligence process.

Financing and Payments System

Due to extensive documentation required and involvement various intermediaries the payment process is expensive, time consuming and opaque. Once the data will be present on decentralized technology, it will become more transparent, secure documentation and verification processes, decrease the number of involved parties and make it more convenient for both the buyer and the seller.

Challenges

Though blockchains can help to solve various problems, it still faces many issues for its adoption like

Regulation

The current environment is regulated by the government, financial institutions and courthouses. Through digitisation, there would be less control and regulation can become tough.

Scaling

There are millions of transactions that take place. This technology, cannot store much data. This is a major problem as it limits the transaction stored.

Standardisation

There exist many blockchain technologies but are not inter-communicable.This results in a lack of standardization or interoperability.

Widespread adoption

As blockchain is still an emerging technology, most people do not fully understand its usage and applicability. The adoption of its technology will take a lot of time.

Conclusion

Though it seems that all the flaws prevailing in the rental sector can be covered by blockchain technology, it still has a long way to cover to fully inscribe it in the global system.

Get In Touch

Any question? Reach out to us and we’ll get back to you shortly.

Follow us on