30 Nov 2017
Key decisions at all stages in the property life cycle – from financing, constructing and buying, to leasing and occupying assets – rely on the availability, accessibility and reliance of robust verifiable data. However, key challenges in relation to better data capturing and management have given rise to discussions around the potential of blockchain for a wide range of industries, business models and operating processes.
We spoke to leading industry experts at Deloitte to gain insights into the impact of blockchain on real estate professionals. Jan-Willem Santing and Jasper van Gelder share their views.
Just some of the challenges that exist today around data capture and management include:
- A lack of a central storage locations
- Non-harmonised data collection formats and data reporting obligations
- Overall data availability, accessibility and reliability challenges
How can blockchain help?
Blockchain can play an important role in overcoming these challenges, grasping the potential of data in the real estate life cycle. A uniform, trusted source of real estate information for various stakeholders and applications in combination with blockchain has the potential to change the current role of real estate professionals and make multiple checks of the same data a thing of the past.
Blockchain is a set of technical concepts that guaranties the uniqueness of transactions, their order and time.
Bitcoin is one of the most well-known implementations of blockchain technology, where the goal is to prevent the user from double spending. When a user wants to spend cash it works as follows:
- The user can create a transaction in which they prove they own cash (using cryptography)
- The user distributes the transaction to all connected computers
- Each computer checks whether the source of the funds being used in the transaction have not already been spent
- If all checks are passed, the transaction might end up in a block, after a process called mining
Blockchain provides the potential for all parties involved in the network to make use of the same (decentralised) source of information. Furthermore, blockchain ensures that the registered details can be shared with third parties in a trustworthy, uniform and efficient way.
The potential for the real estate industry
For the real estate industry, we envision a Federated Real Estate Data network, FRED. FRED envisions a federated, distributed network for exchanging real estate information between administrative systems (FRED members). FRED members all contain their own information and communicate directly with each other via an application programming interface (API) that allows them to exchange documents.
This communication does not rely on trust; clients use a second medium (blockchain) to validate whether the provided information is the truthful. Most blockchains are ledgers that simply keep track of transactions, giving them the authority to tell if one is valid or not.
FRED proposes a layer on top of the blockchain protocol, giving it the authority to tell whether a real estate transaction is valid or not. It tags each blockchain transaction with enough information for other FRED members to understand the semantics behind the transaction. The advantage given by using blockchain technology in this way is that we can rely on its transparency, immutability, ease of transfer and inability to be counterfeited, to transfer digital tokens with unprecedented security and ease.
The benefits of a federated real estate data network
FRED would make information sharing across organisations not only easy but secure and verifiable.
Blockchain is seldom, or never, a solution in itself but can be used as a building block.
API’s are another building block. The focus is generating structured information based on unified definitions and reducing the time taken to manually enter information. Instead of sending documents in human readable format (Word, PDF, Excel) a connection to the system of each counter party with API’s needs to be in place. This makes the move of information possible without the manual interference of a human.
In the ideal situation within FRED, one single source of truth for the location, size, cashflow, quality, state of maintenance, occupancy and contracts of commercial real estate assets is created with accessibility for each relevant stakeholder during the life cycle of a building.
We believe blockchain will deliver a positive contribution to the world of real estate, in terms of uniformity, efficiency, and transparency.
Due to innovative technologies such as blockchain, data driven real estate management is on its way and with it, radical changes to the role of real estate professionals. Improvements to the quality of data is therefore essential. Blockchain can act as an enabler for more trust, transparency and efficiency in the real estate ecosystem. It provides new opportunities but also requires change of professionals and organisations.
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