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Blockchain Startups Disrupting The Real Estate Industry

Having revolutionized banking, blockchain, the underlying technology behind Bitcoin, is set to bring change to the multi-trillion dollar real estate industry.

The global real estate industry, estimated to be worth trillions of dollars, could prove to be a lucrative industry to disrupt considering the current systems related to land titling which involves mountains of documents into which data and information on land transactions are manually inputted, is a time-consuming process that is susceptible to fraud and clerical errors. The inefficiencies and inadequacies in the current land titling system is the driving force behind the multi-billion dollar title insurance industry; IBIS World estimates the US title insurance industry is worth about US$ 17 billion while data from the American Land Title Association (ALTA) reveal that nearly US$ 4 billion in title insurance premiums were generated in the US during the third quarter of 2017 alone.

Propy

Country: United States of America

California-based real estate marketplace startup Propy uses blockchain to maintain a decentralized title registry in an effort to enable people to buy and sell real estate in any location, from anywhere without the problems associated with international real estate transactions such as fraud.

Properties listed on Propy can be purchased using regular fiat currency or cryptocurrency; using the latter enables the usage of smart contracts and a blockchain-powered decentralized, immutable registry which ensures that all aspects of the transaction, as well as title deeds and property rights, are stored forever, in a tamper-proof database. In 2017, Propy made headlines when it announced it had completed the world’s first real estate purchase on Ethereum blockchain, when TechCrunch founder Michael Arrington purchased an apartment in Ukraine using smart contracts, in Ethereum cryptocurrency and PRO (Propy) tokens.

Cross border real estate has been on an upward trend and is likely to continue doing so. According to a report by Knight Frank, cross border real estate transactions accounted for 32% of all real estate transactions by volume, up from 25% during 2009-2011.

In Asia, cross border real estate transactions are at a 10 year high according to Real Capital Analytics and according to Knight Frank, 2017 marked the first time since tracking the markets in 2007 where Asia-Pacific has overtaken Europe and North America as the top source of cross border capital outflow. Real estate buyers from China were the biggest source of cross border capital, followed by Hong Kong and Singapore according to Knight Frank while the US, UK and Germany were the top destinations for inbound capital.

Bar chart showing Asia Pacific cross border commercial real estate investments, capital outflows by source (in US$ billions), in 2017. China was the biggest source of outbound capital into commercial real estate, with US$ 31.5 billion of cross border commercial real estate investments originating from China. China was followed by Hong Kong (US$ 20.5 billion), Singapore (US$ 19.9 billion), South Korea (US$ 8.6 billion), Japan (US$ 3.1 billion), Taiwan (US$ 1.7 billion)< Australia (US$ 1.7 billion), Thailand (US$ 1.1 billion), Malaysia (US$ 0.5 billion), and India (US$ 0.3 billion).

Propy is positioned to capitalize on this lucrative trend; of Propy’s approximately 50,000 monthly website views, about half come from China, from prospects looking to invest in real estate outside their home country.

Furthermore, according to Propy’s whitepaper, initially, the Propy Registry will mirror the records in local land registries in which land transfers are recorded. Going forward however, the startup aims to have the Propy Registry as the official ledger of record for the relevant land registry department. Propy earns a percentage of the final purchase price of every transaction completed using Propy’s platform.

If Propy does succeed in its ambition of getting jurisdictions to adopt the Propy Registry, then Propy’s PRO tokens could potentially hold more value since the Propy platform will be required (as opposed to being merely an option) to conduct real estate transactions. Whether this ambition actually materializes however, remains to be seen.

Zebi

Country: India

Having been selected by Andhra Pradesh to deploy its blockhain-based solution to digitize the state’s land registry, Indian blockchain-based big data solutions startup Zebi is now reportedly in talks with several other state governments to introduce its blockchain-based big data solution to digitize their land records easing buyer concerns over real estate fraud such as fake land certificates, a very real problem considering India has a 69% bribery rate (the highest in Asia Pacific) according to a survey by Transparency International and was ranked the most corrupt nation in Asia in 2017.

According to Indian government official J.A. Chowdary, an estimated US$ 700 million is paid in bribes to land registrars across India and about two-thirds of all civil cases in India are disputes related to land and property.

With transactions rising in India’s real estate sector and projected to continue rising over the next decade driven by the country’s young population reaching home buying age and rising disposable incomes (Morgan Stanley forecasts India’s property market sales to grow at a 14% CAGR during 2016-2020 and 18% during 2020-2025), Zebi’s Ethereum-based technology solution as well as its token (ZCO) could grow more important as it increases the reliability and transparency of India’s land registry, thereby reducing potential problems such as property related fraud.

ChromaWay

Country: Sweden

Swedish blockchain startup ChromaWay has tied up with the Swedish Land Authority (Lantmäteriet), consultancy group Kairso Future, real estate search portal Svensk Fastighetsförmedling, telecom Telai Sverige, IT firm Evry. and a group of participating banks namely SBAB and Landshypotek Bank to conduct a pilot program to demonstrate how a private blockchain network could carry out real estate transactions. Each step in the transaction process is verified, and stored securely and immutably on the blockchain, and all participants in the real estate transaction – the banks, the government, buyers, sellers – will be able to securely track and trace the state of the transaction as it progresses from start to completion.

Consultancy firm Jairso Future estimates the blockchain solution could save Swedish taxpayers US$ 106 million a year by eliminating paperwork, cutting transaction times and reducing fraud.

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