6A — April 13 - 26, 2018 — Financial Digest — M id A tlantic
Real Estate Journal
www.marejournal.com
F inancial D igest
By Kevin Shtofman, Deloitte US Blockchain is coming: Is the world of Real Estate ready?
A
s speculators have rid- den the Bitcoin wave up (and down), a dif-
technology that fuels Bitcoin and its offspring: Blockchain. A Blockchain is a type of distributed ledger. This means that every participant has his or her own copy of the ledger and there is no central record of account. Once recorded, ledger transactions cannot be altered and every copy of the ledger is identical across the network. The network and all constitu- ent parts act as a database that records transactions – generat- ing an immutable audit trail for transactional activity. The net- work can be either completely open or open only to trusted counter parties.
What benefits could Block- chain provide to players in the Real Estate industry? Here are three areas that suffer from efficiency problems where Blockchain technology could be an effective solution: Real Estate Documentation Currently, the majority of real estate documentation required and used for transac- tions (deeds, rental agreements, titles, mortgage documents, etc.) are in paper form and come from various third par- ties, opening these transactions to the risk of potential forgery and providing opportunities for fraud. System efficiency is low,
manual errors happen often, and record keeping is open to theft and human error. A Blockchain land registry platform would eliminate mul- tiple third party intrusions and mitigate fraud by streamlining participation and authenticat- ing data/documents. The Swed- ish National Land Survey is creating a proof-of-concept to investigate how Blockchain technology may reduce the manual errors while transfer- ring documents. Leasing and Technology In owning and managing a commercial or residential prop- erty there are a multitude of
service and payment transac- tions that must occur between the lessor, lessee, and other third parties. Cash flow, appreciation, and tax information must be tracked, recorded, and verified, and compliance maintained. Therefore, managing properties and tenants, and enforcing the agreements around lease terms requires a better platform for consensus and reference as well as payments. Smart contracts on Block- chain can structure secure cash flows and automate payments with real-time reconciliation. Smart contracts can also enable split ownership and distributed rents. The City of Rotterdam has teamed with Deloitte to achieve data driven city man- agement, beginning with a prototype for recording lease contracts on Blockchain utiliz- ing smart contracts. Purchase Process Property research requires a significant amount of time where financials and legal regu- lations are concerned. A large part of this effort is finding and verifying physical proofs of identity, ownership, etc. Since this is a manual task, the process is time consuming and human error and data loss eas- ily occur. Searching for proper- ties, vetting, and entering into terms of sale is an extensive and unnecessarily complicated effort that can discourage in- vestment. An MLS built on Blockchain would enable more accessible and comprehensive listings with better data control and verified historic records through a peer-to-peer network. In addi- tion, by building unique digital identities for each property on a Blockchain, key information such as financials, owner his- tory, vacancies, etc. would be readily accessible on demand. ABN Amro has begun a pilot with IBM to develop a system in which buyers, sellers, brokers, and regulators may share and record real estate transactions while supporting connectivity with regulatory bodies such as the central bank and Land Registry Office. Although still in the early stages of development and testing, Blockchain progress is gaining steam, and real estate professionals will be rewarded for getting onboard sooner rather than later. Kevin Shtofman is Na- tional RE Blockchain Lead at Deloitte US. n
ferent group of global citi- zens has come to realize the potential ben- efits of this technology: Real Estate investors, de- velopers, op-
Kevin Shtofman
erators, and service providers. Their shared cautious optimism has very little to do with the rise of fall of cryptocurrency prices, but instead comes from the promise of the underlying
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