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“Blockchain has the potential to revolutionise how the real estate sector operates, lowering transaction costs and providing investors easier access to international listings,” says DJ Van Keuren, Vice President, Hayman Family Office. “There will be pushback from various parties whose businesses will be impacted, so a number of issues must be addressed. Real estate professionals, lawmakers, regulators and technology developers will have to work together to confront the difficulties,” he suggests.

Van Keuren is a keynote speaker at the marcus evans Real Estate Investors Summit 2018, taking place in London, United Kingdom, 19 – 20 November. 

What is the future of cryptocurrencies? How will Blockchain and smart contracts impact real estate investing? 

From a Blockchain perspective, cryptocurrency data is stored in a peer-to-peer network and decentralised. Every new transaction or information added is immediately visible. Currently, real estate is full of registrations. In the US, records are kept by individual counties, each with different standards and protocols, making interoperability a problem. Brokers keep a registry of investors, landlords a registry of tenants. These are uncoordinated, slow and often paper-heavy. 

Blockchain and smart contracts can revolutionise this outdated model. This requires data providers, appraisers, due diligence providers, notaries and brokers to collaborate. A Blockchain-based land registry would enhance and streamline the way real estate transactions are logged and executed. It has the potential to make investment transactions and renting cheaper to facilitate and more transparent. Smart contracts will be able to be executed without the need for human interaction, so transfer of ownership and other transactions can be commoditised. Transactions that used to take weeks can be completed in a few hours. However, these reduce or even eliminate the need for lawyers, title companies and other intermediaries, so there will be pushback. Blockchain will be taking people out of the process. 

What real estate investment opportunities does this translate to? 

Blockchain will allow greater opportunity to purchase real estate on a global basis, because with cryptocurrencies, there is no need to deal with different banking systems. They can be converted to cash easily. Blockchain in general increases efficiency, transparency and transaction security, reducing fraud. Blockchain-based land registries would appeal to overseas investors from countries with less mature central registries. 

Many countries are embracing or exploring Blockchain and smart contracts. Sweden has taken this to the next level and has made a commitment to adopting Blockchain for its real estate. Dubai has a Blockchain 2020 initiative and will be recording all real estate contracts on a Blockchain. England and Wales have an established and well-developed central land registry, yet the HM Land Registry is considering implementing Blockchain. Japan is tracking a new land registration system, while Singapore has decided not to implement the technology at all. In the US all counties have to come together into one main data centre. Some European countries have been cautious. If everybody works on the same level, speaks the same language, this technology would have a huge impact on the sector internationally.   

There is a company looking into developing a Blockchain-based multiple listings service, to give investors access to international listings, and the ability to buy properties with cryptocurrency. Transaction costs would be lower, the process more efficient and accurate. 

The first global REIT also came out in Dubai, allowing investors to use any form of currency to buy into different types of funds without worrying about exchange rates. Not only can Blockchain provide transparency, but also a means to buy real estate on a global basis, in a much easier fashion, instantaneously.

What risks should investors be aware of?

Some cryptocurrencies have gone under, and there has been fraud associated with a few of them. Investors need to consider: Is it a secure environment? What is the credibility of the company? What is the track record of the team? Investors still have to go back to the fundamentals of investing in real estate and evaluate the operator and investment.