Blockchain: disruption in the real estate sector? | KPMG | BE

Blockchain: disruption in the real estate sector?

Blockchain: disruption in the real estate sector?

Blockchain has received numerous accolades from business leaders, politicians and opinion makers. The new technology ensures that an intermediary is no longer necessary to safeguard a transaction. It is an enormous opportunity for many sectors and particularly within the real estate sector – the notary, the banker, the government employee ... Parties must adapt to the disruptive developments that blockchain brings to light.

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Blockchain: disruption in the real estate sector?

Will blockchain make the notary obsolete? The answer is no, but the profession will change dramatically. Blockchain will sharply curb the administrative burden for citizens and automate administrative procedures. This means the role of a notary will also shift. With the heightened complexity of buying a house, and the increasing number of regulations that accompany it – there is a new found need for guidance and advice in the sale process. A notary is needed, now more than ever, as an advisor and increasingly less as someone simply ‘taking note’.

Simplifying administration

With the sale of a home, the notary plays an unavoidable role. According to a law of 1803, the notary is the only one authorized to register the purchase of a property, making it official. In a normal sales process, the notary follows a number of steps: the identity control and the possible outstanding debts control of the buyer or seller, the acquisition of the necessary documentation concerning the real estate, the cost calculations, the deed signing and the costs of settlement. 

This process - from control to settlement - takes roughly two or three months.  Most of this time is spent acquiring the necessary documentation on the real estate, and controlling the identities and solvency of the buyer and seller. Naturally, the notary along with various government and private institutions are involved. A concrete example: urban planning design must be requested from the municipality. The legal time frame for this is 30 days, even though the task takes no more than a few hours to complete. 

But a long procedure is not the only challenge. Citizens are often forced to go through the same administrative procedures multiple times with multiple authorities - resulting in inefficiencies and aggravation. Identity control, for example, is carried out by the notary, the municipality and the bank all independently. Today, the services involved have little oversight of the extensive administrative procedures citizens must go through with other authorities. 

Here is where blockchain offers a solution. A blockchain network among the various authorities involved in the sale of a home, makes it possible to harmonize a process that repeats the same steps. With the transparent sharing of information, all parties have a clear and constant view on the status of the various administrative procedures and their outcomes. The introduction of blockchain in real estate leads to a simplified administrative process, a reduced processing time for citizens, gained efficiency and a reduced workload for all institutions involved. 

How would this work in practice? Today, when requesting a loan, both the bank and the notary will carry out a control on the identity and the outstanding debts of the client. Expedient communication between the notary and the bank will ensure the administrative repetitiveness once necessary, no longer is. This way, once the bank has approved, the notary can immediately begin to process the necessary documentation concerning the real estate without having to relaunch the same controls.

Automation

The blockchain technology allows an optimization of the complete sale process and the expedient exchange between the parties. And within this lifecycle, numerous processes can be automated. Notably, in the form of digital smart contracts. Such a smart contract automatically carries out a predetermined agreement when the conditions - as based on objective information - have been met. 

The automation of administrative procedures can of course also be carried out with classic software systems. But blockchain offers the enormous advantage of information sharing in a safe, clear and structured fashion. The achieved gains in efficiency can benefit the notary, the government as well as the client. The transformation may, for example, eventually result in lowered costs for administrative documents.

Other applications in the real estate sector

Efficiency can also be achieved in other real estate processes. Blockchain enables the reliable sharing of information among the borrowers, the financial institutions, the registry and other involved parties to streamline the process of mortgage loans. For this, consider a transparent financial platform on which the financial institution can expediently consult the necessary information, while the borrowers can also reap the benefits of the increased transparency and competition.

With the development and exploitation of large real estate projects, blockchain can play an innovative role by bolstering the communication and sharing of information among investors, real estate and construction companies, facility managers and insurers. This will reduce administrative burdens, and facilitate the development and construction of new and transparent financial real estate products.

As mentioned, the technology equally presents opportunities for government institutions. In addition to real estate actors - tax administration, environmental and social agencies also become part of the blockchain network. The collection and control of real estate related taxes, for example, can be simplified as can the control and issuance of environmental and construction permits and social subsidies. 

There is a clear future for blockchain in the real estate sector. For the notary, the government, the developer and the citizens it means administrative simplification, automation, protection, transparency and a reduction of costs. So with a huge potential for positive outcomes across parties, we must work to understand and adapt to this evolving context.

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