Blockchain tech in home rental market

In the Union Budget 2018, former finance minister Arun Jaitley discussed the government’s plans for the emerging technologies and said that the government would explore the use of blockchain technology proactively for ushering in the digital economy.

There is a lot of buzz around blockchain, Internet of Things and related technologies. This makes us realise that sooner rather than later, we should be familiar with the technology to let it positively affect the existing business models across industries. While these new-age technologies have been successfully integrated with a few industries, a foolproof blockchain real-estate market has the potential to create new business models of bringing the buyers and sellers together.

With the government and large IT companies being very vigilant towards blockchain, it is time for us to understand it. Blockchain is a digital, decentralised record book that keeps track of all the transactions. Every time information is entered, it is stored as a ‘block’ that is added to the ‘chain’ of similar previous blocks, which can be accessed by people who are connected to the particular thread without an intermediary.

So, with blockchain, two or more people will be able to share databases and processes without disrupting each other’s work. It transfers data in an encrypted mode and stores them in a distributed, decentralised blockchain network, making it extremely safe and less-prone to malicious attacks.

Traditionally, in a home rental transaction, there are three main groups who work in silos — homeowners, tenants and an intermediary, popularly known as brokers. Therefore, there is always some degree of opaqueness, making the real estate industry one of the highly unorganised segments in India.

Online home rental aggregators are creating a disruption in this space by bringing all the groups into one platform, thereby ensuring transparency. These platforms aim to organise the home rental market, and blockchain technology makes this process simpler and more secure. It can directly connect businesses to services, without any intermediaries; thereby helping save money, time and the clutter that generally exists in these processes.

Smart contracts: As we are beginning to embrace shared economy and co-living, the definitions of property ownership and rentals are also evolving. This means traditional rental contracts will now be shifted to quantifiable smart contracts.

A smart contract is a computer protocol which has registered all the terms of the agreement between the owner and the tenant through coding. It is intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. These transactions are traceable and irreversible.

Asset tokenisation: Blockchain technology enables asset tokenisation of the property which helps in the case of co-ownership or joint ownership. With tokenisation, one can convert the rights to an asset (home) into digital tokens — for example, if the value of a house is Rs 50,00,000, tokenisation can store this as 50,00,000 tokens (this is just arbitrary, there could be even 5 crore tokens if needed).

Each token represents 0.0005% of the asset. When one wants to sell or rent out only 50% of their home, they will have to value the rent for only 25,00,000 tokens. In cases of co-living, it becomes much easier to lease or rent part of the property where the entire transaction is recorded through blockchain.

Real-time transactional data: Blockchain technology is moving at a fast pace as the digital economy takes hold. Industries are using the technology for access to real-time transactional data. In the home rental market, we can access the availability of raw materials, aka rental homes, real-time.

This along with artificial intelligence eases the understanding of the demand and supply in the market and pricing models, thereby helping the stakeholders with a range of rent-justified housing. Better forecasting of demand and supply has also helped businesses build inventory more strategically, reducing the struggle to drop unsold inventory.

Blockchain is indeed an emerging technology, which has now started to gain newer applications in the wider spectrum of the real estate industry. It will have a lasting impact on the home rental market, as adoption grows among concerned stakeholders. With the organised home rental market still in a nascent stage, blockchain technology can play the role of a catalyst for a system growth of the sector.

(The writer is VP - Business Development, Nestaway Technologies)