Blockchain technology has been the cornerstone behind revolutionizing the Property Management (PM) sector. The impact of blockchain is felt in every aspect of property management – right from due diligence to streamlining the transactions to resident satisfaction. Blockchain is driving digital transformation in the property management sector by introducing ‘pen and pencil’ businesses (which are highly reliant on archaic methods) to the contemporary ways of maintaining the record of business transactions. Blockchain is a decentralized record-keeping technology which is designed to bring more transparency to digital transactions. It provides a form of shared record-keeping which is almost impossible to tamper with. Blockchain functions through decentralized peer-to-peer platforms which build resilience against the spread of corrupted information and boost resistance to fraud. Blockchain aims at recording and distributing the digital information and ensuring it doesn’t get edited. Blockchain ensures that immutable ledgers or records of transactions cannot be altered, deleted, or destroyed through its advanced distributed ledger technology (DLT).
The use of blockchains has exploded with the creation of various cryptocurrencies. A cryptocurrency is an encrypted data string which denotes a unit of currency. It is monitored and organized by a peer-to-peer network and serves as a secure ledger of transactions like buying, selling, and transferring. Cryptocurrencies are decentralized and cannot be issued by governments or other financial institutions. Cryptocurrencies are created and secured through cryptographic algorithms and are maintained in mining where a network of computers or specialized hardware like Application-specific integrated circuits (ASICs) process and validate the transactions.
The Implementation of Blockchain in the Property Management Sector
Like any other industry, the Property Management sector has also not been able to escape the blockchain disruption. Before the introduction of blockchain, a vast majority of business transactions (related to rents & service charges) used to be conducted offline involving face-to-face engagements with various entities. However, blockchain has played an integral role in shifting the PM sector towards digitalization with the majority of residents today making the payment using digitized portals. The introduction of the blockchain allows the property management sector to effectively market their managed properties by listing them online and connecting with the right potential tenants and homeowners. As per the report by Deloitte, the new platforms can eventually assume functions such as listings, payments, and legal documentation are cutting out the intermediaries and will allow both buyers and sellers in saving on commissions and fees charged by these intermediaries. This also makes the process much quicker as the back-and-forth between these middlemen gets cut. This will minimize the cost of operations for the property management sector several folds and will have a profound impact on the occupancy rate and reputation of the property.
Real estate Giants benefitting from Blockchain Implementation in their operations
Some of the examples of Real estate companies who have embraced blockchain are as follows –
- Dubai Real Estate Department Signs MoU With Telecoms Firm to Implement Blockchain
- Emaar announced plans to launch a blockchain referral and loyalty token platform later this year
- Dubai Land Department achieves a technical milestone with the adoption of Blockchain technology in cooperation with Smart Dubai and other partners
Here are the top ways in which Blockchain is revolutionizing the operations of the Property Management sector –
Blockchain has made operations more transparent and has fostered more trust. With the implementation of Blockchain, it has become very easy for property management firms to track all business transactions and documents in a few clicks on blockchain-enabled platforms. Blockchain offers a verifiable and censorship-resistant option that allows property management firms in maintaining the confidential information of the residents and conducting swift verification of their submitted documents to build a more transparent environment. Furthermore, Blockchain also brings transparency to the transaction processes by overcoming the need for wire transfers which take days to process and are costly-affair too.
2. Smart Contracting
Property Management is far more complex than many think. It’s way beyond maintaining a property or upgrading the appliances. Today, property management firms deal with a vast range of services & functions which involves processing hundreds of documents every day such as: lease agreements, maintenance requests, service charge invoices, listing agreements, offer sheets, closing documents, letters of intent, and resident verification documents to name a few.
Blockchain empowers property management firms with a single decentralized property management system to convert all the bulky paperwork into smart contracts. This allows property management firms to fetch quick insights on prevailing rental values, tenant history, property details, payment frequency, and contractor agreements and also in reducing their paperwork significantly. Signing smart contracts over paper contracts also streamline the transaction process and overcome the need for negotiation with the stakeholders to accelerate the speed of the process. It also makes the process more transparent and secure.
A smart contract is a self-executing contract which outlines the terms & conditions of the agreement between two parties. Blockchain allows property management firms to write terms of the contract into lines of codes which are stored across a distributed and decentralized blockchain network. It also assists property management firms in easily monitoring the execution of the contract and in tracking the transactions conveniently.
3. Issuing Possession Documents & Countering Frauds
Blockchain portals have also made it much easier for property management firms to issue the possession documents of the property to the homeowners and provide them with an authenticated proof of purchase or sale of a property with valid evidence of ownership, exchange, and transaction. Blockchain has also enabled property management firms in countering instances where an illegal owner tries to occupy the property by producing false documents through its functionality of uploading the title documentation on the blockchain network. This functionality also allows the property management firms to easily view the documents and conduct swift verification of the homeowners and hand them over all the related- documents which make them feel that they are proud owners of the property.
4. Minimizing the Number of Intermediaries
The role of blockchain has been instrumental in minimizing the number of intermediaries such as: brokers, agents, escrow firms, etc. in the property sales process. The report by Deloitte titled – ‘Blockchain in commercial real estate: The future is here’ reveals ‘brokers, lawyers, and banks have long been part of the real estate ecosystem. However, blockchain may soon usher in a shift in their roles and participation in real estate transactions. New platforms can eventually assume functions such as listings, payments, and legal documentation. Cutting out the intermediaries will result in buyers and sellers getting more out of their money as they save on commissions and fees charged by these intermediaries. This also makes the process much quicker as the back-and-forth between these middlemen gets cut.’
Blockchain facilitates property management firms in storing and transferring the records of the residents on their platform which leads to a significant reduction in the processing time and cost for them.
5. Assists in Leasing & Payments
Blockchain assists the real estate & property management sector in the leasing process. Distributed ledger technology allows leases to be signed as well as paid on-chain in real-time. This automates dividend and rental payments to property owners and also overcomes the need for manual reconciliations. Furthermore, smart contracts assist the sector in the automatization of different types of remittances and fees.
6. Countering Sub-leasing and other Fraudulent practices
Today the vast majority of property listing services are privately owned and lack a centralized database for cross-referencing. Due to the lack of decentralization of property listing information, property managers face a real tough time in stopping tenants who are posting the advertisements for their units for sub-leasing. However, with the help of Blockchain platforms, property managers can now easily counter the tenants who are illegally subletting their property or units and violating the terms of the contract.
Blockchain-enabled property listing platforms have emerged as a panacea for the property managers as they automatically flag the illegal listings and allow property managers in tracking the tenants sub-leasing their property. Moving the property listing to a single decentralized blockchain-based server enables property management firms in creating a unified database which is accessible to every stakeholder. Blockchain allows potential homeowners to purchase property and make investments using decentralized finance or DeFi services. Furthermore, as data is monitored and stored securely, it is nearly impossible for any third party to inflate the price of the property or post any fraudulent information.
7. Overcoming Siloed Databases
Blockchain-enabled platforms also facilitate property management firms in reducing siloed databases by securing the data in tamper-resistant shared databases which compile & store all the relevant data in one place which can be accessed in a few clicks to make the process more transparent.
8. Facilitating Real estate transactions
Blockchain has played an integral role in streamlining real estate transactions on trading platforms and online marketplaces. This has empowered both the real estate & property management sector in exploring novel ways to trade assets. Digital trading platforms like ATLANT tokenize properties and assist in online trading and in exchange the tokens for fiat currency.
9. Simplifying Rent Collection Process
Blockchain platforms have completely revolutionized the process of rent collections for property management firms. Blockchain-enabled platforms automatically send alerts to the residents whose rent or service charge payments are pending. Blockchain-enabled platforms also facilitate property management firms in calculating and billing the service charges in real-time based on the data collected through IoT devices and electricity consumption records. This minimizes the time consumed in calculating service charges and other payments
In the coming years, there will be a rise in property management firms embracing blockchain-enabled platforms for rent collections due to the increasing popularity of Bitcoin & Dogecoin as a mode to make service charge payments in Dubai as well as across the globe. In 2021, Samana developers – a leading real estate developer in Dubai started receiving all the payments in Doge coins for its residential project in Jumeirah Village Circle. This will encourage several property management firms to implement blockchain-enabled platforms to maintain these transactions.
10. Creating Memorable Experiences for the Residents
Blockchain allows property management firms in exploring novel ways to enhance residents’ experience. Using blockchain-enabled platforms, property management firms are tracking useful data to understand the residents’ expectations to make their managed communities attractive and improve the occupancy and satisfaction rate. Blockchain-enabled platforms also provide information on residents’ preferences to the property managers to make their services personalized without compromising the data security.
The top 10 ways in which Blockchain applications are empowering the property management sector in streamlining its operations are as follows –
- Smart Contracting
- Issuing Possession Documents & Countering Frauds
- Minimizing the number of intermediaries
- Assists in Leasing & Payments
- Countering Sub-leasing and other Fraudulent practices
- Overcoming Siloed Databases
- Facilitating Real estate transactions
- Simplifying Rent Collection Process
- Creating Memorable Experiences for the Residents