The blockchain and housing: how to make a transparent real estate market

The problem of trust

Those who are faced with buying or selling real estate, know what it’s a pain. The problem is not limited to finding a suitable buyer or seller. Actually, the main problem lies in the area of trust. People prefer to go to a familiar real estate agents, look for agents through friends, expecting that themselves guarantee the security of the transaction. Although, to reduce the risk of being cheated to a minimum, just need to strictly follow the rules and procedures of purchase/sale of property. But people prefer to pay realtor friends a few hundred thousand, often confusing the concept of “sense of safety” and “professionalism”.

The blockchain itself the opportunity to cheat is reduced to zero. This technology allows you to securely and distributed to store reliable data, which can be anything: documents on apartment, recorded on remittances, contracts, passport, etc. All these data are stored on users ‘ computers network the blockchain. Connecting to it, the user can communicate — everyone has equal rights, everyone sees in the circuit changes, which he is, everyone can make the necessary changes without the involvement of intermediaries, and any malicious changes will not have power because it will be immediately detected.

As you know, technology came the blockchain out of bitcoin. They are then actively taken up by the financial sector. So, in early March of this year, the 40 largest banks in the world announced about the experiments with new technology. It is believed that in the near future this will dramatically change the banking environment. According to estimates of the Bank Santander, the savings on cross-border payments, security and securities trading through the blockchain can make up to $20 billion a year. Cost reduction is possible due to the lack of centralized management and a slow and expensive payment systems.

The blockchain can be applied wherever there is a question of trust. And the real estate market, especially in Russia, is a gold mine for the new technology. It will allow to exclude unnecessary process steps, reduce time, and costs: agents do not need to check the documents for the preliminary preparation for the transaction, banks will quickly prepare documents for a decision about the mortgage. According to our calculations, the blockchain will reduce the cost per trade to 1-1. 5%.

Innovation vs. bureaucracy

Now, when does the real estate transaction, all data pass through companies house. It is the only custodian of data on the ownership of the property. In addition, the transaction usually involved a lot of parties: notaries, real estate agencies, banks, insurance companies, boards of real estate, buyers and sellers. With increasing chain exacerbated the problem of trust. Realtors double-check the documents several times. Banks do the same thing. Any change entails a long process of inspections and approval. Buyers and sellers, not trusting each other, forced to turn to intermediaries, with numerous well-known abuse that fragile trust, including at the level of agents and notaries.

Thanks to the blockchain, you can simplify the whole process. The data chain (in this case of transaction documents) visible to all participants in the process. Everyone can add a new document in the chain, and the unique code to the new link gain to all parties. If you have the appropriate rights, you can view any document at any time, such as a certificate of ownership. Thus the transparency and distributed nature of the blockchain when the information is not stored in one place, as in the case of regpalaty, ensures maximum security and guarantees stability of the data.

The main issue is when the state represented by the registration chamber will begin to use new technologies. Now the world is at least two countries are actively developing projects implementation of the blockchain to determine the level of state authorities: Ukraine in Odessa, where was visited by the famous reformer Mikhail Saakashvili, and Greece, where historically large problem with real property rights on land.

When our building will be adopting blockchain, then change the real estate market. All real estate transactions will take place electronically. Disappear the risk of loss of property rights. As a matter of fact, almost eliminates the need in regulate, at least in the form in which it exists now. And in 2015 the state spent on maintenance of activity of Federal registration service of more than 41.5 billion rubles, were registered more than 25 million rights, transactions, restrictions and encumbrances on real estate. The registration rights today is 10 calendar days — at least in Moscow. However, it is worth noting that Russia in this sense is one of the best in the world (ranked eighth in terms of “Registering property” in the Doing Business ranking). However, the blockchain will register the rights to property almost instantly. In addition, the real estate transactions will eliminate the need for notaries who charge for their services up to 30 thousand rubles.

This simplification of the process and increased confidence likely would stimulate citizens to actively make transactions on purchase/sale of real estate. It can not affect positively on the economy, including at such an important level, as labour mobility: to simplify moving the more people will move between regions in search of suitable work. Labour mobility is one of the main factors to improve productivity. According to the HSE, the flow of workers from inefficient industries to efficient in 2005-20012, gave 20% of productivity growth. And we are talking only about a relatively narrow segment of residential real estate. What prevents using the blockchain to simplify the registration IP, LLC or JSC? The Institute of development Internet (IRI) at the end of last year has made to its “long-term development of the Internet,” the legalization of the technology of the blockchain. According to the plans, this should happen before the end of this year.

While there’s a revolution from below: the world and Russia is no exception, there are startups based on the technology of the blockchain, which will improve the most conservative agents of the economy — the notary and the registration chamber. Entrepreneurs are starting to use the blockchain for an organization’s internal business processes.

Open registries on the basis of the blockchain — the future of public services. Fraud of any loans, real estate transactions, registration of documents, financial translations will simply become impossible and the granting and confirmation of rights and references will be a simple matter, requiring only a couple of seconds.

The point of view of the authors, whose article published in the “Opinions” section, may not coincide with editorial opinion.