The increasing rate of rural-urban migration is one reason why the real estate industry is rapidly growing. According to Grand View Research, the revenue of the real estate market will be worth over US$4 trillion by 2025. Other factors also contributed to the growth of the market apart from rural-urban migration; this includes urbanization and economic development in different developing countries, which has positive contributions to the real estate sector's growth.
This development in this sector remains a source of attraction to investors seeking to explore more opportunities. The industry has billions of dollars in investments circulating, with a high profitability level, if invested strategically. This is why the real estate sector is promising and will continue to remain relevant in the coming years.
Although the market appears promising and continues to experience growth, several factors pose limitations to its rate of growth, one of which is liquidity.
Converting invested real estate assets into cash remains an issue as it is challenging. Investing in this market requires substantial capital, while in most cases, investors tend to obtain a mortgage as a proper investment. Making such financial commitments would at least need the cushioning effect of bringing returns of investment soon enough. However, in most cases, profits in the real estate sector take more time to realize.
When these real estate investments are made abroad, it gets more complicated in countries where investors have neither citizenship nor permanent residence. If this is the case, investors will have to go through tedious processes, including documentation, employing agencies, before acquiring these assets, which in the long run still holds down funds for an amount of time before adequate returns are yielded.
Securing mortgage loans from banks by individuals to acquire properties is another challenge in participating in this market. Some investors eagerly interested in investing in properties may not have the sufficient collateral needed to obtain these loans. As such, a lack of funds discourages further investments.
Taxes also plays a stumbling block in the industry. Foreign investors in the home markets face this limitation considerably more than locals in the country of investment. On most occasions, these taxes discourage potential investors, especially retail investors. Furthermore, dealing with the paperwork required and the limitations imposed in some countries are some barriers worthy of mention.
Addressing the challenges mentioned above will attract more investors and foster increased growth in the market. That's why a system must be developed to provide investors with an easier way to invest and eliminate the barriers across foreign borders. Since the advent of blockchain technology and what it has achieved in disrupting several sectors and industries by totally transforming their traditional business processes, organizations have begun exploring ways blockchain can also help enhance the real estate sector.
Blockchain technology is designed to facilitate decentralization, transparency, security and enable borderless transactions. It has been used to leverage sectors like the financial, luxury, gaming, and health sectors; the real estate sector stands to gain more from the technology. For instance, LABS Group, an end to end real estate technology firm has raised US $6M from investors PLUTUS.vc, Elevate Ventures, Coinunited Capital. The prop-tech firm provides a platform for real estate properties to be digitally represented on the blockchain, and anyone from any geographical location can access. This means that foreign investors can gain easy access to property investments without facing foreign barriers.
Suppose an investor were to decide to purchase property in another country of choice. In that case, LABS will act as the custodian of real estate properties in the locality and obtain the title deeds for the properties. LABS will further digitize the properties on the blockchain where investors, foreign or local, can access the blockchain in a somewhat property swap market. Investors will thus be able to buy fractions of the property.
Foreign investors will have the ability to purchase properties as if they were local buyers considering LABS Group will be the title deed custodian. This eliminates the need to pay high taxes as foreigners, and the title deed for the property will be owned as a local entity.
Besides, the platform allows fractional purchases of properties, a feature made possible by blockchain technology. This is synonymous with purchasing a square foot of a property. The real estate market is highly capital intensive, where investors may need to have all the required funds to buy a property. However, with the LABS Group framework, investors have the means to buy a portion based on what they can afford and the funds they have at hand. Investors can get in the market even with the limited funds they have at hand. The need to obtain mortgage leverage is no longer necessary as the barriers to entry into the market have been lowered via blockchain.
With blockchain technology, there's a strong possibility of facilitating fractional ownership of assets in the real estate market. This gives small investors a good advantage as they gain access to real estate investments without the limitations of needing substantial capital.
The challenge of excessive taxes is also eliminated via blockchain as investors can purchase on foreign grounds locally.
This innovative technology makes it possible for foreign real estate investments without barriers and complex documentations, creating a world where everyone can trade and earn returns without limitations or constraints to investments.
Blockchain enables peer-to-peer trading and borderless transactions, which means investors no longer need to wait for months or years to earn returns; investors can trade and transfer rights on the blockchain platform. This further increases liquidity in the market, considering investments can now yield returns upon the investor’s time of choice. Using blockchain to leverage this sector is a step in the right direction. It brings us closer to a borderless world where anyone can carry out transactions with no limits and barriers.