CSB ON THE APPLICATION OF BLOCKCHAIN TO THE REAL ESTATE MARKET

As things stand today when purchasing a property in a foreign country or even one’s home country the buyer relies on the need of having payments settled and cleared by a financial intermediary such as a bank.

We all have heard the famous buzz word of the year – maybe of the next decade. Blockchain! The technology which we all hear about brings about a new way of doing business. What makes Blockchain technology so interesting is that it can be applied across a multitude of different areas, from identity management to intellectual property rights, patents and trademarks to voting and supply chain management just to mention a few. Malta is not only taking the lead to become the blockchain island but it is also applying it to various sectors including education, healthcare and property.

The greatest difficulty in a property transaction is transparency. Why? Because the buyer and seller are dealing with a number of intermediaries. Blockchain technology which supports trusted transactions through a shared network, allows for the immutably of information and allows for the safe passage of monies and transactions.

The first advantage of applying Blockchain to the real estate market is that sellers will be able to place the details of their property on the blockchain and thus give buyers access to one decentralised database, which database would contain all available properties not only on the local market, but also internationally, identifying who the actual owner of such property is.

The fact that a worldwide distributed and decentralised database is established gives the necessary infrastructure and scalability to perform efficiently. On the other hand, a seller, will have access to all necessary information in relation to the buyer, and as a result of the ability to exchange information in a quick and efficient manner, transactions will be frictionless and less time consuming.

Another advantage of using a blockchain based solution would be that all deeds or titles of acquisition would be held on the blockchain. The actual blockchain could be a hybrid – i.e. a mix of private and public ledgers which would allow certain information to be available to all parties whilst the more sensitive information is retained from public eyes. The information placed on the blockchain will allow for the easy identification to land/title owners. The system will verify that the deed of acquisitions held are valid and legitimate which could end years if not decades or centuries of disputes in relation to ownership. When a sale of a property or land takes place, the buyer is registered as the new owner of the property. There shall exist a record of the transfer of such property and proof of new ownership, including the title deed showing the passage of the property. Such a transaction will be recorded through the use of a smart contract, which will be entered into between the buyer and seller.

Within the rental market, the application of blockchain and smart contracts can facilitate the process of vacating a property, whereby upon the tenant leaving the property and all is in order (or else damages are to be settled) in accordance with the terms and conditions of such rental agreement, the smart contract can automatically execute the agreed terms and respect the rights of either party.

Another way in which property deals can be facilitated is through a new payment mechanism. As things stand today, purchasing of a property in a foreign country or even ones home country the buyer relies on the need of having payments settled and cleared by a financial intermediary such as a bank. If the property is being bought overseas one would need to convert his/her currency into the currency of the seller. Through blockchain technology – digital currencies could easily solve such an issue as payments would be settled directly between the buyer and the seller.

This is a reality which Malta is already embracing. It was recently announced that Malta will have an application that will allow notaries to record promise-of-sale agreements on the blockchain. This will allow local notaries to be informed in real-time when a property has been sold, which will thus remove any possibility of human error. We at CSB are excited to apply these endless possibilities.

For more information on Blockchain in Malta or relocating to Malta, contact us on info@csbgroup.com or +356 2557 2557

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