A Simple Guide To Understanding The Impact Of Blockchain On Real Estate Crowdfunding

Blockchain and crowdfunding are the two emerging trends in the real estate sector which is currently in its budding stage. A crowdfunding platform is a space in which property developers list their projects along with their scope, potential, capital requirements, profit shares, etc. It is a place where developers meet their potential investors. By investing through crowdfunding platforms that are powered by blockchain technology, investors can identify the most profitable option and make sound investments. Using a crowdfunding platform is also beneficial as it makes it easy for the parties to connect and also fulfill each other’s requirements. 

Also Read: 5 Ways Blockchain is Revolutionizing the Real Estate Sector

Using blockchain-oriented crowdfunding platforms enables investors to receive more precise input on the expected returns as well as the exit period to invest and gain shares in a project. Such platforms are very important and beneficial for investors as they provide transparency and reliability. 

Also Read: Real Estate Crowdfunding in India – The Essential Guide for You

Blockchain

You may be wondering if blockchain and database are the same. Well, they serve a similar function of storing data but the blockchain is differently encrypted which makes it a much more secure system than a database that can be easily changed and hacked. The information stored on the blockchain is permanent once they are entered. 

How does blockchain work?

Blockchain collects all the relevant information and then it is grouped as blocks. These blocks hold data and have specific storage limits. Once the blocks of the storage reach its limit, it is chained to previously filled blocks. It is these chains that make the data stored in the blocks as unchangeable and indestructible. 

Blockchain-powered crowdfunding for real estate business

Blockchain technology decentralizes the trading of real estate assets, rental agreements, purchase or sale agreements, property task management, etc. It helps in regulating, financing, listing, etc. along with managing activities. It also facilitates peer-to-peer financing for the purchase of real estate assets. 

The crowdfunding process involves financial transactions from different individuals and thus the transfer of finances must be carried out securely and efficiently. These conditions are fulfilled by blockchain technology as it facilitates the same. Blockchain technology also eliminates middlemen and prevents fraudulent activities from taking place. It also helps in mitigating risk as information is made accessible and investors are well aware of the various investment opportunities available to them. By investing in platforms that use blockchain technology to provide crowdfunding opportunities, investors will be able to evaluate risk. 

Also Read: Top 3 Real Estate Technology Trends Post Covid-19

Benefits of blockchain-powered crowdfunding 

Some benefits of investing in blockchain-powered crowdfunding options include:

• Enhanced transparency

The use of crowdfunding platforms using blockchain technology enhances transparency in a real estate transaction. They provide live dashboards and qualitative reports which enables the investors and real estate businesses to make informed decisions. This in turn brings security and also helps in preventing fraudulent activities to a great extent. 

• Analytical tools

These platforms often contain an analytical tool that provides the investors with a proper understanding of the amount of risk in a real estate investment. The analysis of the associated risk is carried out by conducting due diligence and by studying the history of the past transactions of the property. This in turn enables the investors to take a wise and informed decision. 

Also Read: Due Diligence Real Estate-Everything You Need To Know

• Portfolio Analysis

Every investor aims to build their portfolio by diversifying their wealth. Portfolio diversification is important as it enables the investors to mitigate risk to a great extent. Real estate is one of the preferred investment choices to diversify the portfolio as it is less risky than other investment options as it is more stable and less volatile. By using crowdfunding platforms that are empowered by blockchain technology, investors can analyze property data and investment risk. Thus it enables efficient portfolio analysis.  

• Investor communications

One of the major benefits of investing in crowdfunding platforms that uses blockchain technology is the efficiency in communication that is brought in. Investors using such platforms can communicate using interactive dashboards or through secured data rooms. These platforms also regulate the information flow and provide automatically updated financial reports as well.  

• Fund management

Are you aware of what crowdfunding is? If not, potential investors come together and pool their funds to finance a real estate property. Crowdfunding activities are carried out mainly through smart mediums and involve a developer, asset manager, and investors. Since the investment is not carried out by a single individual, efficient fund management becomes even more important. Crowdfunding platforms powered by blockchain technology manages fund easily with the help of very dedicated workflow tools.

• Deal flow management

Using crowdfunding platforms can be beneficial in ensuring ease in deal flow management. Investors are no longer resistant to their geographical boundaries and they can invest in different localities within India and beyond. Crowdfunding platforms enable potential investors to access and review property listings on these platforms by sitting in the comforts of their homes. 

Risk of blockchain-powered crowdfunding

Since the nature of blockchain perfectly suits the details of the crowdfunding industry and its consumers’ expectations, blockchain crowdfunding is a very viable business proposition. Even so, there are several dangers to consider when building a blockchain-based crowdfunding platform.

• Legislation that differs

Different nations govern equity-based blockchain crowdfunding differently. Buying and selling stocks, using blockchain, and running a crowdfunding business are all regulated independently, thus there is now a need for a more defined legal framework.

• Security

Although blockchain networks are extremely safe, they are not impenetrable. The majority of blockchain security problems revolve around the generation and maintenance of private keys.

• The technology provider’s option

The platform on which a blockchain-based crowdfunding website is built is also important. For this purpose, there are now two prominent options on the market.

Blockchain and crowdfunding are in their infancy stage at present and are not very common. However, the use of blockchain in different parts of the world has proved it to be exciting and full of possibilities.  The use of blockchain technology has also been recognized as beneficial as it helps in maintaining transparency and in managing funds efficiently. It provides investors a proper insight into different investment choices and provides them with an updated risk analysis. 

Crowdfunding too has its benefits. It helps the investors with the little fund at hand to invest in high capital projects. Thus by investing in crowdfunding platforms that are powered by blockchain technology, you are not only expanding the horizon of your investment but you are also doing it with utmost safety and transparency. Assetmonk is a wealth-tech platform pertaining to commercial real estate. We offer some of the top-quality projects in Bangalore, Chennai, and Hyderabad. Our offerings are categories into Growth, Growth Plus, and Yield Model. Our offering has an expected return of 14-21%. Visit our website to know more.