The Future of Blockchain-Based Real Estate Transactions
By Michael Scott
In his book “Down the Rabbit Hole: Discover the Power of the Blockchain," author Tim Lea briefly explores how blockchain technology can be applied to the codification of property ownership worldwide.
This should be seen as welcome news to the real estate industry, where illiquidity and centralization create major inefficiencies for investors, especially those seeking to purchase properties abroad. Currently, there are no international standards or comprehensive technologies for electronic property rights transfers. Moreover, legacy registry systems that were created to handle local investors are ill-equipped to facilitate transfers of international ownership.
Enter Propy, an international peer-to-peer real-estate marketplace aimed at solving the problems of purchasing property across borders. It is arguably the world’s first blockchain-based network for fostering the seamless purchase of international real estate online.
The “Propy Registry” is fueled by smart contracts designed to track and execute real-estate transactions according to regional regulations. Capitalizing off of the groundbreaking advancements of Ethereum, Propy allows brokers, buyers, sellers and title agents and notaries to execute transactions utilizing blockchain-based private keys within existing legal frameworks.
Propy is fueled by the ERC20 “PRO” tokens that allow for simple integration with users’ wallets as well as ease of use with traditional exchanges. The token is required for interaction with the Propy Registry, specifically when users change ownership of a title or register a new title.
The company is led by CEO and founder Natalia Karayaneva, who has an extensive background in real estate development and blockchain advocacy. Karayaneva has roadmapped Propy’s global property store with a decentralized title registry to disrupt the $340 billion cross-border real estate market.
“I’ve been a real estate developer for 12 years, constructing 100–400 unit vacation developments and selling them to foreign investors,” Karayaneva said. “My team, which consists of brokers, lawyers and accountants, has been facilitating cross-border payment assistance and title deed issuance assistance in-house. Being a software engineer by profession, I believe in solving problems by automation.”
Propy was incorporated in 2015 in an attempt to resolve issues encountered by foreign buyers seeking to invest in real estate in growing markets such as Dubai, Monaco, London and new EU member states. According to Karayaneva, the initial vision is to launch a convenient listing platform focusing on global cities, similar to Airbnb, and then to gradually automate the purchasing process.
In early 2016, according to Karayaneva, several blockchain entrepreneurs asked her to find a niche for their ideas in a real estate vertical. This is how she learned about blockchain and its potential in real estate.
“I then asked a friend of mine, Alex Shelkovnikov, [previously] the blockchain advocate at Deloitte, to help us engineer a solution for cross-border payments, and he advised us to talk to the crypto engineer and entrepreneur Andrey Zamovskiy, who later became our chief blockchain architect,” Karayaneva said.
Zamovskiy, she added, inspired the Propy team to apply the solution of “double spending” for digital assets to real estate ownership transfer. This is when she understood that blockchain technology has been the missing link in automating the real estate purchase process — an environment that often lacks trust and is at times fraudulent.
When asked to expand upon the host of problems facing international real estate investors, Karayaneva produced a long list.
“Cross-border real estate transactions usually involve language and cultural complexities, of course,” she said. “But the localized and bureaucratic nature of real estate, the difficulties in cross-border payments and the need for myriad third parties involved in all aspects of the transactions can lead to long delays, at best. At worst, fraud concerns and just general transaction friction can make buyers hesitant to enter these markets. This leads to less liquid markets, which exacerbates problems.”
Her company’s solution to this? First, Propy aggregates and translates listings in global cities (the data storage is planned to be decentralized as well in the future).
Second, by using blockchain smart contracts, Propy allows each party, including the broker, buyer, seller and title agent and notary, to sign off on a transaction that consists of a payment process and paperwork according to the existing legal framework.
It should be noted that Propy’s legal framework is based on U.S. use cases that comply with California legislation. The effect of this is that it allows Propy to be narrowly focused, aiming for fast adoption in markets like those in the Golden State.