Property markets worldwide are far from transparent. Middlemen drive prices upwards, red tape impedes the dynamic development. Blockchain, however, may change it all. Digital Asset Live Editor-in-Chief talked to Mark Lloyd, Max Property Group MD. His firm has developed Max Crowdfund, a blockchain based solution to the above problems.
Q1: In your view, which functions of the current property market may be placed on blockchain?
A1: The most obvious property transactions to be placed on the blockchain are land registries (ownership, property details, historic transfer details), property management (maintenance instructions and invoices), investments (loans, bonds, mortgages) and licenses (construction and occupation). Once all is placed on blockchain technology we would have a truly transparent property world.
Q2: Which of the above is already implemented in Ardor, your blockchain?
A2: With Ardor you could essentially implement all of the above, but obviously apps need to be built on top of it. The main important requirements are that the assets created on a blockchain are controlled assets (tokens only transferable between approved accounts to ensure compliance with financial regulators) and phased transactions (for property management, so the tenant has a complaint (boiler broken), the property manager accepts the complaint, the repair man accepts the job, the job is signed off by the tenant and the property manager and the invoice is added, approved and paid).
Q3: Is this your own proprietory blockchain?
A3: No. Ardor is a blockchain owned by Jerlurida. We opted for a BaaS solution as the child chain solution offered by Ardor had all the functionality we needed. This eliminates the expensive task of developing your own blockchain, maintain a node network, etc. Ardor is also proof of stake and we like this energy efficient system.
Q4: Do you envisage a more global application of Max Crowdfund platform? Let’s have a look at a utopian scenario.
A4: Our ambition is certainly to go global. From a utopian perspective we would like to have all land registries on blockchains that can communicate with each other, as this would allow 100% transparency on ownership, values, historic transactions, etc.
As a property investor I would also like to see all property management placed on blockchains that communicate with each other as this would eliminate nasty surprises after buying a property.
Finally I would like to see all property investments to be 100% transparent by creating controlled assets on blockchains. Financial regulators and governments would certainly like that too, as taxes would be based on ownership that is easily identifiable and no more obscure structures would be allowed.
If Max Crowdfund could be a big participant in that “new” property industry we would be very pleased indeed.
Q5: Now will you please describe a more real life scenario of how the Max Crowdfund platform functions?
A5: To start you can create an account and pass KYC as an individual or a company. Once you have passed KYC you can link a bank account and deposit money (crypto and fiat) on your balance.
All fiat money are deposited into the Max Crowdfund Escrow account. When an account holder (has to be a company and has to be a property owner or developer with property in his name to give as an underlying asset) wishes to obtain finance they can apply for finance on Max Crowdfund.
Our property specialists will perform due diligence checks and if the project passes we assign a risk rating. Based on this risk rating an interest rate is recommended and once all is agreed the project will be placed.
Registered users who have KYC approved accounts on Max Crowdfund can subscribe to the fundraiser and once the loan amount is achieved the loan will become effective.
At that stage we automatically create a controlled Asset on the MPG blockchain and all investors will be assigned their security tokens. At this stage the Max Crowdfund Security Trustee will take a charge on the property on behalf of the investors to protect the investors in case the fundraiser can no longer pay the promised interest payment.
In that case we will execute on the property and pay the investors their money back (assuming the property can be sold for the full amount of the outstanding debt).
Once we have obtained the required license from the financial authorities we will also open the secondary market for all the security tokens, as this functionality already exists on Ardor.
Q6: How do you think the masive adoption of DLTs will effect property markets? Will be so powerful as to effect property price?
A6: First of all it will make it far more transparent. If you are a property investor you know exactly what I mean.
It will make the property pricing more honest as you should be able to see what a property last sold for, what the neighbours property sold for, what the condition of the property is, whether the tenants pay on time and are good tenants in general, etc. etc.
As such it could affect the pricing but this could be upwards as well as downwards.