Proposal for a Blockchain enabled Peer-to-Peer Real Estate Platform (for Germany)

Introduction to the German Real Estate Market

Germany is the 4th biggest real estate market in the world. It’s a very mature and stable market, which makes it a potential and lucrative investment target for conservative and risk averse investors. The current concept to own a flat in a condominium system or a sole house in Germany is based on hundred of years of trade customs, laws and the central ledger “Grundbuchamt”. The public land title register is organized by the federal state and the municipalities. To file for a submission to the public ledger one has to use a notary who ensures that the information in the public ledger “Grundbuch” reflects the will of the contractual parties during a property transaction.

General Problems with Real Estate Investments in Germany

  1. High cost of transaction due to the needed use of the public ledger “Grundbuchamt” and the notary office
  2. Time consuming process due to the non-digital execution of contracts
  3. Certain processes have to be manually agreed on by the seller and executed by the notary (and official register), therefore to become the registered owner of a property can take months and in some cases even years.
  4. The parties have to trust the “middleman” of the public ledger which is not decentralized and vulnerable to fraud.
  5. The typical notary digital office structure is not organised decentralized, therefore also vulnerable to fraud.
  6. In most cases the personal presents of the seller and buyer, or at least of their representatives/attorneys is necessary.
  7. Limited diversification of investors in locations and asset classes due to big tickets. Typically in Berlin, the capital of the Investments in Germany in residential real estate start from about 100.000 Euros and upwards.
  8. Limited possibility to sell just a fraction of the property, or to co-own.
  9. Limited possibilities to borrow money from third party (while using the property as a collateral).
  10. Purchase process requires personal presence in Germany (or in a German consulate office).
  11. Cost of transaction is high (purchasing side costs, taxes and fees account for up to 15% of the total purchase price)
  12. Limited performance measurements due to either limited transparency by administration or the lack of implementation of technology to actually generate data.

Therefore, the benefits to use a system based on blockchain technology seems inevitably reasonable. However, the implementation is a high hurdle, not only the judicial and but also legislative institutions need to be convinced about the benefits of the system.

A lot of people in the real estate industry hope that the land title or land register so-called “Grundbuch” in Germany could be revolutionized by the blockchain technology.

But it is most likely that this change will take a long time to integrate in the minds of the politicians and the industry participants in Germany.

For that reason, we propose another bottom-up approach and grassroot initiative to start with a blockchain enabled real estate transactions in Germany. It’s a initiative using existing laws and regulations to the benefit of a peer-to-peer network.

Our Proposal

See full article on Medium:

https://medium.com/@alexanderkorte/proposal-for-a-blockchain-enabled-peer-to-peer-real-estate-platform-for-germany-c30c039a31cf