Why Worbli and which industry? I am proposing a Dapp idea which I believe can really disrupt the property development market, affordable housing and governing properties. In this article I will outline the basics and will not go into too much detail as it will cause a massive disruption when it comes on the market and has to be looked at in great detail to iron out the fine print and legal hurdles.
First lets have a look at how the traditional property development works. I am looking at Australian market and narrowed down to where I live – Canberra. I have had a few meetings with local property developers when I was studying Urban Planning, so I know how the market works here. I would say the formula is pretty similar around the world:
- Developer acquires land in an auction bidding against other developers.
- The concept design is presented to the public for submissions of interest.
- Before the developer starts building the general rule is you have to sell 80% of the units.
- Once units have been sold the building begins where they have less than a year to complete the development.
- Last 20% of the units are sold of which is usually the profit margin.
- Building management is sold off to a third party.
The problem with this model is that smaller developers, community organisations for affordable housing as well as general public are priced out of the action. Community members have little to no say what type of development is going to be built. Also. buyers and investors have no say in how the building is managed and have little control of the management fees.
Companies that take control of the management put a margin as well as a fee on top of every contract. Changing a light bulb, a cleaning contract or any bigger improvement on the building are all subject to this extra commission. The fees are paying for a salary of 50k-75k/y for a facilities administrator, as well additional expenses for Facilities Coordinator 50k-75k, Facilities Manager 75k-100k/y, Facilities Director 100k-150k/y and other office staff(Facilities Management Salary Survey 2015 Australia and New Zeland). At the same time the community which is actually using the building still have to have a board which approves or disapproves any proposed changes, improvements or proposals have general meetings and be actively engaged.
So my solution would be multifaceted and there is still a lot of work to be done to work through the details. This could be split into two solutions for the two areas, but if implemented right from the start would add value to any new development and would work best if implemented together.
Property Management and Development on Blockchain:
- A security token is created and sold to the early investors to acquire land.
- A concept with a few possible development options is created.
- Second round token issued to fund the development
- Token holders vote on the best design and price solution.
- Building commences.
- Token holders vote on the amount of units sold vs leased short time(Airbnb or simmilar) vs long term lease.
- Sales start.
- Building governance is inbuilt into the units.
Confused yet? It sounds a bit complex at the start, but if UX is right it all comes down to the ease of use and trust.
How it looks in practice – lets say the land cost is $1M and we are developing 40 units:
- 1 Million security tokens are created at a price of 1$ and sold at parcels of $10000min to have a max of 100 investors.
- With 100 or less investors it would be easier to reach a consensus on the design/price/profit margin leaving lets say 3 options. This can be left to vote for the next round of funding.
- Second round of token sale begins to fund the development with 10M tokens available at a 25% premium. Math behind it – 40 units at an average price of $400k=16M-20%profit=$12.8M(or around that to make it easy I changed it to 12.5M). Original investors can cash out if they want a quick 25%. Total token amount is 11M after this round.
- Vote on best option for the investors and the community as tokens will mean a percentage of the development.
- A contractor is selected from verified builders most suited for the job and given a contract with clear goals. Smart contracts lock in the funds until deadlines are met and quality assured.
- Token holders vote on the general use and the look and feel of the community with the decision of sale of 100% of the units to lock in the funds and get out from any further management decisions making a quick profit. This part is still under consideration and can work in many ways in different scenarios if different percentage of the property is sold and the rest is leased.
- Sales start with the money locked in another smart contract until agreed targets met. Tokens never go on any exchanges it all stays in the original ecosystem backed by the value of the project.
- Property governance solution is built in to the unit management system same as lets say heating or energy consumption meter. The community would be registered as a co-op for legal reasons for now, which in turn means voting for board members and the positions just like in a current system, but can be adjusted to suit every project or according to legislation in different jurisdictions. Voting options from simple light bulb changes to more complex and important decisions like cleaning contractors, general maintenance and upgrades. Some votes would be compulsory, some would be limited to the affected units. Governance structure would change project to project, but it would be a lot more accessible and cost saving. The fees would be set depending on the scale, but can save up to 50% to start with and money can be locked in to a contract with multisig access to pay for services.
Why Worbli? Well Worbli will have KYC/AML inbuilt on the protocol level which makes legal hurdles easier to overcome and cheaper to implement. Anyone participating would have to have an approved account. Just like EOS main net transactions would be free, instant and verified on blockchain which makes dispute resolution easier for everyone involved.
This solution takes out the middle men making substantial savings for the occupants of the property, provides easier access for investing into the property market, community organisations seeking more affordable housing, if involved, can have a say on the profit margins and vote on cheaper and more accessible housing for underprivileged. The aim is to turn the market around and not crash the market, but make housing more accessible to everyone in these times where raising capital for a first home buyer is almost impossible. Rent to buy is a popular option in a few European countries and tokenized economy makes it easier and cheaper to implement and could be built in as an option from the start.
It is just an overview and extensive consultations with current property developers and stakeholders is taking place to tweak it to a possible MVP eventually.
If you have any questions or comments please send it my way and I am open for a discussion in a possible collaboration.
Thank you! Let’s Worbli together!