This interview is part of our new Blockchain In Real Estate series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and real estate.
In this interview we speak with Hriday Ch. Sarma, Relex Deputy Director- Strategy, Relex Development, to understand how this company is using blockchain to transform the real estate business, and what the future of the industry holds.
1. What’s the story behind Relex Development? Why and how did you begin?
HS: Relex came about originally as an extension of the private equity and investment advisory function that Squawk Advisors, its original founding company, was doing. Squawk Advisors was primarily dealing in frontier industries such as inhalable medicines/supplements and frontier market assets in Cambodia, Vietnam and even Mexico. My friend, Keith Hilden – founded the company, and he has continued to play a steering role driving activities till at present. My role and association with Relex dates back to the early days of Squawk. Even back then, I supported company’s strategic engagement matters with both clients and partners – a role that I have continued to hold till at present. Prior to that, Keith and me worked as colleagues for a Israel based crowdsourced geopolitical risk analysis company.
Before blockchain, we primarily dealt in real estate, industrial park, and infrastructure deals, and lined up foreign investors for project owners in Southeast Asia—at times arranging investment partners for the country’s largest real estate developers. We had to expend a great deal of resources on making sure that both parties adhered to their side of the deal. This was the crux of the matter that blockchain solved dramatically—making sure that none of the 3 parties would undercut each other out of the deal. When we integrated blockchain technology and connected them to our capital raise contracts, deal integrity rose dramatically, both in crowdfunding deals and private investment advisory deals. When we integrated crowdfunding, we found a way to not have to tap the same investor pool over and over every time we discovered a new investment. As such, the diversity of investors greatly was enhanced, and new ideas from people from different backgrounds came together in the capacity of proxy developers.
We saw crowdfunding tied to blockchain as a way that counterparty risk could be virtually eliminated, as well as broadening the available pool of investors that project owners could shop their deals out to. In short, it was a beautiful start to the beginning of the new global economy—an investment-based economy built on the basis of crowdfunding. The shared views of our team on crowdfunding brought Keith to Belarus, and he agreed to move the company here with Oksana Lozytskaya picking up the baton from him. The rest has been history, and we have moved forward with the basic foundation of crowdfunding on blockchain to create a new basis for the economy, starting in Belarus.
2. Please, describe your use case and how Relex uses blockchain:
HS: The real estate sector is the most important asset in any given economy. Hence, it becomes necessary to test all possible research options for the use of blockchain and digital technologies through real estate (and infrastructure) in order to then extend and adapt this practice to other asset classes in the economy. These are the basic steps of how a national economy can be transformed.
The crowdfunding model of Relex, enabling generation of investments up to $220 million USD for suitable projects, is both unique and important to the global economy – with Belarus an example of this. Our model enables capital to be more efficiently allocated to investments, which is the basis of the digital transformation of the real estate market – and the market of institutional investments. Any listed project with the relexcapital.com platform can receive investments from across the world, benefiting the developers as well as investors, who as a community may decide what projects come in the platform and which projects secure greater investments. This is made possible through Relex’s proxy developer model—where investors are not just passive participants, but active contributors to the real estate projects that they invest in. As a matter of fact, our business model is creating new rules of the game in the market.
3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?
HS: Presently we have developed a model of investment in the real estate market which allows a wider pool of investors to participate from literally the ground up. Starting at the land plot phase, to construction, to the launch and use of the project in the local and national economy. This model can work in all markets, whether at community level or at the country level. In recent times, there has been growing curiosity and approvals for its implementation. We have noticed this interest in particularly acute in frontier markets.
The model brings in wide-ranging benefits to all stakeholders connected to the platform. The investors gain full transparency in the process of channelling their investments, thus reducing the risks of investment as well as the price of invested properties, whether commercial/ non-commercial apartments, seaports, etc.
We are currently working with investments of different levels, from small individual investors to large funding institutions.
4. What other blockchain use cases in real estate are you excited about?
HS: Fintech and ‘invest-tech’. These are the technologies allowing you to quickly carry out not only transactions, but also to create the necessary basis for the digital transformation of assets, funds, and resources of both the manufacturer and the buyer. Fintech is set to become the mainstay of the global economy as it undergoes a transition to being services driven, and especially in the broad construction sector; whereas, invest-tech is re-defining how investors may put in their money in a more transparent and user-friendly manner in properties of their choices across the world.
Blockchain is equipping activities in both sectors to be executed under a systematic and scientific approach. Proper architectural structures, such as that use algorithm for proof-of-work or proof-of-stake for generating consensus, etc., are key for that to receive proper attention and development. We will be proceeding accordingly, by providing these important tools for the market.
5. Where will Relex be in 5 years?
HS: We are creating a digital agenda with regard to digital transformation for as many countries as possible. Our priority target countries are frontier and emerging countries; however, we are planning to engage with big economies, such as Canada and even India that we are already dealing with. It is important to remember that the very basis of digital transformation of economies rests on crowdfunding, so this will continue to be a core tenet of what we do.
We plan to introduce fintech tools of digital transformation across sectors and nations. We plan to emerge as a credible and sought-after platform for driving forward institutional transformation in the global markets.