The legitimacy of cryptocurrencies are still often a topic of debate in India, however, its underlying technology of blockchain has caught the fancy of many.
With technological entrepreneurs claiming blockchain as the next big virtual asset, this distributive ledger looks promising for otherwise centralised private sectors such as commercial real estate (CRE).
Though the outcome of adopting this technology in the realm of real estate may be unspecified at this moment, there is no doubt that implementing blockchain into CRE will initiate a more transparent procedure while eliminating the need of escrow services that are usually a part of such acquisitions.
Distortion in India’s land market contributes to a whopping 1.3% decrease in the national GDP. Coming to think of it, that is more than $3.1 Billion worth of money that is lost in land scams and bribes every year, the permanent solution of which lies with blockchain.
Tackling bribery in Real Estate
As per a report by the Government of Andhra Pradesh, buyers and sellers in India pay upwards of $700 million (Rs 4,500 crores) every month in bribes to land registrars across the country. Those trying to buy a piece of this earth would know that it is not an easy task to clear documents across the property trail. From negotiating with the brokers to handling the notary procedure, this process is both time consuming and corrupted.
Technological intervention in such a situation can, however, work wonders! By using ledger based technologies in real estate, not only will the corruption be minimised but also transaction costs arising from other mediatory interventions will go down efficaciously, lowering the property prices.
Applying blockchain technology to CRE will ensure easy access to all governmental approvals, eliminating the need of smoothening the hands of many during the course of purchase. This will render the process frictionless, and data manipulation and forgery almost impossible.
The main highlight of this incorporation will, however, be the advent of smart contracts that will encompass the digital time stamp and IP address of the parties involved in the investment, permanently recorded and available across multiple systems to numerous viewers, bringing an end to years of property disputes.
Why could blockchain mean so much?
Case Study: Adarsh Society Scam – A 31 story apartment building constructed to originally house the Kargil war heroes and their widows, saw influential bureaucrats and wealthy politicians as its new occupants. What was originally designed to be a six storied building constructed on sensitive defence land, soon became the epicentre of a high profile land scam and money laundering case.
There were allegations that apartments worth 8 crores in the Adarsh Society, were sold to the kin of politicians in the Maharashtra government, all registered in the name of proxy owners. Ashok Chavan, who was the CM of the state at that time was caught to have colluded with other high ranking defence personnel, in concern with the land ownership of this Mumbai prime location.
As an immediate effect, Mr.Chavan was stripped of his title as the State’s CM by his party.
In 2011, the Maharashtra government set up a bench to look into this matter and found 25 illegal allotments, all given as ‘gifts’ to politicians involved in the property trail. Additional 40 flats were allocated to civilians, defeating the purpose of constructing the building in the first place.
As the case developed further, it was also noticed that the building had no official environmental clearance from the concerned ministry, but a fake NOC from the ministry was submitted during the initial submission.
Now, in a scenario where blockchain is incorporated in this field, this scam would not have been able to materialise. The environmental clearance could not have been forged as was seen in this case, since all the authorisation would have been catalogued digitally on the ledger. The ownership of flats by proxy owners would have also been phased out since details of all the allotments would have been available for further verification.
Tax evasion on this property as was recorded by the court would have also not been possible.
Thus, incorporating blockchain in real estate looks promising because it will model a reliable and steady business ecosystem, sans the scams. Given as in a report, two-thirds of the civil cases in the sub-continent are made up of land and property disputes- something that will effectively dissolve with the integration of blockchain in the field of property estate.
Though every day we witness striking developments in the field of blockchain, we have, however, only managed to scratch the surface of this otherwise far-reaching field. Still being in the inceptive stage, the implications of this ledger based technology on different industries are still rather ambiguous.
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