In the market for a three-bedroom property in Koramangala for over a year Kunal finally sees an advertisement for a property he likes. He opens the blockchain ledger on his computer with his private key and searches the property on the government’s land registry database using the property ID provided by the seller in the advertisement. Here he can scan through the entire ownership trail of the property – owner, property taxes paid, maintenance receipts, title reports, mortgage lender, approvals, broker and so on. To go into the details he needs the seller to share his private key. He messages the seller, schedules a viewing, negotiates a price and gets access to the property blockchain.
He adds his banker to the blockchain who approves the mortgage after going through the property papers and title history. The sale deed is signed digitally and the payment is released to the seller’s banker (also on the blockchain). Next the sub-registrar is intimated of the sale and the title is transferred in Kunal’s name in the blockchain. Welcome to the future of real estate purchase and ownership.
Blockchain is a digital ledger (think of it as a software or an app on your phone, tablet or PC) that contains digital record of transactions. It was initially developed to keep track of the amount of bitcoins in circulation but its usefulness has now extended far beyond cryptocurrencies. In order to access a particular document (for example a property sale deed) the user will need his private key (think of it as a password), the document’s public key (which is “public” or freely available) and the document owners’ private key. A user can see the document through the public key but will need the owner’s private key to see what’s in it.
As tech entrepreneurs in the property sector we are in a unique position to see the inner workings of the entire property purchase cycle in various cities from sourcing (via brokers or online sites), site-visits, negotiation, signing, legal diligence, mortgage, documentation, payment and registration. We’ve dealt with sellers, brokers, mortgage lenders, lawyers and land registry officials at the sub-registrar’s office. Ask anyone who has completed a property deal – it’s not easy.
From working with ingratiating brokers to slippery lawyers and corrupt officials, the entire process can drain the most resolute of investors. As per JA Choudhary, special chief secretary & IT advisor to the chief minister of Andhra Pradesh, buyers and sellers pay upwards of $700 million (Rs 4,500 crores) in bribes at land registrars across the country. No property deal can be executed in any of the big cities today without paying a “facilitation fee” to the sub-registrar, which can range from Rs 25,000 to several lakhs depending on the size of the transaction.
Technology can eliminate all these leakages and make the process almost frictionless. But for it to play a role, the government has to be pro-active in allowing technology to disrupt the buying and selling process. Without the government’s backing, blockchain will remain an ineffective tool to fight corruption and delays. Therein lies the rub. A large portion of that $700 million goes to corrupt politicians and political parties that use it to line their pockets and fund their election campaigns. There is therefore a very large disincentive to allow this technology to be implemented. However, if the government is serious about its intention to root out black money and corruption, they will need to take a decisive step in this direction. Blockchain technology can make an immediate and lasting impact on the property market. Let’s look at some of the benefits of implementing the technology.