Blockchain-Based Solutions for Efficient and Secure Property Transactions

By Mr. Siddharth Ugrankar

In an ever-increasing interaction among the digital and physical world, handling of real-world property transactions remains inefficient at its best. Property transactions are greatly submerged in bureaucratic red tapes, the hands of middlemen, and even the hands of fraud. But technology seems to have a little silver lining with the promise the blockchain technology holds to make things transparent, secure, and efficient for property buyers and sellers. It is beyond technological evolution; it's the conceptual sweeping transition of trust and ownership.

Pain Points of Traditional Property Transactions

Buying a home or any piece of property is often the biggest financial decision a person must make. Yet, the process is far from being simple. Several players are involved in it: buyers, sellers, real estate agencies, banks, lawyers, and government agencies all of whom add a lot of many layers of complexity and cost. The time taken to close a deal often stretches to weeks or months, often due to the high importance of due diligence and verification of property documents.

The next critical concern is the threat of fraud. From document forgery to impersonations of real property owners, fraud will show its ugly head in whatever way possible. In the U.S. alone in 2021 real estate fraud schemes accounted for over $300 million. According to a report by the India Forensic Centre of Studies, property fraud has been a big problem in India; the money lost to various scams, such as document forgery and illegal land grabbing, was pegged at nearly ₹1.3 lakh crore (approximately $16 billion) every year. Weak land registry systems and corruption make all sorts of opportunities for the fraudster to capitalize on these weaknesses, which result in many disputes. Indeed, 66% of civil cases that are directly connected with property issues float before Indian courts, hereby surpassing the immediate need for a more secure and transparent system.

The elusive nature of the conventional systems, where data is largely distributed and not easily accessible, forms an environment that is very easy for fraudsters to manipulate.

In developing countries, these issues are further pronounced. Weak land registry system and higher corruption often lead to property disputes and lengthy legal battles.

Enter Blockchain: A Trust Machine

At the base, blockchain can be defined as a decentralized ledger recording transactions across many computers in such a way that the registered transactions cannot be altered retroactively. This technology has several key comparative advantages for property transactions.

First, blockchain can drastically rid the need of intermediaries. Traditionally, this is a process whereby the third party expends so much effort at verifying the authenticities of the document and finally ensuring that the conditions of the sale are met. There is little need for the countless intermediaries that come between these processes with blockchain. Smart contracts are self-executing contracts where the terms of the agreement are directly written into code and can automate various steps in a property transaction, making sure they move to the other only when certain conditions are met. This is not only faster but also more cost-effective.

The second area where blockchain helps is that of transparency and security. All transactions in a blockchain are time-stamped and immutable. This means that it is not possible to change them or delete them once recorded. Consequently, it is possible to have a very clear chain of ownership and thus, the near elimination of fraud risks. For instance, a buyer could easily track the history of a property that indicates previous sales, changes in ownership, liens, and encumbrances. Such level of transparency is never achievable through traditional systems because their records are incomplete or difficult to access.

And due to the decentralization nature of blockchain, it is more challenging for a single point of failure to disrupt the system. In traditional property transactions, whole system is on the line if a central registry becomes breached or corrupted. Contrast that with a blockchain implementation: the distributed nature of it spread amongst thousands or tens of thousands of nodes means hacking essentially cannot succeed in altering records. Security is high and very important, particularly in these low-trust environments with governmental institutions and corruption risks.

Applications in the Real World and Success Stories

Several countries and businesses are indeed already attempting to translate blockchain's promise into the world of property transactions, and the results are still more than promising.

The Government of Sweden experimented on using blockchain for land registry through a test project in 2017, and this was able to show that through blockchain; the time it takes to conduct a recorded property transaction is lessened from many months to a few hours only. More than 1.5 million land titles have been registered on the blockchain since its introduction, and the technology increases security while eradicating fraud or disputes that can appear in the process of property transactions.

Dubai has been one of the leading cities in the real estate industry in early adoption of blockchain. Under its Dubai Blockchain Strategy, the Dubai Land Department started an initiative to digitalize all real estate transactions on-chain by 2025. Similarly, in India, the states of Tamil Nadu and Telangana are using blockchain to store land registry records and smoothen the registration process.

Challenges and the Road Ahead

The potential benefits of the technology are many, with few challenges to deal with. One of the biggest is in regulation. Property laws are, by definition, some of the most complex and diverse across countries. In many, the existing legal framework hasn't adapted to the requirements of blockchain-based transactions. It's a government's initiative to reform their laws and regulations to make blockchain work for property transactions.

Another challenge is that of the acceptance of the technology itself. Quite a few people, especially in the older age groups, do not understand what blockchain is and may likely be skeptical about putting this to such a huge transaction as home buying. Much, of course, will depend on education and awareness campaigns to instil trust in blockchain systems.

Lastly, a challenge remains regarding the digital divide. While most of the world is undigitized, especially in developing countries, the access and digital literacy are limited, indicating that there persists a digital divide yet to be covered to make blockchain a revolution for property transactions across the globe.

Conclusion

However, when one conceptualizes the capability of blockchain technology to change the value of property and its circulation, it is simply overwhelming. By reducing the number of agents, increasing transparency, and adding security layers, the process of property transfer is sped up and made cheaper in a new kind of transfer that is quite highly secured.

In an increasingly trust-based digital world, blockchain is a new iteration of a property transaction—one that is transparent, efficient, and secure. It may be a long road to widespread adoption, but the destination promises to be worth the journey.

The more we delve into its possibilities, the more evident it seems: the future of property transactions lies on the blockchain.

Author Bio

Mr. Siddharth Ugrankar is CEO & Founder, Qila.io