Table of Contents
While the popularity of cryptocurrency has surged in the last few years, the underlying technology behind it, ‘Blockchain’, can be used in various fields. It can also be used in the real estate sector, to the benefit of consumers and the industry, to strengthen data privacy, improve security, promote paperless transaction, etc. Blockchain, which was popularised by the Bitcoin cryptocurrency, uses concepts such as artificial intelligence and internet of things, to make process run by integrating databases in real time.
“In the blockchain technology, the data does not sit in one centralised location and hence, it will not be prone to virus attacks or localised attacks. The primary benefit of blockchain is that it is a direct link, from business to service and vice-versa, without any intermediaries. This helps to saving cost, time and clutter,” says Rajiv Nehru, head of training and product development, RICS South Asia, adding that blockchain can make the real estate industry efficient.
Benefits offered by blockchain technology
Blockchain technology can be useful, when there is a lot of dependence on empirical data and where speculation is part of the business. Blockchain can also be crucial, where unknown data can result in distrust and agony to the end-user. Such instances seem common in the realty sector, where transparency is at a premium and information is scattered, hidden or ambiguous. “The realty sector is plagued with high cost of transaction, unpredictable timelines, opaque due diligence, illiquid market, cash flow management issues in case of leasing and lack of transparency. Blockchain allows for disintermediation, increased transparency and maintains the complete chain of records, which enables faster due diligence,” explains Vikram Pandya, director – fintech, SP Jain School of Global Management.
Is the real estate sector ready for blockchain implementation?
According to experts, blockchain technology can finds application in the real estate sector, over the entire life-cycle, from prefeasibility to execution and maintenance of projects. Many processes within the real estate development life-cycle, like product specifications, pricing, contracting, procurement, property registration information and due diligence, project progress, sourcing, customer profiling, product design, customer preferences, etc., can be processed through the blockchain technology, to bring out realistic data that can then be used as business intelligence, to drive sustainable operations.
Pandya, however, points out that “For successful and effective implementation of blockchain, we will require clarity on several regulatory aspects:
- One of the key areas where regulations are lacking, is applicability of ‘smart contracts’. Smart contracts make it possible to implement programmable logic. For instance, a typical lease agreement will require identification of both the parties and will provide for payment terms. A smart lease contract, in this case, can verify the parties by using digital signatures and can automatically transfer amounts, based on a schedule.
- Presently, the Information Technology Act does not provide clarity, on whether blockchain-based digital signatures are valid or not.
- There is no clarity under the Indian Contract Act, vis-à-vis such digital contracts.
- There are many related acts and provisions, which will need revisions/ updates, to reflect the impact of these modern technologies.
- Clarity and regulatory supervision will also be needed for blockchain-based REITs (real estate investment trusts).”
Advantages of using the blockchain technology in the real estate industry
Source: SP Jain School of Global Management