Revolutionizing Real Estate with Blockchain

First thing first, Blockchain itself is not illegal in Nepal or any other countries, but in regard to Crypto currency it’s considered illegal. If you ask ten people about Blockchain nine may define it in terms of Crypto currency. But actually blockchain is a decentralized network consisting of blocks which are groups of records containing information in encrypted secured manner. Blockchain is a technology- Bitcoin is a currency, a Crypto currency which run on blockchain technology. From the legal point of view and from many other perspectives — these two are completely different. Technology itself is never illegal, the use of it is. For example, if a person uses Facebook to blackmail someone, his act is considered illegal not the Facebook, because it’s just a technological medium. In same way the use of Blockchain in other sectors like data sharing management, real estate marketing, regulating supply chain in business and any other legitimate affair is not considered illegal.

With all these details what I want to imply here is the use of blockchain in Nepali real estate. The real estate and housing market has started to grow in Nepal after the fade of recession period. Since the market price is expected to increase along with welcoming platform for new investment, the country stands at edge of investment boom. Despite the prospect of growing market, Nepal is still doomed by some context that discourages investment and makes it less convenient for both domestic as well as foreign stockholders. In the wake of property business, some noticeable scams like Real estate’s fraud case of Sudhir Basnet, another seventy corer rupee scam with forged land documents and many other issues have threaten credibility of Nepali real estate market. So, will it be a rational choice if the government consider using block chain technology to improve real estate affairs? Or should we keep relying on old vulnerable institutions and endure more problems?

Let’s see a hypothetical sample how blockchain will work in real estate business. A resident from Pokhara planning to buy some land in Kathmandu sees an advertisement for a property available in his desired area. Immediately he opens the Blockchain ledger on his computer with his private key and verifies the property registration in government record. He also find entire detail about land including– authentic owner, tax information, land title documents, government approvals and other required information. Then he contacts the owner, negotiates price and get ready to buy land. Now he adds his bank to the blockchain network, the bank approves loan after going through the property document and title history. The sale documents get signed digitally and the payment is released to the seller’s bank account. And every detail is recorded transparently in distributed ledger, without any risk of fraud. This hypothetical scenario can be future of Nepali real estate if the government encourage blockchain technology in land business with all systematic requirements. However our real scenario while buying small piece of land begin with: brokers, sellers, loan providers, lawyers, bureaucrats land registry office and that too with threat of fraud and forged paper. Ask anyone experienced with property deal — it’s long, hard and insecure deal.

American economist Douglass North’s in his 1991 defines institutions as “humanly devised constraints that structure political, economic and social interactions”. Throughout history institutions have been devised by human being to create and order and reduce uncertainty in exchange. Going with his idea, institutions like bank are tool to minimize uncertainty, so we can exchange value in systematic and secure way. With the evolution of Blockchain we are now on edge of radical revolution, even in absence of bank or other economic institutions, we can share value through technology alone. Blockchain is a decentralize database that vault registry of assets and transactions record across a peer-to-peer network. It’s a public ledger indicating who owns what and who perform what transaction to whom. In short, it records every detail.

Similarly this technology could also help traders by cutting off extra inspection costs, registration and loan fees as well as property taxes; all will be done by smart contracts. Today Nepali real estate procedure is too much dependent on slow inefficient bureaucracy and paperwork — and by automating them we can get rid of all unnecessary burdens. Also the transparency, auditability and security in property deal will be maintained.

During addressing speech in Kantipur Conclave Prime Minister Oli said “We want an enhanced level of foreign investment to complement our domestic resources . . . we welcome foreign investments and technology with open arms. . . Dear Investors, If you have been waiting for the most appropriate time for investing in Nepal, now is the time. . . We are actively pursuing administrative reforms and strengthening of institutions”. Adopting blockchain in real estate business can shepherd this investment dream of prime minister by creating flexible model to connect potential land investors with likeminded sellers, in very secure platform. It will also end the doomed fate of low-functioning institutions and corrupt bureaucrats by replacing the system with smart contact (a computerized transaction protocol that executes the terms of a contract). Additionally the government will also be benefited as the tax revenue will increase because of easy property tracking mechanism in blockchain. Some renowned institutions like Ubitquity and Propy has already gone ahead with blockchain in real estate business. Under blockchain system, properties of any kind can be liquefied and exchanged like stocks; as any trader can sell part of share of particular property and need no single buyer. Amid such system people with weak financial potential can also enter in investment business. At the time when we have one-third government and Prime Minister who envision technological revolution, this is the right moment to bring blockchain in real estate, it’s now or never.

Blockchain is on verge to revolutionize the future of real estate transactions in same way as internet has done in information sharing. This technology offers an opportunity to revisit our crippled system, ranging from improving institutional procedure to risk management. Such flexible model encourages people to make authentic investments and further reinforce economic growth. Its benefits include transparency, accessibility, security and easy traceability-when implemented in the real estate; these properties can solve major issues and make Nepal a flexible investment hub for both domestic and foreign stakeholders.

Sites Consulted

Property fraud case in Nepal: https://thehimalayantimes.com/kathmandu/victims-of-real-estate-scam-demand-justice/

Ubitquity and Propy: https://youteam.co.uk/blog/14-blockchain-startups-in-real-estate-to-watch/

Douglass North’s 1991 paper: https://edisciplinas.usp.br/pluginfile.php/1695541/mod_resource/content/1/North%20%281991%29.pdf

PM Oli Speech: http://kathmandupost.ekantipur.com/news/2019-02-17/nepal-has-all-attributes-required-for-development-pm-oli.html