Apart from the criticism that the Demonetization move was poorly planned and the repercussions not very well thought through, another important question raised by few experts is that it does nothing to plug the sources of black money and hence has very limited effect. In other words, even if you recover the money today, the culprits will adapt and figure out ways to convert money in other forms of assets such as real estate.

The word is already out that the next economic surgical strike (apologies for the cringe worthy headline) is going to be in the area of property and land rights. It’s no news that a significant portion of black money is used to buy real estate and the Indian Government is believed to have already started the crackdown to identify benami (anonymous) properties and track down its owners.

In third world countries such as India, the problem is twofold. It’s not just that black money is used to buy real estate but many farmers in rural India do not have appropriate land records to prove ownership of land they have been tilling for generations and because of this they do not have access to appropriate capital and loans to grow their business. Leveraging technology such as Blockchain could help address both issues.

Blockchain Based Notary System:

Now, this is not as far-fetched as it seems to be. Various initiatives have been launched by the Government of India to digitize land ownership rights such as Computerization of Land Records (CLR), Digital India Land Records Modernization Programme (DILRMP), National Land Record Modernization Program (NLRMP) etc. and the projects are in the final phases in most states.

The Government’s vision is to link land records + AADHAR + PAN Card and hence get complete visibility on ownership and transfers.

While this is a significant step, if we are to truly plug all avenues for black money to be utilized for land deals then we need few additional tools and better control. While AADHAR is a visionary and ambitious policy move there are glaring security and fraud loopholes in managing the database and its ability to validate transactions.

The power of Blockchain is not in just digitizing and organizing records but the efficiency and transparency it can bring in and at the same time address some of the concerns raised above. It can facilitate the linking of different databases while ensuring security and help implement the Government’s vision.

The four main areas it can bring in efficiencies and hence prevent benami land deals are:

1. Tracking Ownership: Land ownership in India is a complex maze. Land rights are passed on from one generation to the next and often with no records. Changes in ownership, multi-party inheritance and identifying the real owner can be easily facilitated through the Blockchain. Since the transfers are strongly linked with an individual’s official identity, benami deals can be practically eliminated.

2. Security: Data on the Blockchain is practically incorruptible. One can’t just create another set of documents and claim ownership for the same piece of land which is the manner in which most of the land grabbing mafia work. Also, one can’t create a complex maze of ownership with multiple identities where the owner is practically a single person but on paper exist as multiple individuals

3. Transaction Costs: There is a significant cost for the parties involved in a land deal and the Government for facilitating, recording and validating the transaction and this cost can go up to 30% of the deal value. This cost can be significantly reduced as you only need two agreeing parties to arrive at a consensus and record their transaction. This will make real estate more affordable for most Indians

4. Smart Contracts: By linking, AADHAR, Bank account details and PAN details, collection of property tax, insurance premiums etc can be automated leading to better efficiency. Currently the Government only has a vision to link databases to prevent fraud but there are no actionable protocols that can be triggered once a fraudulent transaction is detected. Smart Contracts can help achieve this in real time.

The technology really has the potential to make land deals as simple and straight forward as buying a phone on Amazon and few Governments are already emerging as early adopters of this technology.

Below are few countries with Blockchain projects on land rights and real estate business:

Delaware

The state has announced two initiatives. First one is to move state archival land records on to an open distributed ledger enabling transparent land rights and with this the ability to track ownership. With proper land rights, people can have access to banking services and access to loans and capital to grow business. The second initiative is to put company records on an open ledger to keep track of equity and shareholder rights of private companies in the state.

The Republic of Georgia:

In a move to bring in more transparency and reduce corruption, the Government has entered into a partnership with a BitFury, a Bitcoin mining start up, to design and implement a land titling project based on Blockchain technology that is aimed as an online notary service for its citizens. The project aims to bring down notary costs from $200 to $0.10.

Ghana:

In a country plagued by violence and corruption, Government agencies have partnered with Bitland to create an online portal for people to register and buy property. The project has been implemented in 28 communities to enable tamper-resistant property ownerships. This is an ambitious move by the government to signal transparency and attract foreign investment http://bitlandglobal.com/

Sweden:

Being a developed country Sweden is ahead of the curve and planning to place real estate transactions on the blockchain so that all parties involved in the transactions – banks, government, brokers, buyers and sellers – would be able to track the progress of the agreement once it is completed. This will enable instantaneous confirmation of valid transactions with the utmost levels of security and integrity

To know more about this technology read my other articles:

Reducing Inefficiencies in Financial Institutions

The Next Generation of Internet – Blockchain

Sources:

Surgical strike again: Modi government begins survey of benami properties: http://www.abplive.in/india-news/surgical-strike-again-modi-government-begins-survey-of-benami-properties-448873

Welcome move to end benami property; time to implement amended 1988 Act: http://blogs.economictimes.indiatimes.com/et-editorials/welcome-move-to-end-benami-property-time-to-implement-amended-1988-act/

Why fear when Digital India is here: Land records to be digitized:http://indiatoday.intoday.in/story/why-fear-when-digital-india-is-here-under-nrlm-land-records-to-be-digitised-will-prevent-frauds/1/697818.html

Republic Of Georgia To Pilot Land Titling On Blockchain With Economist Hernando De Soto, BitFury:http://www.forbes.com/sites/laurashin/2016/04/21/republic-of-georgia-to-pilot-land-titling-on-blockchain-with-economist-hernando-de-soto-bitfury/#7efd9de76550

Bitland's African Blockchain Initiative Putting Land On The Ledger:http://www.forbes.com/sites/rogeraitken/2016/04/05/bitlands-african-blockchain-initiative-putting-land-on-the-ledger/#26529d2a1029

The Blockchain is Perfect for Government Services: http://www.coindesk.com/blockchain-perfect-government-services-heres-blueprint/



