In June 2018, an E. Coli (bacteria, usually harmless) outbreak across the US, from consuming romaine lettuce sourced by Walmart, resulted in the death of 5 people. The Food and Safety Department found out the reason behind the outbreak in 7 days. However, using blockchain technology, Walmart was able to do this research in 2.2 seconds, which substantially reduces the likelihood of infected food reaching the consumer.
Walmart is collaborating with IBM Food Trust Solution to test a blockchain-based food supply management tool that will help Walmart keep track of information of every single leafy green vegetable that it acquires or sells. Thus, the retailing giant can trace the final product back to the specific farm it came from, suppliers it went through, the store it was sold from; ensuring every aspect of the product is traceable.
Blockchain is an incorruptible global ledger system that provides a way to record and transfer data, such that it is transparent, auditable, safe, fast and invulnerable to outages. These qualities enhance its appeal as a technology that can potentially disrupt a lot of industries and change the underlying way they function, transact, store information, deal with data, and transparency among other things.
Besides food supply management, blockchain is being tested and even trialled in industries as diverse as medicine, law, real estate, banking and airports. A recent research by PwC on blockchain revealed that about 84% respondents (600 executives of companies from 15 territories) are actively involved with developing blockchain related solutions, suggesting the popularity of the technology in the industry.
Blockchain in Real Estate
The processes in the real estate sector are archaic, extremely time consuming, paper-based, outdated, and heavily reliant on intermediaries at various stages, all of which makes it highly susceptible to fraudulent activities. Blockchain can potentially change this on a very fundamental level. It will ease the process, thereby, transforming the real estate sector into a more fluid entity. The potential benefits of applications of blockchain in the Indian real estate sector can foster trust-based transactions that are fast, transparent and binding. Here’s a look at different aspects of real estate, that blockchain technology can impact positively.
Land Title Frauds
The Indian real estate industry faces a real challenge in maintaining, verifying and searching for title deeds. Just a fraction of them are digitally available thus making title ownership susceptible to fraud due to multiple claims of ownership. Blockchain can prevent such cases by digitising land titles. It will enable every property to have a digital address in the blockchain that consists of additional details like occupancy, finance, ownership records, specifications and attributes of the property as well as existing legal disputes, if any. These parameters would be available to everyone and will be correlatable, thereby, reducing the speed of the transaction from days/weeks/months to minutes.
Transfer of Property
Transfer of a property using Blockchain becomes a simple process. The first owner is required to ‘rehash’ (encrypt) the document in the blockchain to prove the transfer of title of the land to the new owner. The transfer process currently takes weeks/months, a lot of paperwork and a considerable processing fee. With blockchain, this interchange will barely take a couple of seconds.
Smart Contracts based on blockchain can ease repetitive transactions or contracts like rents, deposits, installments by automating them. Using a feature called ‘multisignature’ in the blockchain, two parties can enter into an automatically binding agreement. The open-source nature of smart contracts ensures that contracts are executed as dictated by the source code. These contracts, therefore, are automatic, transparent and once executed are indisputable, irreversible and unalterable thus ensuring high confidence among users.
The real estate sector suffers from an over-reliance on various intermediaries like brokers, registration officers, banks, notary, etc as these middlemen hold key information/access that isn’t available to the common man. Blockchain, as a decentralised medium would help bring all this information on to a common platform and enable its distribution, thereby ensuring that the information is transparent and hence, available to everyone minus the various fees that one pays during the process.
Additional Uses of Blockchain in Real Estate
Blockchain can also empower online real estate markets by upgrading their abilities and functionalities. Right now, the portals serve as a means of connecting people to real estate properties by providing information about the property and assisting in site visits. With the advent of blockchain, these real estate markets will be converted to something like a stock market allowing buyers to find sellers and execute real estate transactions on-the-go.
The transparency and speed of action offered by blockchain technology will open avenues for crowd ownership or fractional ownership in real estate. These investments can be used for rental purposes, as collaterals in loans, or for personal benefit as outlined by the terms of the agreement. Further, this will also open doors for foreign investment in Indian real estate, thereby, improving the quality of living and commercial spaces.
Industries are resistant to change, especially when the change is transformational in nature. Blockchain as a technology is in a very nascent stage. It will take a while for the Indian real estate sector to adopt and build on the technology. That combined with forward-thinking from realty firms in convincing consumers to embrace the technology, and the government’s efforts in designing and implementing policies will decide the future of the technology. The trichotomy of RERA, demonetisation and GST has brought transparency into the system and has built the perfect environment for such transformational changes to take place. It is now up to the stakeholders to step up.
(Previously published in March 16 2018 edition of HT Estates)