Blockchain technology use to bring down cases of benami transactions 

What is blockchain technology?

A blockchain with regard to property rights is a digital ledger, a record of accounts, of who owns what, and when. Through blockchain, a digital record of transactions can be created, and a system of unerasable data records with a permanent audit trail can be instituted. What this means is that once land records or property transactions are on the blockchain software – governments, banks, agents, buyers are sellers can easily access the chain of data pertaining to that property. This will reduce fraud and ensure that properties cannot be sold thrice over to the same entity. Benami transactions will also get eliminated.

It is necessary to digitise land records in India because majority of land holdings in the country have no records of ownership and there is no formal mechanism to verify land titles. Over 80 per cent of cases in courts are about disputes over land titles and fraud pertaining to property. Blockchain is the same technology used in bitcoin currency.

Blockchain and Benami properties

Block chain adoption and automation can help prevent benami transactions.

“With block chain and impending automation of property registration, we could create algorithms to detect and prevent benami transactions based on money trail and title holding.  Instead of current system, which penalises benami transactions upon detection, block chain adoption and automation could be used to prevent such transactions. Further, past benami transactions could easily be investigated if an immutable record creation system like block chain is adopted,” says Nikhil Narendran, partner, Trilegal.

“Illegal mutation of title records is still palpable in the domain of property. Blockchain will facilitate the process of tracking the real owner and unveil the humbug of deception vis-a-vis ownership with multiple identities,” says Baladevan Rangaraju, founder, India Institute and co-founder India Property Rights Alliance.

Are states thinking of implementing Blockchain technology?

"We are currently digitising all our land records and taking the blockchain technology route is the next step,” J.A. Chowdary, technology advisor to the Andhra Pradesh government, told Moneycontrol on the sidelines of a conference on distributed ledgers for secure property rights titled Blockchain for property governance held in the Capital recently.

The Andhra Pradesh government intends to switch departmental data onto Blockchain platforms within the next eight months. Pilots projects have already been launched in case of its civil supplies and land records departments.

Telangana has also started a pilot programme in Hyderabad where it is using Blockchain technology for land registration and integration with the state revenue department in association with Centre for Development of Advanced Computing (C-DAC). The programme is expected to start in the next six to 12 months.

Rajasthan too is setting up an independent authority to verify and guarantee land titles in its cities, a move seen by experts as speeding up property transactions, freeing up the courts and boosting urbanisation in the state.  Its creation comes after the state passed the Rajasthan Urban Land (Certification of Titles) Bill in April last year becoming the first state in the country to do so. Under the new law, property owners in urban areas that are governed by municipal or state authorities can ask the new certification authority to verify ownership for a nominal fee. After examining the chain of ownership and checking owners' documents against state records, the authority will issue a guaranteed title, a process expected to reduce litigation.

Blockchain will pave the way for smart contracts

Keeping registries/records on blockchain paves way for smart contracts, making land title transfers much more convenient and efficient without the involvement of a third party intermediary. Smart contracts are computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract.

“In the context of property titles, smart contracts enable a fraudulent-free, transparent and uninhibited exchange of money, property, shares etc,” explains Baladevan.

Banks will be able to disburse loans faster

Blockchain will also enable faster home loan disbursals. Banks and insurance companies will have to spend much less time on the verification of records, leading to quicker decisions, lower transaction cost (processing fee) and higher availability of credit.

“Disposing of non-performing assets too will be easier and quicker as the records will be cleaner and up to date,” he says.

Challenges faced by states in implementing blockchain

Some challenges faced by states to implement blockchain in India are technology infrastructure needs to be strengthened. In order to use this technology, the existing discrepancies in the land records have to be resolved. Where no records exist, records have to be created.
“Due to lack of coordination between various nodal agencies handling land records, the information registered is not standardised. This issue needs to be resolved,” he explains.

Which countries have adopted blockchain for property transactions

Countries such as Georgia, Honduras and Sweden are using the blockchain technology to conduct pilots for creating an immutable title records system. In Georgia, use of this technology is expected to allow more secure mortgages, contracts, and mineral rights. To model a property purchase records system using block chain and smart contract technology, ChromaWay is piloting the first block chain project in Sweden.