Ever thought how a couple of decades ago communicating with people living abroad was so difficult? Letters, post boxes, stamps, envelopes and waiting for the post man? All this vanished with the advent of email — you just have to click the “send” button.
Now think about renting an apartment. You sign a contract with the landlord, register it on Ejari, submit documents to get water and electricity and give postdated cheques. What if all these can be done in a way that is as easy as pressing the send button? Dubai is now working on a solution to achieve just that and it’s all part of the Dubai Blockchain Strategy, which was launched last year by Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Dubai Crown Prince. The Dubai Future Foundation has established the Global Blockchain Council to “explore, discuss current and future applications, and organise transactions through the Blockchain platform”.
The way blockchain works is simple: a central register is created where every piece of land will get its own identifier. This ledger will then track this asset over its life into perpetuity. Because of the nature of the ledger, all events that happen during the life of the asset will get reflected in the various parts of the ledger.
Examples of such events are when the land is bought or sold, when tax is paid on the land, when the land is valued, when the land is rented out, when the land is bequeathed, when the land is mortgaged or when services are provided to the land (construction, water, electricity etc). Each time, the current status of the land is reflected in this ledger.
What about recent issues regarding cybersecurity?
This is an extremely important question. The nature of the technology is such that the ledger is highly encrypted with a methodology so unique that it would take an immense amount of computing power that normal computers cannot accomplish even in 100 years to break down the code to be able to get any sense of the ledger. Also, even if the code was decrypted, then the ledger can only be read, not changed. Thousands of copies of the ledger are stored worldwide, each using different codes and changing one ledger copy will not be enough — at least 51 per cent of the ledger copies need to be changed to fudge data. This is beyond the scope of most governments even.
Also, since this is a chain any change in one block will cause all subsequent blocks to become unverified. So the challenge to hackers would be to change all events that have recorded from a previous point in time in 51 per cent of ledgers across the world in a small amount of gap before reconciliation takes place again.
So why was this technology not implemented earlier if it is so great?
The technology has only become viable in recent times when a lot of emphasis and adoption of cloud computing has taken place.
What does it mean for buyers of real estate?
Buyers of real estate can rest assured that once they are listed as the owner of the property on the blockchain ledger, then no one can challenge their ownership of the real estate. Moreover, if they are buying the real estate from an entity that is listed as the owner of the property on the blockchain ledger, then the seller is genuine. Additionally, the technology is such that it is impossible for the seller to fraudulently sell the same piece of property to two buyers. Thus buyers will no longer need to be present physically to conclude the deal or get the title paper.
What does it mean for banks who give out mortgages against real estate?
Banks can look up the status of the property in the blockchain ledger – whether it has already been mortgaged or not, whether this is the first lien or second lien, how is the ownership structure etc. Once this has been established, they can place a lien on the property ensuring security of collateral. The game changing aspect of this technologyis that banks worldwide would be able to finance a property in Dubai without necessarily having a local office.
How does it help property owners?
Property owners will face minimal paperwork or inconvenience if the property is listed on the blockchain ledger. Title deeds will no longer require safekeeping. If they wish to mortgage or release a mortgage, all the process will be completely online as there is no more paper titles, if they wish to gift or bequeath the property to their spouse or children, the transfers can also be done online directly through the registry — making disputes a thing of the past.
How does it help property tenants?
Everything that a tenant does that is associated with the rental property would be seamless and paperless. This includes the contract with the landlord, the postdated cheques, getting a water connection etc. Also, any time a tenant needs to prove address (for registration of a company, sponsoring family or housemaids, getting health cards etc.), this step will be eliminated as the details are already linked online and are seamless.
How does this help the government?
The government would have a registry that would give them a solid view of ownership. This would help with tax collection (sales tax, wealth tax, inheritance tax etc). It also gives the government solid data on the land prices to build real estate indices. It would help urban planning as the government would automatically get an idea of population density and associated demand for services — think ensuring enough local schools and hospitals, waste planning, resource planning etc.
Given the nature of the technology, more and more applications are being researched and implemented. The impact of the ideas are immense, and it’s only a question of time before life will be different again.
Akansha Chirania is a banking expert with a background in risk management and financial innovation. The views expressed here are her own.
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