Introduction
Pakistan’s real estate sector has a large contribution to its economic growth. Investments in real estate are often considered more rewarding as people associate the ownership of land and property with many positive socioeconomic indicators of wealth. However, buying and selling property has its challenges in Pakistan, ranging from incomplete information to problems in land acquisition, transparency, and fraud schemes. Blockchain technology has existed for more than a decade, but its understanding has only recently gained momentum among real estate organisations. As the technology is based on a secure and decentralised system that can be used for managing transactions, property details, and customer profiles, there is a massive potential for it to bring positive change in the real estate sector. The process of buying and selling property involves several steps, and blockchain can be used to track and authenticate each step along the line. Therefore, the potential of blockchain technology in the real estate of Pakistan is encouraging and is expected to bring a revolution in the sector.
The Iqbal Institute of Policy Studies (IIPS) explores and discusses the potential of ‘Blockchain Technology’ in the real estate sector of Pakistan.
Challenges of Real Estate in Pakistan
It is no doubt that real estate is a challenging field for those who are unaware of all the laws and regulations regarding the sale and purchase of any property. Not only that, but multiple documents are required in the process, along with the help of several third parties such as real estate agents, brokers, and investment advisers. Market evaluation and investment strategies are areas that are only accessible to real estate professionals, and therefore, a strong level of trust is required in most cases. That has often led to fraud and manipulation of overseas clients who are not present in Pakistan to verify every single detail.
Information is extremely valuable when making decisions about the sale and purchase of a property. Incomplete information or non-disclosure of facts is the main cause of fraud and mistrust in the real estate sector. Gaining access to credible information is a challenge in Pakistan as land records are not digitised ae, easily manipulated. That means that bringing in f secure and transparent digital land record managemensystem t will positively impact buyers, sellers, and investors of real estate.
Another major concern and challenge for the general public is contract management and land ownership acquisition. Contracts are often legally worded and poorly understood by anyone unfamiliar with legal terms. There are also many clauses included that waive off liability from real estate developers. Moreover, contracts take a very long time to prepare and have to be rechecked multiple times before they can be signed by all agreeing parties. This makes the process of sale and purchases a very time consuming and cumbersome task.
Lastly, a lack of transparency causes distrust amongst buyers and sellers. There is not much anyone can do about the fact that while making investments, people have to compromise on their right to complete and accurate information. In a majority of cases, the general public is unaware of the status of developing projects and their approvals from government entities. People are also kept in the dark when it comes to project details and has to rely on the reputation of the developer for making decisions about investing in new projects. Lack of transparency also fuels speculation in the market and drives the cost of land to unimaginably high rates (Puri, 2016).
How Blockchain will Impact the Real Estate Sector of Pakistan
Blockchain technology is no longer an area of fiction. Rather, major companies like IBM, Deloitte, KPMG, and others investing a lot of time and effort into materialising it. Sweden has been experimenting with blockchain technology since 2016 for managing its land records. The benefits of a secure, electronic, and self-governing system cannot be understated in the world of real estate. Pakistan stands to gain a lot by implementing blockchain technologies in maintaining land records and transaction details of real estate.
Another area of impact will be in contract formation and execution. Smart contracts are contracts that do not require human intervention and are based on algorithms that automatically enter details of properties and agreeing parties to a contract. The process is based on multiple steps, but no progress can be made without completing the preceding step’s requirements. This ensures that nothing is missed while making a contract and accurate details are mentioned with no chance of data manipulation. Similarly, escrow accounts are used in real estate to hold payments against the delivery of development projects. The process can also shift to the blockchain via the smart contract application.
Fractional ownership is another interesting potential impact of blockchain technology. Wealth in Pakistani society is concentrated in the hands of a few, and most people cannot invest in real estate based on their savings alone. If properties are divided into smaller parts and sold, then a greater number of people will be able to afford them. That, in return, will also boost the sector’s growth as previously untapped market potential will be realised. The whole idea can easily be implemented using blockchain technology, which otherwise would become a very arduous task (Liebkind, 2020).
Blockchain systems provide a smooth and seamless transaction experience. As intermediaries are not required for a transaction to take place, the cost of selling and purchasing land will be significantly reduced. With blockchain, information on land titles and registration can also be managed resourcefully as historical data can also be linked to every new future transaction for a more detailed record. Each property can then be assigned a unique blockchain ID that is connected to all its specific characteristics. Among other things, this would make property appraisals easier and quicker. Therefore, the impact of blockchain on the real estate of Pakistan will largely remain positive and provide for greater transparency and investor confidence, ultimately leading to massive growth in the sector (Tmd. Studio Ltd., 2017).
Conclusion
As Pakistan continues to see growth in its real estate sector, challenges related to land title, registration, access to information, contracts, and transparency are also being highlighted. Blockchain technologies have been implemented in different capacities all around the world. As the process ensures the secure management of land records and efficient sale and purchase of property, Pakistan should immediately look towards bringing future innovation in blockchain technology.
Key Takeaways
Buying and selling of property have its challenges in Pakistan, ranging from incomplete information to problems in land acquisition, transparency, and fraud schemes.
Blockchain technology is based on a secure and decentralised ledger system that can be used for managing transactions, property details, and customer profiles.
The process of buying and selling property involves several steps, and blockchain can be used to track and authenticate every step of the process.
Incomplete information or non-disclosure of facts is the main cause of fraud and mistrust in the real estate sector. Gaining access to credible information is a challenge in Pakistan as land records are not digitised ae, easily manipulated.
Bringing in a system of secure and transparent digital land record management will positively impact buyers, sellers, and investors of real estate.
Major companies in the world like IBM, Deloitte, KPMG, and others are investing a lot of time and effort into materialising it. Sweden has been experimenting with blockchain technology since 2016 for managing its land records.
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