Blockchain technology and Pakistan’s Real Estate Market

While the Blockchain technology  was formed to enable the first ever cryptocurrency,  it has expanded its usefulness to areas  much  beyond  the crypto world. One sector where Pakistan can  and must  utilize the benefits of Blockchain technology   is  the  real estate  market.  It  is  important to mention at this point that this by no means proposes the use of crypto currency in real estate market, and therefore, it is essential to begin by understanding what Blockchain technology  really is.

Blockchain technology  is  a  digital system of information recording and storing  by a third party making it unable to be modified thus  preventing  against  hacking or cheating the system. One may call it as  a  digital ledger that stores transactions and other relevant details across  the entire network of computer systems on the Blockchain. This data security enables Blockchain technology  to be a  legitimate, reliable and trustworthy technology  for various industries requiring  high level of cybersecurity and that include significant financial transactions. In summation, Blockchain technology  allows information to be digitally recorded and distributed but not edited.

Pakistan’s real estate industry is marred with multiple significant issues. One major issue on the transaction  side of the real estate market is the information asymmetry.  Lack

What Is a Blockchain?

“A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a   blockchain   stores   information   electronically   in digital format.  Blockchains  are best known  for  their crucial role in cryptocurrency systems,  such  as Bitcoin, for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.”

Source: Investopedia,  https://www.investopedia.com/terms/b/blockchain.asp

of  knowledge  about  presence  of  sellers,   potential buyers, the correct market price form the basis of this information asymmetry. Moreover, no online database or  any  other   mechanism  is   present  to  verify  the information  or credibility  of the other  party involved. This has then enhanced the role of real estate agents in the  market,  allowing them to evolve into  price setters as  well  through   market  manipulation  with   support of   investors.   On  the   contrary,   use  of   Blockchain technology will go a long way in resolving these issues. Digital storing and availability of information will mean

the issue of information asymmetry will to a  large extent be resolved. It will enable buyers to view available properties and relevant information  round the clock and also add credibility to the data available. The trust deficit will  naturally be removed. Moreover,  buyers and sellers will  both  be able to see  the transaction  prices  of similar properties in the  present and past market conditions thus  be able to not only analyze the price trends but also have real time knowledge of the current trading price of property. This will take back the price setting  powers from any party and instead  have the prices be led  by the market forces of demand and supply.  Blockchain will surely help remove massive inefficiencies of the real estate  market. While some might assume based on the  above information  that this  could mean the role of real estate  agents  could be eliminated,  but that  is  not  the case.  Instead,  it  will  help the  agents  in better  performing  their  responsibilities  as defined  in  the Islamabad Real  Estate Agents and Motor Vehicles  Dealers (Regulation of Business) Rules  1984 and now in  the Real  Estate Regulatory Authority Act. Introduction of Blockchain technology will remove the additional burden on the real estate agents of verifying information, ensuring credibility of buyer and seller as well as ensuring protection  against fraudulent transaction  by any side and complete transaction. These all that are not the responsibilities of the agents  but due to market inefficiencies  have to be taken up by them will not be needed once Blockchain technology  is introduced. Given the  nature of the transactions through blockchain  technology’,  the transactions  between  buyers  and sellers  can be made more secure  (See below).

[1]Blockchain and Suitability for Government Applications (2018), Analytics Exchange Program