Dead capital is an economic term related to property which is informally held, is not legally recognized, and cannot be exchanged for financial capital. The uncertainty of ownership decreases the value of the asset and/or the ability to lend or borrow against it. PwC estimates that Nigeria holds at least $300 billion or as much as $900 billion worth of dead capital in residential real estate and agricultural land alone. The high value real estate market segment holds between $230 billion and $750 billion of value, while the middle market carries between $60 billion and $170 billion in value. The challenge for countries without adequate land management is not simply to build a land registry system but to create a system that is trustworthy, efficient, and free of corruption. It is with this in mind that I came up with the idea to use the Blockchain to solve the problem of land registration using the Blockchain.
In principle, land registries simply need to maintain records of land and real estate ownership, recording changes of hands/ownership as they happen over the years as people sell and move on and or when people pass on plus inheritance. Historically, land registries have been based on paper documents, which can be lost, destroyed, forged/falsified, or otherwise manipulated especially by insiders who control the filling/storage system. But paper documentation comes with the risk of being lost due to human error. Technological solutions offer an improvement on this but sadly in Sub-Saharan Africa less that 1% was under offical government registration as at 2004. Governments can harness Blockchain technology to address these challenges. The immutable and transparent nature of Blockchain could curb forgery of land titles, create an unmodifiable history of land transactions, and allow real-time verification of land ownership. Blockchain provides a potential solution for many of the challenges of land registration around the world. This use case for blockchain extends beyond a pure database, leveraging the opportunity to create a permanent, unbreakable record of ownership for land and or real estate.
Problems with Land Registration and How Blockchain can Make a Change Time delays – The registration gap, which means the time between completion and registration can take several months. The registration gap can be reduced to a few seconds as the information is changed instantly. So, blockchain will enable registries to change the property title as soon as the payment is received and all conditions of the registry process are met with. Fraud – Several cases where the seller was an imposter have been reported where the buyer was only aware of the situation after the money transfer in payment. All transactions made through blockchain are made utilising a unique digital signature owned by the signatory and the action can only be performed by the owner of the digital signature key. This ensures that the transaction is performed by the right person thus eradicating the chances of fraudulent transactions taking place. Human error – This is the most common issue the Land Registry can face. The accuracy is dependent on the human touch; which makes the register vulnerable. With blockchain, the transactions are a lot less exposed to outside human intervention. The transactions are done between the concerned parties and the information and the transaction must be accepted by all persons involved in the process. This creates various checkpoints and eliminates the chances of human error. Loss and or theft of records – The land registry records on paper or digital can be lost or misplaced. The records can be destroyed by floods, hurricanes, earthquakes or wars. These can be stolen or destroyed or manipulated by humans. The digital records can be hacked and manipulated. Blockchain is kept in the 'Cloud' and can be kept at multiple locations with synchronised blocks and that makes the records indestructible and indelible. Blockchain records cannot be hacked due to the nature and cryptographic functioning of the technology. Implementation Implementation of blockchain would mean having to deal with issues created by decades-old poor land governance. It would also need a large investment to ensure the management of this technology. It is not impossible to streamline and digitize a land registry. Many governments in the developing countries struggle with poor land governance issues, including registry digitization. Most who have attempted to adopt the new technology, are still far off from implementing the blockchain technology on a larger scale if any. However, the technology has some potential in areas where they have already succeeded in establishing a good record of title deeds. The emergence of technology such as GPS, satellite imagery, machine learning, and machine imagery are some good examples of possibilities for completion of land record digitalization. These technological advancements might play a big role in the establishment of blockchain land registries in the future.
The use of the Blockchain in land registry will reduce the cases of dead capital in the real estate market as it would mean that assets can be traded freely and without restriction.
References https://en.wikipedia.org/wiki/Dead_capital https://www.linkedin.com/pulse/blockchain-based-land-registries-how-technology-can-mutabazi/