Potential of Blockchain Technology in Real Estate of Pakistan



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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.

 




How RERA will Impact Dispute Resolution in Real Estate


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Preamble

As real estate is a valuable commodity in any society, disputes over its possession, ownership, control, and trade are common. Pakistan is marred by an ineffective judicial system that is over-burdened by land cases. It is reported that over a million cases are pending in the country related to real estate. As a solution to this problem, establishing an appellate tribunal under a real estate regulatory authority can greatly impact dispute resolution throughout Pakistan. Read our blog to understand the impact of RERA on dispute resolution in real estate.

Introduction

Throughout the world, real estate is considered among the most valuable assets. That is true for any country as land rarely depreciates and is also linked to many socio-economic growth indicators. Disputes in land and property are increasingly being witnessed across many areas of Pakistan. They are mainly related to the title of the property, property inheritance or will, damaged property, ownership dispute, and tenancy issues. The justice system of Pakistan remains inefficient as matters related to land are connected with the revenue department. Having to rely on their support for the resolution of real estate related cases makes the entire process more problematic and cumbersome. This makes dispute resolution a lengthy and resources hungry task. Although there are alternative dispute resolution mechanisms in every society, if one party alleges criminal conduct, it becomes better to utilise attorneys and legal processes of litigation. Therefore, implementing an appellate tribunal under a real estate regulatory authority will positively impact the resolution of land-related cases in Pakistan.

Dispute Resolution in the Real Estate Sector

Dispute resolution is the process of solving disputes between two or more parties whenever conflict arises. The techniques used in the process include citizens, governments, business entities, and corporations. Although it is usually done in courts, other methods like arbitrations, mediations, and conciliations are common in the real estate sector. Pakistan lacks a digital record of land titles, and there are high chances of fraudulent activity. This also makes verification of property titles a difficult task for the common public as not everyone can access the revenue department. Recently, a large number of new developers have come up with new projects that are not regulated under any authority. This makes buyers vulnerable to scams as the developer is not bound to fulfil his duty to the buyer. Moreover, disputes regarding the inherited or willed property are also common as, most often, the credibility of the will is challenged. Most people also don’t check claims to a property and the actual ownership of the seller at the time of buying. Lastly, disputes are common when it comes to rented or leased property. It is mainly because prior rules to the agreement are either not understood properly or are miscommunicated to entice potential customers. (Ayush, 2020)

Why RERA will Help Dispute Resolution in Real Estate

The most common reason for the delay of land-related cases in Pakistan’s judicial system is the unnecessary adjournment of cases, re-hearings, and slow progress in evidence built-up. It is most often the case that decisions are suspended over decades, and generations of families are involved in litigation processes (Dawn, 2018). Considering the present situation, the establishment of a real estate regulatory authority will also ensure speedy dispute resolution through the establishment of an adjudication mechanism. According to the Islamabad real estate regulation and development bill 2018, an appellate tribunal known as Federal Real Estate Appellate Tribunal will be established within three months of enforcement of the act. This means that all cases regarding the real estate sector, pending in any court of law, will be transferable to the appellate tribunal. Some mechanisms will ensure the speedy processing of cases as the accused will have to deposit 30 per cent of the penalty charges upon hearing of the case in cases of developer fraud. Each case will also be given preference within 60 days. Up to 80 per cent of Pakistan’s civil caseload is to do with land acquisition and titling disputes. The formation of RERA will also streamline the process of land titling, and therefore, this will also help in lowering cases related to land titles. Lastly, land administration officers do not explain or publish procedures related to documentation, land records, and the validity of officials. RERA aims to increase awareness among the masses in this regard and can significantly reduce the chance of disputes arising. (Government of Pakistan, 2020)

 

Conclusion

Pakistan is facing a crisis in terms of litigation of land-related cases. The real estate regulatory authority will greatly impact the resolution of land disputes by the establishment of an appellate tribunal that will only hear land cases. Mechanisms will be placed to ensure that cases are swiftly resolved and appeals made to current cases are taken on a priority basis. As there are many reasons for land disputes ranging from ownership, tenancy, inheritance, and developer fraud, the formation of a real estate regulatory authority will positively impact the situation.

 




Real Estate Trends to Watch in 2021


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The world is changing. And with it is changing the real estate arena. There are several contributing factors but certain developments are noteworthy. Researchers have conducted surveys that show that people are increasingly preferring to live in secondary and tertiary cities and valuing quality of life over material gains. Consumer preferences have also changed owing to technological advancements where people now prefer modern day amenities in their real estate property

Graana.com gives you an overview of the changes in macro trends within the real estate sector as shown in the graph below: 

Shift in Location Preferences

There is a shift in the preference of location for residential purposes among citizens. The aching memory of the financial crisis and the uncertainty that followed have made people nervous. The current COVID-19 crisis has further added fuel to the worries. The subsequent retrenchment have raised eyebrows among the populace regarding the sustainability of expensive high-end developments in skyrocketing properties. Thus, people are increasingly preferring second and third tier cities for investment purposes.

Jenna Gerstenlauer, CEO of Sound Mark Partners, says that her firm is focusing on developing Class A projects in secondary markets. While explaining her perspective, she said, “investors favor these sorts of projects over luxury condos priced at the top of the market that might not be able to command the same rents in a downturn.”

The concerns are valid. The property prices in urban areas are increasing exponentially. The price of a small apartment in a developed area is equivalent to the entire year’s salary of a middle-class individual. All major cities have witnessed this trend over time. Karachi, Pakistan has seen an unprecedented spike in property prices from 50% to 100% in a span of over five years (2015-2021) making it a distant dream for people to own a house in the metropolis. This lack of affordability is the dictating factor behind the change in behaviour and preference for suburban areas. 

 

Value of Better Quality of Life

People are moving back to the suburbs for a better quality of life. All these areas do not possess the same potential from an investors point of view; some places have more prospects of growth while some places still need attention. But the underlying notion remains the same. People are shifting to the suburbs because of the benefits they provide. The houses are cheaper which means for someone who enjoys gardens or swimming pools, they can afford a house with these amenities in the suburbs. Moreover, they can be away from the hustle and bustle of the city and lead a simpler life. These areas also have potential for growth which means there are developments with regards to the provision of universities, hospitals, schools etc. With the installation of these infrastructures, there is also potential for employment and economic growth. 

A senior official at one of the world’s top 10 sovereign wealth funds highlighted their residential property development strategy. He stated that their ideal location was one where there was “focus on university towns where there are space constraints, an educated workforce and potential for innovative micro-hubs.”

 

Rental Revival 

Research states that there is increasing interest in rental properties as opposed to home ownership. This is because of the greater emphasis among the millennial for a life of freedom and mobility. They want the possibility of being able to travel and explore their options in comparison to their ancestors who preferred stability. The millennial are less risk-averse in this regard. 

 

Maurice Malfatti, Managing Partner at Blue Heron Asset Management, states that, “the move away from home ownership to renters, and a focus on experience over ownership, is permeating all age groups, not just millennials.” This stance is corroborated by the census data of the United States. It states that interest by people aged 60 or older in renting properties increased by 32% over the last ten years. 

 

Likeness for Shared Spaces 

There have been many social, cultural and technological developments happening and as a result behavioural changes are occurring. The nature of jobs are also changing due to advances in technology which enables people to work remotely through a small device to achieve their deliverables. Technology has also made it easier for people to access things required for daily use. With just a click, people can now order groceries or food to their doorsteps. This has made it easier for people to survive for days without being glued to a specific location. 

In addition, more and more women are joining the workforce which is bringing acceptance for flexible working environments. The increasing traffic woes and pollution has also reinforced the trend of work from home. The incidence of a global pandemic (COVID-19) has further accelerated the trend by forcing people to work from home. 

Furthermore, the house-sharing model is popular in the urban areas of the Asian countries where the population density is high and people are flocking into cities in high numbers in search of employment. To accommodate the population influx, new buildings are designed specifically in order to accommodate them in a smart way. Hence, the new designs show purpose-built buildings which have separate rooms and a shared lounge or living space for entertainment. The kitchens are also usually shared. This shared model is suited to the millennial who are increasingly looking for cost-effective and sustainable ways of living and also for older populations who are more accepting of the notion due to its affordability.  

All these behaviour changes in Asia are due to a move towards digitisation, connectivity and mobility. The situation is different in the North American market but it is expected that acceptance for co-living will take place in the future. 

 

Digital Expectations

These are times of technology. Things are constantly changing around us. It means that even property owners are expected to update their skills and provide facilities and modern day services. The availability of the internet is essential to get work done. This is not only a millennial requirement but older generations also prefer basic facilities as the dynamics of the world have changed the working dynamics.  

In addition, the house owners are also making use of technology to attract more tenets. The world of technology makes it easy to buy, rent and sell with just a click. Several apps have been developed for this purpose. Graana, Pakistan’s 1st online real estate marketplace, is one such initiative that makes it easier and convenient for property owners to manage their properties. The Graana app is trustworthy and reliable. One can make use of their user-friendly portal to add details and leave the hard work for the experts. The app will find a suitable solution according to one’s preferences. This has surely made life easier and revolutionised the real estate sector. 




How to Achieve Real Estate Transparency


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Preamble

The pandemic has highlighted the importance of real estate transparency in the urban environment. As real estate transparency continues to increase globally, the rate of growth in this transparency is not quick enough. This blog discusses how real estate transparency can be achieved in light of society’s demands for sustainable and ethical practices.

 

Research Questions

  • What is the importance of transparency in the urban environment?
  • How to overcome the real estate industry’s transparency challenge?

Introduction

Real estate transparency is an essential part of a well-functioning economy and society as it covers multiple aspects of an individual’s life. A transparent real estate market is where stakeholders have ready access to high-quality market data and performance benchmarks (WEF, 2020). The market should also be characterised by certainty, consistency, and rigorously enforced rules and regulations. Transparency in real estate not only helps governments in making smarter decisions for urban infrastructure, but it also helps public bodies and the private sector to enable sound and long-term urban planning, attracting new investments to a city, boosting business efficiency, and raising employee well-being and productivity. Therefore, public policy must focus on introducing measures that facilitate transparency and protect citizens property rights through the enforcement of rules and regulations.

 

Importance of Transparency in the Urban Environment

The real estate market is considered transparent when it becomes clear how the market mechanisms and the variables behind these mechanisms work. A strong indicator of transparency in real estate is the ability to capture transactions and process information. Transparency in the real estate sector can be achieved by rigorously enforced laws and regulations, high-quality products, easily accessible market information, performance benchmarks, and high professional standards. Once information and processes are made transparent, government institutions and private businesses can make better decisions with more confidence. This also allows governments to function effectively and provide long term benefits to local communities and the environment. The real estate sector can act as a powerful driver of a city’s success. The sector plays a role in transforming neighbourhoods, providing productive public spaces, and attracting new businesses to a city. To achieve all this, the real estate sector requires high levels of transparency. 85 out of 100 countries surveyed under the JLL and LaSalle’s Global Transparency Index have recorded improvements since 2016, whereas Pakistan ranks 73 out of 100 on the JLL transparency index (JLL, 2020). Therefore, Pakistan needs to adopt certain steps to enhance its transparency in the real estate sector.

 

Global Position of Transparency in Real Estate

Improvements to real estate transparency are being made throughout the globe. But overall progress is not high enough as societies are continuously demanding higher ethical standards, and businesses are being held accountable for operating transparently and sustainably. More than 70 per cent of countries have seen an improvement in transparency over the last couple of years, but many are struggling to maintain progress (UN, 2020). Those at the top of the transparency index are setting new benchmarks for other countries to follow. Real estate transparency has been boosted in these countries, mainly by the use of proptech and new data, sustainability initiatives, and anti-money laundering regulations. The most significant progress has been made in components of sustainability, where an increased focus on corporate social responsibility has led to the introduction of green building certifications and energy-efficient standards widespread in higher-income countries. Several countries have also developed national frameworks for net-zero carbon emissions.

 

Overcoming the Real Estate Industry’s Transparency Challenge

Technology is likely to play an increasing role in driving transparency change in the future. As the world experiences increased technological innovation, public demand for more transparent systems will increase and motivate governments to introduce policies that enforce such laws and regulations. Real estate markets have always been slow to adopt technological changes, but recently, due to the introduction of artificial intelligence and IoT technologies, property technology has experienced rapid growth. The mass adoption of technology is likely to play an increasing role in driving transparency movements globally, helping boost real estate transparency too. The real estate industry is harnessing huge amounts of data, but it will be needed to ensure that privacy and security are protected by ethical behaviour.

As these technologies become more widespread, the private real estate industry will need to work in close collaboration with governments and civil society to achieve greater transparency. There should be active policy engagements to determine how this data will be made readily available. The UK’s digital street program is one of the best examples of running research programs and funding local authorities to trial digital property solutions. Another step could be to incorporate a global mandate to tackle climate change by building a decarbonised economy leading to new transparency pressures. Mandatory sustainability standards are likely to take greater prominence in the real estate industry, and the adoption of building resilience standards will also increase transparency. Lastly, transparency cannot be achieved without the collaboration of public and private sectors and the establishment of a transparent market that ensures the delivery of sustainable, resilient, and healthy cities.

 

Conclusion

Transparency is becoming an area of considerable attention for governments and industries around the world. The role of the real estate industry plays a crucial part in the development of individuals and societies. It helps create a more competitive, efficient, and flexible environment for investors and consumers. Access to market information, performance benchmarks, and high professional standards are what makes the real estate industry transparent. Transparency increases accountability and quality of governance in a city and leads to greater standardisation in areas related to property, city planning, and environmental reporting. Therefore, measures are required to be taken to introduce greater transparency in real estate by incorporating more technology in the real estate sector.

 

Key Takeaways

Real estate transparency is an essential part of a well-functioning economy and society as it covers multiple aspects of an individual’s life.

A transparent real estate market is where stakeholders have ready access to high-quality market data and performance benchmarks.

The market should also be characterised by certainty, consistency, and rigorously enforced rules and regulations.

Transparency in real estate not only helps governments in making smarter decisions for urban infrastructure, but it also helps public bodies and the private sector to enable sound and long-term urban planning, attracting new investments to a city, boosting business efficiency, and raising employee well-being and productivity.

Transparency in the real estate sector can be achieved by rigorously enforced laws and regulations, high-quality products, easily accessible market information, performance benchmarks, and high professional standards.

More than 70 per cent of countries have seen an improvement in transparency over the last couple of years, but many are struggling to maintain progress.

Real estate markets have always been slow to adopt technological changes, but recently, due to the introduction of artificial intelligence and IoT technologies, property technology has experienced rapid growth.

The mass adoption of technology is likely to play an increasing role in driving transparency movements globally, helping boost real estate transparency too.

The real estate industry is harnessing huge amounts of data, but it will be needed to ensure that privacy and security are protected by ethical behaviour.