The blockchain technology that underpins cryptocurrencies such as bitcoin could change the way property deals are done and recorded more than any other new technology, real-estate and technology experts say.
And Sweden’s nearly 400-year-old land mapping and registration authority is likely to become one of the first government agencies to test using blockchain technology for conducting property sales.
The Lantmäteriet expects to conduct the first such transaction in the next few months and is shortlisting volunteers who want to buy or sell a property using the blockchain system. “From the technology point of view, we are quite ready,” said Mats Snäll, Lantmäteriet’s chief digital officer.
Proponents of blockchain say the technology would make recording and transferring titles faster and much more efficient. Transactions that today take months to complete could take days or even hours, they say.
Blockchain technology also is practically bulletproof when it comes to fraudulent transactions, experts say.
In a blockchain data structure, transactions are created and shared among a network of computers. There is a unique digital record of every transaction, which is grouped into a “block.” Any changes or additions to the block would need to be verified by a majority of other participants on the network, making it difficult to alter information stored on the block.
Just as cybercurrencies use the blockchain to record who owns a particular coin, or when ownership is transferred, the technology could be used to record who owns a particular property, experts say. Many governments still use paper records for recording title, a cumbersome process that is vulnerable to fraud.
Like many other new technologies, blockchain has the potential to be enormously disruptive.
For example, title-insurance companies in the U.S. are concerned that it would reduce the need for title insurance, threatening that multibillion-dollar business. Title-insurance companies essentially guarantee property owners that their ownership claim to a property is solid. If it isn’t the insurers cover the loss.
To be sure, there remain hurdles to the full-scale adoption of blockchain to conduct real estate deals in Sweden. For one thing, Swedish law doesn’t accept digital signatures to register a property sale or purchase, so the law would need to change.
Governments and agencies in other countries such as the U.S., India and the Republic of Georgia also have been experimenting with blockchain land registries. Tech giants such as International Business Machines Corp. and startups like blockchain technology-developer R3 CEV also have tested the use of the technology for recording titles.
In Sweden, the Lantmäteriet has joined with companies such as telecoms firm
AB, consulting firm Kairos Future, and blockchain technology company ChromaWay AB, to create a structure for conducting real estate deals on the blockchain.
The Lantmäteriet is already highly digitized and paperless. Still, it can take three to six months from the signing of a purchase contract to the registration of the sale. With the blockchain, the processes would be much faster, Mr. Snäll said.
“It could be hours,” said Jörgen Modin, chief solutions architect at ChromaWay. He noted that this system would allow a deal to be signed and registered even when the buyer or seller isn’t physically present in the country.
In the blockchain system, a digital contract would be created on the blockchain, to be signed by all parties using digital signatures. The buyer’s bank could issue the loan based on this contract, and grant the loan faster, according to an official report on the Lantmäteriet project. The digital contract would be accepted for registering the title.
In the U.S., local governments looking into blockchain technology include the Cook County Recorder of Deeds in Chicago. In 2016, it initiated a project to test, for example, how digital property abstracts could be created using the blockchain. The city of South Burlington, Vt., recently embarked on a similar project.
In India, the Andhra Pradesh state has tied up with ChromaWay to build a blockchain-based solution to record property deals, according to ChromaWay.
In the Republic of Georgia, the National Agency of Public Registry has been storing real estate titles, triggered by a new sale or purchase or a mortgage registration, on a blockchain structure for the past year. So far 1 million land titles have been saved, each with a unique hash code, according to the agency’s chairman.
The agency’s next target is to get “smart contracts,” which would enable real-estate transactions to go through digitally. “It gives us the possibility to offer the service to citizens while being abroad,” said Papuna Ugrekhelidze, chairman of the Republic of Georgia’s registration agency.
The country recently adopted a law to accept digital signatures, and is working on other regulations related to blockchain technology, he said.
Write to Shefali Anand at [email protected]