In 2019, PwC estimated that as much as $900Bn dead capital is locked up in Nigeria’s residential and agricultural real estate market.
According to the consulting firm, approximately 95% of household dwellings in Nigeria have no title or a contestable title.
More than anything else, Nigeria’s complex land title and documentation process is a major contributor to this problem.
Because of this, it is essential for the government and the real estate industry to actively seek means to unlock the dead capital in the industry.
One way to achieve this is by incorporating blockchain technology into the process and birth about a more secure and transparent system.
Blockchain technology is a decentralized digital ledger system that records transactions in blocks which are secure, transparent and immutable. As the volume of real estate increases daily, there is a pressing need for these transactions to be securely documented to prevent errors, data manipulation and fraud.
In certain countries, blockchain technology has been successfully implemented in the real estate sector. For instance, in 2017, the Indian government partnered with a Swedish start-up company named ‘ChromaWay’ to address the rising incidents of property fraud in the country. Just last year New Town Kolkata Development Authority (NKDA) partnered with Airchains to adopt India’s first NFT-based land mutation. This groundbreaking initiative saw the adoption of 50,000 NFT’s covering 27,000ha of land and representing approximately 1m property records across the country.
According to the report released by Emurgo Africa in 2023, Kenya, Nigeria and South Africa received a total of $88.5m (70%) of blockchain funding in Africa. The 2023 global crypto adoption index report released by Chainalysis ranked Nigeria as the second country for the adoption of cryptocurrency in the world. Despite this significant growth of blockchain technology in Nigeria, its integration into the real estate market remains limited. In the following paragraphs, we have a case for why blockchain technology should be ingrained in Nigeria’s real estate ecosystem.
The real estate market in Nigeria is fraught with some challenges. Chief among them is fraud, opaqueness issues and formalization. Africa’s commercial real estate space is a $15 Trillion industry but grossly underdeveloped. Addressing these challenges would require novel solutions. One major solution is the adoption of blockchain technology.
The Federal Government, recognizing the challenges in the real estate market and the country at large, approved a National Blockchain policy on May 3, 2023. The policy’s potential benefits were improved transparency and accountability, increased efficiency, supply chain management, identity verification and smart contracts.
One of the focus areas for this policy’s implementation is targeted at the adoption of blockchain technology in land registration and record system. Another response to this was a partnership between Distress Property Market Ltd and Wallstreet Exchange to tackle the challenges in the Nigerian property market by leveraging the power of blockchain technology. This partnership aims to streamline transactions, increase access to investment and empower individuals through innovative financial solutions.
But how will blockchain revolutionize the market? In the following paragraphs, we have highlighted some of the features of blockchain technology and how Nigeria can adopt it in fixing its dead capital problems.
Blockchain is built on key technology that can either be private owner or public
By implementing a system of public and private keys for listed properties, properties will be stored safely in the blockchain system.
Public keys represent property ownership on the blockchain, while private keys act as the digital signature of the owner, which are used to access digital assets. This gives each property a unique digital identity associated with it and makes it secure.
Tokenization and Non-Fungible Tokens (NFTS)
Tokenization and NFTs are digital tokens used to create real estate ownerships. Tokenization allows for ownership of properties to be divided into smaller fragment of units, that investors can invest in. Harbor is a platform in the United States that tokenizes commercial real estate amongst other functions. In 2019, the company tokenized real estate shares worth $100m on the blockchain, this move was targeted to make it easier for 1,100 investors to trade with the ownership in these properties.
Blockchains are capable of making Smart Contracts
Smart contracts are self-executing contracts in which the terms of agreements will be directly written into code through blockchain technology. These contracts will automatically execute actions when predefined conditions are met, without the need for intermediaries.
Dubai has actively explored the use of blockchain technology in the real estate market, the Land department infused blockchain into its system of operations by recording real estate contracts and transactions and linking them with the Dubai Electricity and Water Authority (DEWA), the telecommunications system and other organizations in the country.
It adopts a transparent online ledger that tracks historic ownership
Blockchain technology allows for a transparent and traceable history of property ownership, increasing trust and authenticity. Propy is a real estate platform, that uses transparent online ledgers to record property transactions securely. It provides a decentralized platform where people can buy, sell and rent properties, with transparent records of ownership, title deeds and transaction history
With the use of blockchain technology through the features highlighted above, the Nigerian real estate market can be transformed in these various ways:
Better Property Title Management
Blockchain can revolutionize property title management by providing a decentralized and immutable ledger for recording ownership records. Each property title is represented as a unique digital asset on the blockchain, which would ensure transparency, security and efficiency in the transfer and verification of ownership.
HouseAfrica, a prop tech startup company launched a product in 2023 called ‘Systemap’ which leverages blockchain and map technology to create a private land registry and digitize real estate project sitemaps in the country.
Smart Contracts for Transactions
By implementing Blockchain, smart contracts can be enabled to automate property transactions by securely recording and verifying ownership transfers, terms and conditions.
Smart contracts execute predetermined actions automatically when predefined conditions are met, ensuring transparency and trust in property transactions. Through the blockchain’s decentralized feature, parties involved in property transactions can securely exchange assets without the need for intermediaries, which reduces costs and streamlines the process.
Fractional ownership and tokenization
Through tokenization, real estate assets are divided into smaller, tradable units, allowing investors to purchase fractions of properties. This democratizes access to real estate investment, increases liquidity and provides transparency and security through immutable ownership records stored on the blockchain.
Property listing and marketplaces
By building blockchain based platforms for property listing and marketplaces, transparent and secure transactions can be facilitated between buyers, sellers and agents to improve the efficiency and accessibility of the real estate market.
Tenant and property management
Blockchain can be utilized to streamline the tenant management process, which includes rental agreements, lease payments and maintenance requests by implementing smart contracts, virtual tours and decentralized databases for property management.
In conclusion by leveraging blockchain technology in these various ways, the real estate market in Nigeria can experience increased efficiency, transparency and accessibility which drives growth and innovation in the industry.
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