In 2019, PwC estimated that as much as $900 billion of dead capital was trapped in Nigeria’s residential and agricultural real estate markets.
According to the consulting firm, about 95% of ordinary homes in Nigeria either have no title or have no disputed title.
Above all, Nigeria's complex land ownership and documentation processes are a major contributor to this problem.
Therefore, it is imperative that the government and the real estate industry proactively seek avenues to release dead capital in the industry.
One way to achieve this is by incorporating blockchain technology into the process, creating a more secure and transparent system.
Blockchain technology is a distributed digital ledger system that records transactions in secure, transparent, and immutable blocks. As the volume of real estate increases daily, there is an urgent need to securely document these transactions to prevent errors, data manipulation, and fraud.
In certain countries, blockchain technology has been successfully implemented in the real estate sector. For example, in 2017, the Indian government partnered with Swedish start-up Chromaway to combat the growing number of property fraud cases in the country. Just last year, New Town Kolkata Development Authority (NKDA) partnered with Air Chains to adopt India’s first NFT-based land mutation. This groundbreaking initiative adopted 50,000 NFTs, covering 27,000 hectares of land across the country and representing approximately 1 million real estate records.
According to a report published by Emurgo Africa in 2023, Kenya, Nigeria and South Africa received a total of $88.5 million (70%) of blockchain funding in Africa. The 2023 Global Cryptocurrency Adoption Index report released by Chainalysis ranks Nigeria as the second most crypto-adopted country in the world. Despite the significant growth of blockchain technology in Nigeria, its integration into the real estate market remains limited. The following paragraphs explain why blockchain technology needs to take root in the Nigerian real estate ecosystem.
The Nigerian real estate market faces several challenges. The main ones are fraud, opacity issues and formalization. Africa’s commercial real estate space is a $15 trillion industry, but it is significantly underdeveloped. New solutions are needed to address these challenges. One of the key solutions is the implementation of blockchain technology.
Recognizing the challenges in the real estate market and the country as a whole, the federal government approved the National Blockchain Policy on May 3, 2023. The potential benefits of this policy were increased transparency and accountability, increased efficiency, supply chain management, identity verification and smartness. contract.
One of the focus areas in the implementation of this policy covers the implementation of blockchain technology in land registration and recording systems. Another response to this was the partnership between Distress Property Market Ltd and Wallstreet Exchange to harness the power of blockchain technology to address the challenges of Nigeria’s real estate market. The partnership aims to streamline transactions, increase access to investments and empower individuals through innovative financial solutions.
But how will blockchain revolutionize the market? In the following paragraphs, we will discuss some characteristics of blockchain technology and how Nigeria can adopt it to solve the dead capital problem I emphasized.
Blockchain is built on a leading technology that can be privately or publicly owned
By implementing a system of public and private keys for the listed properties, the properties are securely stored on the blockchain system.
The public key represents ownership of a property on the blockchain, while the private key acts as the owner’s digital signature and is used to access the digital asset. This gives each property a unique digital ID associated with it, ensuring security.
Tokenization and non-fungible tokens (NFTS)
Tokenization and NFTs are digital tokens used to create ownership of real estate. Tokenization allows ownership of real estate to be divided into smaller units that investors can invest in. Harbor is a US platform that tokenizes commercial real estate among other features. In 2019, the company tokenized $100 million worth of real estate stocks on the blockchain, a move aimed at facilitating transactions for 1,100 investors using ownership of these properties. .
Blockchain can create smart contracts
Smart contracts are self-executing contracts where terms and conditions are written directly into the code through blockchain technology. These contracts automatically perform actions when predefined conditions are met, without the need for an intermediary.
Dubai is actively considering the use of blockchain technology in its real estate market, with the Land Department recording real estate contracts and transactions and linking them with Dubai Electricity and Water Authority (DEWA), telecommunications systems and power systems. By doing so, they introduced blockchain into their business system. other organizations in the country.
We use a transparent online ledger to track past ownership
Blockchain technology enables transparency and traceable history of real estate ownership, increasing reliability and reliability. Propy is a real estate platform that securely records real estate transactions using a transparent online ledger. It provides a decentralized platform for people to buy, sell, and rent real estate, with transparent records of ownership, deeds, and transaction history.
The use of blockchain technology through the features highlighted above can transform the Nigerian real estate market in a number of ways, including:
Better real estate ownership management
Blockchain can revolutionize real estate title management by providing a decentralized and immutable ledger for recording ownership records. Each real estate title is represented as a unique digital asset on the blockchain, ensuring transparency, security, and efficiency in the transfer and verification of ownership.
Proptech startup House Africa has launched a product called Systemap in 2023 that leverages blockchain and mapping technology to create a national private land registry and digitize sitemaps for real estate projects. .
smart contracts for transactions
Implementing blockchain can enable smart contracts to automate real estate transactions by securely recording and verifying ownership transfers and contract terms.
Smart contracts automatically perform predefined actions when predefined conditions are met, ensuring transparency and reliability in real estate transactions. Blockchain’s decentralized capabilities allow parties involved in real estate transactions to securely exchange assets without the need for intermediaries, reducing costs and streamlining processes.
Fractional ownership and tokenization
Tokenization splits real estate assets into smaller tradable units, allowing investors to buy pieces of real estate. This democratizes access to real estate investing, increases liquidity, and provides transparency and security through immutable ownership records stored on the blockchain.
Real estate listings and marketplace
Building a blockchain-based platform for real estate listings and marketplaces will facilitate transparent and secure transactions between buyers, sellers, and agents, increasing the efficiency and accessibility of the real estate market.
Tenant and property management
Blockchain can streamline tenant management processes such as rental agreements, lease payments, and maintenance requests by implementing smart contracts, virtual tours, and distributed databases for property management.
In conclusion, by leveraging blockchain technology in these various ways, the Nigerian real estate market can become more efficient, transparent, and accessible, driving growth and innovation in the industry.
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