Will bit­coin buy you realty in In­dia?

NEW CUR­RENCY From of­fi­cial ac­cep­tance to in­vest­ment safety, crypto­cur­ren­cies are nowhere near to be­com­ing vi­able ten­der to buy prop­erty in the coun­try, even though bit­coins have wit­nessed con­sid­er­able ap­pre­ci­a­tion over the years

HT Estates - - FRONT PAGE - Anuj Puri ht­es­tates@hin­dus­tan­times.com The au­thor is chair­man, Anarock Prop­erty Con­sul­tants

Bit­coin an­dother crypto-cur­ren­cies have been in the news a lot if re­cent times, of­ten for the wrong rea­sons but also be­cause of the mas­sive ap­pre­ci­a­tion Bit­coin has been clock­ing up. To top it off, real es­tate has now been dragged into the bit­coin con­tro­versy, with a hand­ful of projects in some parts of the US and Dubai ac­tu­ally invit­ing in­vest­ments via the Bit­coin route.

With the on­go­ing slump in sales, is it pos­si­ble that de­vel­op­ers in In­dia will of­fer such an op­tion to prospec­tive buy­ers as well? Let us take a closer look at this.

We should be­gin by un­der­stand­ing that the vi­a­bil­ity of any cur­rency as a means with which to trans­act in real es­tate in In­dia ob­vi­ously de­pends on whether or not the RBI and Gov­ern­ment rec­og­nize that cur­rency as valid ten­der in the coun­try.

So far, that is not the case with bit­coin. While the RBI was toy­ing with the no­tion of launch­ing an In­dian crypto-cur­rency, it ap­par­ently does not see much ben­e­fit in do­ing so. This is quite un­der­stand­able.

The mar­ket needs trans­parency – not more opac­ity

The In­dian real es­tate mar­ket is cur­rently in the process of tran­sit­ing from be­ing an opaque and largely un­reg­u­lated mar­ket to a more gov­erned and trans­par­ent one. This process has been kick­started by sev­eral poli­cies and re­for­ma­tive reg­u­la­tions like the Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Author­ity or RERAAct, the uni­fied Good­sand Ser­vices Tax (GST) and the Be­nami Prop­erty Bill.

As part of this process of in­creas­ing trans­parency and ac­count­abil­ity for real es­tate and its re­lated trans­ac­tions, cash flows in and out of the sec­tor need to track­able and ac­counted for at ev­ery level.

This is def­i­nitely not pos­si­ble with money in the form of a cur­rency whose ori­gins and an­tecedents can, al­most by def­i­ni­tion, not be es­tab­lished in the ma­jor­ity of cases.

The no­tion of crypto-cur­ren­cies like bit­coin be­com­ing le­gal ten­der for real es­tate trans­ac­tions in In­dia must first and fore­most be con­sid­ered in light of this fact.

No sig­nif­i­cant ben­e­fits, mas­sive chal­lenges

For the sake of an ar­gu­ment, let us as­sume that bit­coin trans­ac­tions be­came ac­cept­able in In­dian real es­tate.

Would this in any way af­fect the sec­tor in a sig­nif­i­cant man­ner— for in­stance, would ROI on real es­tate be pos­i­tively or neg­a­tively in­flu­enced?

To ar­rive at an an­swer to this ques­tion, we must first con­sider that the value of real es­tate is de­ter­mined by fac­tors such as size, lo­ca­tion, and most im­por­tantly lo­cal mar­ket rates – which, in In­dia, are de­ter­mined in ru­pees. This is how real es­tate is bought and­sold in the coun­try.

Hy­po­thet­i­cally, If the RBI were to ac­cept bit­coin as le­gal ten­der for real es­tate trans­ac­tions at some point, it would be to the ex­tent of al­low­ing the ru­pee value of a prop­erty to be paid for in that cur­rency.

Re­mem­ber, this would only hap­pen if the RBI were able to es­tab­lish the source of th­ese funds to its com­plete sat­is­fac­tion. Then con­sider that bit­coin has be­come­suchapop­u­lar­mode of pay­ment for crime-re­lated trans­ac­tions pre­cisely be­cause its sources can­not be traced if the per­son/s trans­act­ing in it do not want them to be traced.

Even if real es­tate deals trans­ac­tions via bit­coin were to be­come le­gal in In­dia, it would at best be ex­tremely chal­leng­ing - and there would be lit­tle or no real ben­e­fit to ei­ther seller or buyer.

First of all, the Gov­ern­ment levies statu­tory taxes on ev­ery real es­tate trans­ac­tion and re­quires the pay­ment of th­ese dues to be clearly men­tioned in In­dian ru­pees for such trans­ac­tions to be con­sid­ered le­gal.

Like­wise, mar­ket rates and prop­erty prices in In­dia are cal­cu­lated in ru­pees per square foot. From an ROI per­spec­tive, the cur­rency used in trans­act­ing with it does not have any bear­ing on this value – and for a cryp­tocur­rency to be­come ac­cept­able ten­der for buy­ing a sell­ing prop­erty in In­dia, all th­ese cal­cu­la­tions would need to find a paral- lel mone­tary avatar that is ac­cept­able to all stake­hold­ers.

Dif­fi­cult to swal­low, harder to digest

Apart fromthe in­creased reg­u­la­tion in the real es­tate in­dus­try, the In­dian bank­ing and finance sec­tor is ex­tremely con­ser­va­tive and would find it very dif­fi­cult to ac­cept a cur­rency which can­not be fully traced or reg­u­lated. Even if it did find a way to ac­cept it, such a cur­rency would also need to be com­pre­hen­si­ble and ac­cept­able to In­dian end-users and in­vestors. The cur­rency would first need to be sanc­ti­fied and ac­cepted by var­i­ous fi­nan­cial in­sti­tu­tions - which is far from the case now. In fact, bit­coin has gar­nered it­self a rather unsavoury rep­u­ta­tion in fi­nan­cial cir­cles which­would­makeits adop­tion in In­dia even more dif­fi­cult.

More­over, there is the ques­tion of safety of in­vest­ment - a ques­tion which brings the Be­nami Prop­erty Act has now brought cen­tre-stage once more. At the cur­rent time, any ser­vice or com­mod­ity pur­chased in a form of cur­rency which is not ac­cepted as le­gal ten­der in In­dia rep­re­sents a risk to both buyer and seller. Both end-users and in­vestors want their real es­tate as­sets to be le­gal in ev­ery way so that ownership and re­sale do not be­come a prob­lem for them. This, per­haps, is the strong­est ar­gu­ment against bit­coin in In­dian real es­tate trans­ac­tions for now. In short, crypto-cur­ren­cies like bit­coin are very un­likely to take off in In­dian real es­tate in the fore­see­able fu­ture.

AP

Le­gal con­cerns need to be ad­dressed if bit­coin were to be­come le­gal ten­der for real es­tate trans­ac­tions in In­dia

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