Will you be able to use bit­coin to buy prop­erty in In­dia any­time soon?

HT Estates - - FRONT PAGE - Anuj Puri let­ters@hin­dus­tan­times.com The au­thor is Chair­man – ANAROCK Prop­erty Con­sul­tants

From of­fi­cial ac­cep­tance to in­vest­ment safety, crypto-cur­ren­cies arenowhere­n­ear­be­com­ing vi­able ten­der to buyprop­erty here.

Bit­coin and other 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 has­been­clock­ing up. To­top it off, real es­tate has now been dragged into the bit­coin controversy, with a hand­ful of projects in somepart­soft­heUSandDubai ac­tu­ally invit­ing in­vest­mentsvia 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 ob­vi­ous­ly­de­pend­son­whetheror not the RBI and Gov­ern­ment rec­og­nize that cur­rency as valid ten­der in the coun­try. So­far, that is not­the­case­with­bit­coin. While the RBI was toy­ing with the no­tion of launch­ing an In­dian crypto-cur­rency, it ap­par­ently does not see much ben­e­fit in do­ing so.

THE MAR­KET NEEDS TRANS­PARENCY – NOT MORE OPACITY

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 and­out of the sec­tor need to track­able and ac­counted for at ev­ery level.

This is def­i­nitely not pos­si­ble with money in the form of a cur­ren­cy­whose­o­ri­gin­san­dan­tecedentscan, al­most­by­def­i­ni­tion, 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 fore­most­be­con­sid­eredin­lightof 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 mar­ke­trates– which, in In­dia, are de­ter­mined in ru­pees. This is how real es­tate is bought and sold in the coun­try.

Hy­po­thet­i­cally, If theRBIwere 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. Then­con­sider that bit­coin has be­come such a pop­u­lar mode of pay­ment for crimere­lated trans­ac­tions pre­cisely be­cause its sources can­not be traced if thep­er­son/s trans­act­ing in it do not want them to be traced.

DIF­FI­CULT TO SWAL­LOW, HARDER TO DI­GEST

Apart­fromthein­crease­dreg­u­la­tion 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 be­fully traced or­reg­u­lated. Even if it did find a way to ac­cept it, such acur­rency woul­dalso need to be­com­pre­hen­si­ble­an­dac­cept­able 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 un­savouryrep­u­ta­tion­in­fi­nan­cial cir­cles which would make its 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 an­dresale donot be­comeaprob­lem­forthem. 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 take­off in In­di­an­realestate in the fore­see­able fu­ture.

GETTY IM­AGES

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.

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