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