Tokenisation Of Land Assets In India: Can We Achieve It? Here Are The Benefits

Regulatory uncertainty poses the biggest challenge, which can be cleared through progressive policy developments and public-private partnerships. 

The tokenisation of land assets will come as a big booster for the Indian economy.

Source : Freepik

By Devika Mittal

Tokenisation of land assets in India is gaining popularity as a concept, as it combines real estate with distributed ledger or blockchain technology. The core of this process involves converting land assets into digitised tokens that can be easily traded over a secure blockchain network.

India, with a total land area of 32,87,263 sq. km, ranks seventh in the world in terms of land area. Ownership of land assets in India can be broadly categorised into private, government, and religious. While the new age private land deals are happening through digital platforms, the old land parcels in India are still lying untapped and lack proper legal recognition. Infosys co-founder Nandan Nilekani recently sparked a debate around the tokenisation of land assets in India. He mentioned that 50 per cent of assets owned by the Indians are in the form of land, which is not tradable or cannot be used as collateral. 

Benefits Of Land Tokenisation

Easy inheritance of land assets: Inheritance of real estate in India involves going through a series of legal complications and paperwork. Tokenisation of land assets can easily unlock features like fractional ownership and distribution of land assets as per the will of the original land owner. 

Enhanced liquidity of real estate: In investment parlance, land is considered to be a highly illiquid asset class. The challenges related to finding a buyer, price negotiations, and abiding by local laws make real estate transactions a very time-consuming process.  

By tokenising land assets, we can make selling and buying real estate just like shopping on e-commerce. The blockchain technology will ensure that there is no duplication of ownership of any particular land, and ownership transfer will be recorded and available on an immutable public ledger. 

Prevent forging of land documents: Moving land records on the blockchain can make property documents immune to forging and duplication. Blockchain's unique ownership model will ensure no ownership disputes of land assets. 

More efficient land registries: We can completely eliminate the need for physical stamp papers and documents by digitising the registry process in India. Online processes with unique property IDs will streamline the registry process and make verification of the buyer and seller highly convenient. 

Enabling fractional ownership: Tokenisation of land assets will unlock fractional ownership of land, just like a mutual fund. Multiple parties can own a particular land asset and reap benefits according to their share of ownership. This will also increase participation from large institutes and HNIS in owning an expensive piece of land in the form of fractional ownership.

Role Of States/Panchayats

India is a very diverse country, and land laws change with every state. We will have to work towards uniform SOPs when it comes to the tokenisation of land assets. A hybrid body under SEBI and RBI can be created to oversee the overall process of land tokenisation across India. 

A representative from every state should join the decision-making body for the smooth implementation of the policy framework across India. The district tehsils/talukas can also play a pivotal role in ensuring that the remote villages are also covered under the national land tokenisation drive. 

Several Challenges

There are several challenges in achieving land tokenisation at a National level. Regulatory uncertainty poses the biggest challenge, which can be cleared through progressive policy developments and public-private partnerships. 

A lot of land records in rural India are in the form of pattas (a type of land deed issued by the government to an individual or organisation), which are mostly not digitised and will require participation at the panchayat level to digitise such land ownerships. 

A Big Booster

The tokenisation of land assets will come as a big booster for the Indian economy as it will unlock the dormant land parcels across India and turn them into a tradable asset. Such activated land parcels can be used as collateral for business loans, agriculture loans, and education loans, and spark economic activity at the grassroots level. 

Multiple Indian states like Andhra Pradesh, Haryana, Karnataka, Maharashtra, and Chhattisgarh, among others, are actively adopting blockchain technology to modernise their land records and enhance the delivery of citizen services. India, being the tech superpower with a robust digital infrastructure, can lead the world in blockchain adoption. The new tech revolution will enable India to become a $5 trillion economy sooner than expected.

(The author is the Regional Head at Ava Labs)

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