Will bitcoin help you buy property in India?

The Benami Property Act is at the centre stage once more and any service or commodity purchased in the form of currency and is not accepted as a legal tender in India represents a risk to the buyer and the seller.

Bitcoin and any other cryptocurrencies have been in the news for a lot of reasons. The massive appreciation of Bitcoin has been clocking up and to top it off, the real estate sector has now been dragged into the bitcoin controversy with a range of projects in some parts of Dubai and the US inviting investments via the Bitcoin mode.

It is important to understand the viability of any currency as a means with which to transact in real estate in India. It obviously depends on whether or not the RBI and the Government recognize the currency as a valid tender in the country. This is not the case with bitcoin. The RBI is toying with the notion of launching an Indian cryptocurrency; it does not see much benefit in doing so.

The real estate market in India is currently in the process of transiting from being an opaque and unregulated market to a governed and transparent market. This process has been kickstarted by various policies and regulations like RERA Act, the GST and the Benami Property Bill. And as a part of this process, there needs to be an increased transparency and accountability for real estate and its related transactions, the cash flows in and out of the sector should also be easily trackable and accountable at every level. This cannot be possible with money in the form of a currency whose origins cannot be established in most cases. The notion of cryptocurrencies like bitcoin becoming legal tender for real estate should be considered in light of this fact.

Hypothetically if the RBI were to accept bitcoin as a legal tender for real estate at some point, it would be to the extent of allowing the rupee value of a property to be paid for in that currency. This can only happen if RBI were able to establish the source of the funds to its complete satisfaction. It should also be considered that bitcoins are a popular mode of payment for crime related activities because its sources cannot be traced if an individual does not want them to be traced.

Even if real estate transactions become legal in India, it would be extremely challenging and there would be little benefit to the buyer or the seller. To begin with, the Government levies statutory taxes on all the real estate transactions and requires the payment of the dues to be mentioned in Indian rupees for such transactions to be considered legal. Similarly, market rates and property prices in the country are calculated in rupees per square foot. The currency used in transacting with it does not have any bearing on this value and for a cryptocurrency to become acceptable tender, all the calculations will need to find a parallel method which is acceptable for all stakeholders.

Apart from the regulation in the industry, the Indian banking and finance sector is extremely conservative and would find it difficult to accept a currency which cannot be traced or regulated. The currency would first need to be accepted by various financial institutions, which is far from the case now. Bitcoin has garnered itself a rather unsavoury reputation in the financial circles which makes its adoption in India even more difficult. There is also a question of safety of investment which brings the Benami Property Act at centre stage. Currently, any service or commodity purchased in the form of currency which is not accepted as a legal tender in India represents a risk to the buyer and the seller. The investors, as well as end users, want their real estate assets to be legal in every way so that the ownership and resale is not a problem for them. In short cryptocurrencies like bitcoin are highly unlikely to take off in the Indian real estate in the foreseeable future.