Its a great day! You’re excited to purchase prime hotel property in one of the most dynamic cities in the world. Being able to purchase a unit in a five star hotel chain that is 10 minute drive from the tallest building in the world, Burj Khalifa. That’s right, one of the best investments you can make in Dubai, is about to happen when you begin signing the documents with the real estate agent. Once you sign everything, you get this feeling like you just made the most lucrative investment in your career, your parents and your partner would be proud. You walk out of the real estate agent’s office with a wide smile. You go out and celebrate with your friends, and your partner and you can’t wait when the hotel is complete so you can enjoy your investment of $ 850,000 and its five start luxury services.
A year goes by and this happens..
You go back to the real estate agent office, and inquire about your investment unit, you bring your documents, and they tell you,
“Sorry, the agent you dealt with is no longer in the UAE and he sold you a fake property that does not exist. The documents you signed are forged “
As you try to wish that this a dream, you pinch yourself to make sure you are wide awake, maybe get some water, the agent your talking to now, is handing you a glass of water. You look at her eyes, and you know that you’re not the only one who was scammed, there were others too. Your heart sinks to the floor, the excitement about your investment turns into a brick wall that smashes your heart. How did this happen? Why did this happen to me? What am I going to do?
The questions floating in your mind that you may never get answers to are dancing in your head and your loosing control.
“Sir, please have a seat” the agent says with a sweet voice.
“I’ll call the director” she continues.
Yes. This is a true story and it could’ve been you, me, and any of your friends, or family members. Turning a dream investment into a nightmare that haunts you forever.
As you try to figure out what options you have to deal with this disaster, you later find out you have to raise a case with the courts and hire a lawyer in the process which will cost additional $$$$. How long will the court case take before you get your money back? And who will reimburse you for your loss? What are the fees associated with the court case, and how long will it take?
Almost everyone in Dubai wants to own a property in a prime area, but no one wants to be in that situation where they have to fight in the courts to get their lost investment due to a bad actor who decided to fool the system take the money and run.
Another aspect is the reputational damage this has on Dubai as an attractive real estate market. When your friends and contacts hear about this case, they will be reluctant to consider an investment in Dubai, or they will think twice about it. As we know, many of these fraudulent cases go unreported, or it takes forever for the courts to return the money back to the investors, its almost not worth it.
So the biggest question is, how can we avoid such a problem to begin with? What options are available today to prevent or minimize such fraud cases from happening and thereby protect the reputation of real estate investment in Dubai?
“How can we avoid such a problem? What options are available today to prevent or minimize such fraud cases from happening?
The good news is, there are viable technology options that can be implemented to reduce these cases from happening. One of those options is Blockchain — the magical technology that makes Bitcoin trading possible.
Bitcoin Cannot Exist without Blockchain
The system that makes trading Bitcoin possible is Blockchain. Blockchain is the decentralized ledger that records all of the Bitcoin transactions that occur globally. It is important to note that Bitcoin was created as a direct result of the financial crises in 2009 that was created by the banks on Wall Street in New York. Satoshi Nakamoto, the person (or group of people) who created Bitcoin along with other technology professionals, new that the current financial system was rigged to protect the elite few of the banks. To prove this claim, we now know that the Wall street banks in New York were responsible for the creation of the Economic Crisis that resulted in the bankruptcy of the top banks such as Lemon Brothers, Baer Stern, Charles Schwab and the others that followed.
To make matters worse, those executives, and decision makers were not even prosecuted in court, they were not even considered to be prosecuted and they all left their positions with their bonuses and financial packages untouched. While the rest of the world suffered billions of losses in pension funds, retirements, savings, and foreclosures, the executives of the banks walked away with their stock options untouched. So Satoshi created a White Paper “Peer to Peer electronic Funds Transfer system” a crypto currency where users can send money from person to person across borders and countries while skipping the banks and the central banks fees that charge on a transaction basis. Satoshi made the system decentralized, meaning there is no central bank, or any authority that owns the system or controls it.
Blockchain’s main advantages is the fact that it resolves the problem of security, transparency and trust. Due to the way blockchain was designed, it proves to be resilient in addressing the issue of fraud.
The reality is simple, there will always be bad actors, those people who believe they are smart enough to beat the system. People who think they can use loopholes in the system and exploit it for their own financial gains. No technology solution is ever guaranteed to prevents hacks from happening or from fraudsters from committing illegal acts. However, what if there was a way that the system can make it very difficulty for bad actors to commit illegal acts, and if they do commit those acts, they will be easily exposed — This is where blockchain comes in.
“Blockchain’s main advantages is the fact that it resolves the problem of security, transparency and trust.”
Blockchain was designed with built in security to limit the bad actors from committing any fraud cases on it.
The Blockchain Analysis Document
So how can blockchain address the problem of fraud in the real estate property case above? We use the Blockchain Analysis Document. This document is taken from ConsenSys Academy Blockchain Foundations course; were it is used to decide if blockchain is the required technology for a given project, and if so, which blockchain solution would be the most suitable for the given project. The document is a series of eleven questions that address the details of the project.
As we answer the questions it will help us understand how blockchain can be applied to the use-case and how it can solve the problem.
In summary here is how the project would be:
The problem that caused the fraud case was related to the fact that the property Agent used forged and counterfeit documents and created a fake unit in an existing Hotel project that was under construction. The documents that point to the unit were forged, and the signatories and details of the Dubai Land Department (The Land authority in Dubai) were forged. The buyer was asked to sign the forged documents without knowing that the documents were forged. Hence when the buyer came back a few months later to the agency, they informed him of the situation. The bad actor agent has long left the UAE by then with the money.
Blockchain to the Rescue
1. Every document issued by the Dubai Land Department would have a QR code stamped on it. Meaning, every document issued by the Dubai Land Department would have a QR code with a serial number associated with the QR Code.
2. The QR Code along with the Serial number would link to a blockchain transaction that is registered on the database ledger of the blockchain system at the Dubai Land Department office ERP system.
3. The blockchain system would be linked to the Dubai Land Department mobile app, along with the QR Codes of the documents.
4. When the buyer goes to the agent to sign the documents, he can open the mobile app of the Dubai Land Department, scan the QR Code on the document, the QR code would link to the Dubai Land Department blockchain database system, it will show an image of the document along with the details of the document.
5. The Buyer can compare the document he/she is about to sign, to the image of the document shown on the mobile app of the Dubai Land Department to ensure they match.
6. The buyer can enter the address of the Unit into the Dubai Land Department mobile app, and the app will confirm to the buyer that the Unit and the address are valid, and are available for purchase. In addition, it can provide details of the authorized Real Estate Agents that have this listing. This is needed to mitigate the risk that if the Unit was previously sold it would show in the mobile app, that the unit was sold by another agent for example, so in this case the buyer is protected from fraud.
7. By using the mobile app of the Dubai Land Department, it mitigates the following risks:
- If the unit was sold or not previously.
- if the Address of the property is fake or not. (exists or not)
- If the Property agent is valid and licensed to sell this property and is listed under the Dubai Land Department.
- Once a transaction is written to the blockchain, it cannot be changed, modified or deleted, as this is part of the blockchain design to mitigate fraud transactions.
- If the documents were copied or forged in any way, the comparison of the document image with the image in the Mobile app of the Dubai land department would mitigate that risk.
- With this method when the buyer makes a purchase, he feels security and transparency when buying the property, with that relief that he/she are buying an authentic property with a licensed agent that is legit and transparent.
We are not saying this will prevent future fraud cases from happening. There are always people who believe they can beat the system. We are saying with this solution, it will limit the occurrence of fraud real estate cases because it will make it much more difficult for malicious actors tocommitt fraud cases.
Blockchain technology offers two primary advantages, it makes it more difficult for bad actors to commit fraud, and if they do, they will be easily exposed, which will make them reluctant to commit the act.
