Khayelitsha is set to give birth to SA’s first blockchain property register through a pilot study in the area which consists of
almost 1 000 properties located in four sites in Makhaza.
This was at the back of the Affordable Housing Conference taking place in Cape Town this week. The Centre for Affordable Housing Finance in Africa
(CAHF), research consultancy 71point4 and Seso Global have joined
forces to develop South Africa’s first blockchain-based property
register.
And all the properties are government subsidised properties which have
not yet been registered on Deeds Registry.
According to Daniel Bloch, the CEO of Seso Global, a blockchain
property registry company, this will be the first working example of a
blockchain-based property registry in South Africa. Aside from
creating an immutable record of who owns which house, the Seso
platform facilitates and records transactions such as sales and
transfers out of deceased estates and integrates with third parties
who facilitate transactions, including mortgage lenders. “For the time
being, property owners will record these transactions at the
Transaction Support Centre, a walk-in housing advice office created by
CAHF and 71point4 located in the area. But over time, we will record
transactions through the Seso app” says Bloch.
Research reveals that the benefit of the blockchain solution is that
it allows the data to be stored in a decentralised, secure database
that can be updated without any loss of historic data. This means
there is a secure, back-to-back record of all transactions that is
completely tamper-poof. Eventually the vision would be to integrate
this record into the Deeds Registry when other impediments to transfer
have been removed.
Moreover, SA has a serious titling problem.
According to Kecia Rust, the CEO of CAHF, the government has built
over three million RDP houses since democracy. But CAHF’s analysis of
deeds office data indicates that only 1.9 million of these properties
have been registered. The National Department of Human Settlements,
Water and Sanitation (NDHSWS) estimates that the title deed backlog
for RDP properties built prior to 2014 currently stands at 511 752.
These properties were given to beneficiaries, but no title deeds were
registered and handed over. At the same time, there is a backlog of
351 470 title deeds on newer properties.
In addition, registering these properties so long after they were
built and handed over to subsidy beneficiaries is an administratively
complex task. In some cases, original subsidy beneficiaries are no
longer living in the properties. Some beneficiaries might have passed
away, some might have tenants in their properties while others have
sold their houses informally.
“To create a register of property owners we first had to go door to
door to find out who lives in each property and to establish how they
came to be there” says Melzer, founder and lead consultant at
71point4. “We hired a team of 17 enumerators and trained them to
collect information and capture supporting documents. Thankfully we
can leverage smart phone to collect the data, but it still requires a
significant effort. It took us two months to cover these areas.”
Expert opinion is that the effort is well worth it. Properties in the
area sell for over R200 000 informally – and would sell for more if
they were listed on a trusted registry and were ‘bankable’. This would
enable buyers to obtain mortgage finance and create affordability.
Without access to mortgages, buyers have to pay cash for a house, or
use an expensive unsecured loan. There are also significant benefits
to the City of Cape Town of being able to access an accurate and
up-to-date record of property ownership. Without it, the City cannot
collect revenue from households in the area who are not indigent nor
can City departments facilitate building plan approvals.
In many cases in the pilot areas, the original beneficiary is still
living in the property. “We hope that these properties can be
registered in the deeds registry within a few months, and we are
working closely with the City of Cape Town to facilitate that” says
Melzer. “Where the beneficiary no longer lives in the property, we are
in the process of tracing the beneficiary to confirm information we
have gathered on who owns the property. We will also be working
closely with the City on a resolution process where ownership is
disputed.”
It will take some time before all the required information has been
collected and validated. It will also take time for validated
properties to be registered on the deeds registry. In the meantime,
we will enable property owners and occupants to keep those records up
to date, according to Melzer.
“We will also be using Seso’s platform to manage other client service
requests that come to the Transaction Support Centre from all over
Cape Town” says Rust. “These include helping clients to regularise
informal sales and wind up deceased estates. Going forward, as the
country moves towards an electronic deeds registry, we hope the
lessons we have learned will provide valuable evidence to inform the
development of accessible, secure, affordable and efficient mechanisms
to facilitate property market transactions. This is important across
the market, but particularly in entry level segments of the market
where existing mechanisms are simply too costly”.
CAHF, Seso Global and 71point4 have a working agreement to extend this
pilot into other areas and use cases. There are hundreds of thousands
of RDP properties around the country where no primary transfer has
taken place. In addition, in many areas where title deeds were issued,
property owners have transacted informally, which means there is no
longer an accurate record of ownership at the deeds registry.
Blockchain-based solutions can help there too. Blockchain can also
enable households who live in informal settlements and rural areas to
record and maintain land records and secure their rights. “We are very
pleased with the pilot results. We think the solution we have
developed is scalable, and replicable” says Bloch. That does not mean
it is easy but, says Melzer “blockchain technology together the
potential value we can unlock makes it worthwhile”.
