Pooja Dhamor from the National Law University, Jodhpur writes on Smart Contracts in the Indian real estate market.
With the ever-increasing use of smart contracts and blockchain technology in various fields, the idea of regulating the technology by means of law has gained popularity. However, even so, the questions relating to the legality and validity of these technologies, particularly in India, are replete with complexities. One of the most promising uses of blockchain is in real estate, particularly, smart contracts in leasing. The contemporary technology of smart contracts has effective solutions to offer in response to the multiple difficulties faced due to the traditional form of lease agreements. However, as new is the technology, as absent are the legal strings regulating it, thereby resulting in smart lease contracts meeting with multiple legal questions pertaining to their validity and legality. Additionally, smart lease contracts also pose challenges to the mandatory registration requirements of long-run lease deeds in India.
This article aims to explain what the technology is, along with its functional aspects. Additionally, it attempts to illustrate the legal considerations which may obstruct the path of its legality in India. Further, it proposes a solution to the problem of the legal legitimacy of the technology, keeping in mind the licit cogency of an arbitration agreement in digital shared ledger-based contracts. The article further engages in an analysis of legislation on smart contracts in jurisdictions across the world. Subsequently, it deals with smart contracts in real estate, particularly in leasing, discussing the laws and requirements of traditional leasing in India and addressing the question of preparedness of India to embrace automated lease based on smart contracts, taking into consideration the stringent regulations on registration of instruments recording lease of immovable property.