Real-World Asset Tokenisation

The Government of Maharashtra has proposed the Digitisation and Exchange of Land Token Assets (DELTA) Act to establish a state-backed framework for Real-World Asset tokenisation. Read here to learn more about it.

The proposed framework seeks to use blockchain/Distributed Ledger Technology (DLT) to represent physical assets such as land through digital tokens, potentially enabling fractional ownership, greater liquidity and faster transactions.

The initiative aims to position Maharashtra as India’s first “tokenised State”, but it also raises fundamental questions concerning property law, land titles, taxation, financial regulation, cybersecurity and investor protection.

What is Real-World Asset Tokenisation?

RWA tokenisation refers to representing the ownership, rights or economic value associated with a physical or traditional financial asset through digital tokens recorded on a blockchain or DLT network.

Potential tokenisable assets include:

• Real estate and land
• Government and corporate bonds
• Gold and commodities
• Private-market securities
• Carbon credits
• Infrastructure-related assets

How does it work?

• Physical asset
• Verification of ownership and underlying rights
• Digital representation on DLT
• Token issuance
• Fractional ownership/trading
• Digital settlement and transfer
• Fractional ownership

A high-value asset can theoretically be represented through multiple tokens.

For example, instead of one investor purchasing an entire high-value property, the economic interest represented by the asset could be divided among multiple token holders.

This can potentially:

• Lower entry barriers
• Broaden investor participation
• Improve liquidity
• Increase transparency
• Enable automated settlement

However, token ownership does not automatically become legal ownership of the underlying physical asset. The legal connection between the token and the property must be explicitly established by the governing legal framework.

Maharashtra’s Proposed DELTA Act

The proposed Digitisation and Exchange of Land Token Assets (DELTA) Act seeks to create a legal architecture for converting physical land assets into digitally represented assets.

Its broader objective is to connect Land records, Blockchain/DLT, and Financial markets

The proposal is significant because land represents a very large pool of household wealth but remains relatively illiquid because of:

• Complex documentation
• Title uncertainty
• High transaction costs
• Registration requirements
• Disputes and litigation
• Stamp-duty obligations

Tokenisation seeks to introduce a digital layer between the physical asset and financial markets.

RBI, SEBI and the Emerging Tokenisation Ecosystem

RWA tokenisation should be distinguished from unregulated cryptocurrency activity.

• The underlying idea is increasingly being explored within regulated financial infrastructure.
• The source material highlights the RBI’s view of tokenisation as a technological layer for improving market efficiency rather than a substitute for regulated finance.
• The RBI and SEBI have also been associated with “Demat 2.0”, involving DLT-based tokenisation of corporate bonds and settlement using the RBI’s wholesale digital rupee through the Unified Market Interface (UMI).

This illustrates a broader transition:

Traditional securities

• Dematerialisation
• Digital settlement
• DLT-based representation
• Potential tokenised financial assets

RWA Tokenisation vs SM REITs

India already has a regulated mechanism for enabling fractional participation in real estate through Small and Medium Real Estate Investment Trusts (SM REITs).

Feature	SM REITs	RWA Tokenisation
Basic structure	Regulated trust	Digital token/DLT structure
Fractional exposure	Yes	Yes
Ledger	Conventional regulated infrastructure	Blockchain/DLT
Intermediaries	Regulated intermediaries	Potentially fewer intermediaries
Regulatory framework	Established securities framework	Requires clearer asset-specific framework
Underlying ownership	Structured through REIT	Must establish legal link between token and asset
Key challenge	Compliance and regulation	Legal recognition, title, regulation and technology

Thus, tokenisation should not simply be understood as “putting land on blockchain”. Its fundamental challenge is establishing the legal relationship between the digital token and the underlying property right.

India’s Digital Land Administration

India has already created several components of digital land infrastructure that could support future tokenisation.

1. Digital India Land Records Modernisation Programme

The DILRMP has sought to digitise:

• Textual land records
• Cadastral maps
• Registration processes
• Land-record databases

2. Unique Land Parcel Identification Number

ULPIN, popularly described as “Bhu-Aadhaar”, provides a unique geo-referenced identification mechanism for land parcels.

It can strengthen:

• Parcel identification
• Traceability
• Record integration
• Fraud prevention

3. SVAMITVA

• The SVAMITVA Scheme uses drone-based mapping to survey inhabited rural areas and provide property cards.
• It helps connect physical property, spatial mapping, legal documentation, and the formal financial ecosystem

4. NGDRS and integrated registries

• Digital registration platforms such as the National Generic Document Registration System (NGDRS) can facilitate greater interoperability among land records and registration systems.
• Together, these initiatives provide important digital infrastructure for any future tokenisation framework.

Potential Benefits of RWA Tokenisation

1. Unlocking Illiquid Wealth

• Land is one of India’s major stores of household wealth.
• Tokenisation could potentially convert part of this relatively illiquid wealth into digitally transferable financial interests, subject to legal and regulatory safeguards.

2. Fractional Investment

• Tokenisation can lower the capital required to access high-value assets.
• This could expand participation beyond investors who can afford to buy entire properties.

3. Faster Settlement

DLT can facilitate near-real-time recording and settlement of transactions.

This could reduce:

• Paperwork
• Reconciliation
• Settlement delays
• Multiple intermediaries

4. Greater Transparency

A well-designed DLT system can create an auditable transaction history.

This could strengthen:

• Ownership tracking
• Transaction verification
• Compliance monitoring
• Fraud detection

5. Programmable Compliance

Smart contracts can potentially automate predetermined conditions such as:

• Transfer restrictions
• Investor eligibility
• Settlement
• Distribution of proceeds
• Regulatory checks

6. Deepening Capital Markets

• Tokenised assets could potentially connect traditionally illiquid assets with broader financial markets.
• The concept can therefore be viewed as a bridge between physical wealth, digital representation, and financial markets

Major Challenges

1. Conflict with Existing Property Law

• Under the existing legal architecture, a blockchain token does not automatically constitute a registered property deed.
• Property transactions remain subject to applicable laws and registration requirements.
• The DELTA framework would need to clearly establish when and how a token represents a legally enforceable property right.

2. Smart Contracts vs Judicial Intervention

Smart contracts are designed to execute predefined conditions automatically.

However, courts may order:

• Transfer restrictions
• Freezing of property
• Attachment of assets
• Stay of transactions

This raises an important question:

How should an immutable digital transaction respond to a subsequent judicial order?

A robust system would therefore require mechanisms for freezing, reversing, suspending or otherwise legally controlling token transactions.

3. Stamp Duty

Property transactions attract stamp duty.

Tokenisation introduces potentially large numbers of fractional transfers.

This raises questions regarding:

• Whether every token transfer constitutes a taxable property transfer
• Timing of stamp-duty liability
• Valuation
• Collection mechanisms
• Distribution of revenue between the Centre and States

A digital token framework would therefore require a clear stamp-duty architecture.

4. Centre-State Regulatory Overlap

• This is among the most important constitutional and regulatory challenges.
• Land falls primarily within the State domain, whereas financial markets and securities are largely regulated by central institutions such as SEBI and RBI.
• Therefore, tokenised land potentially sits at the intersection of state property law, Central financial regulation, taxation, and technology regulation
• A fragmented framework could create regulatory uncertainty.

5. Title Uncertainty

India’s land-record system has traditionally been characterised by presumptive rather than universally conclusive title.

• Blockchain can establish the integrity of a digital record, but it cannot by itself establish that the underlying property claim was legally valid in the first place.
• Hence “Garbage in, garbage out” applies to land tokenisation.
• The underlying land record must be legally verified before tokenisation.

6. Taxation Uncertainty

Existing Virtual Digital Asset-related taxation provisions do not necessarily provide a comprehensive framework for distinguishing:

• Speculative crypto-assets
• Asset-backed tokens
• Securities tokens
• Property-linked tokens

A clear tax classification would therefore be necessary.

7. Cybersecurity and Key Management

Blockchain infrastructure does not eliminate cybersecurity risks.

Risks include:

• Private-key loss
• Wallet compromise
• Smart-contract vulnerabilities
• Fraudulent token issuance
• Hacking
• Oracle manipulation
• Identity theft

A legally valid mechanism for recovery or replacement of lost credentials would also be necessary.

8. Investor Protection

Tokenisation could make complex assets accessible to retail investors.

However, accessibility without adequate disclosure can expose investors to:

• Misrepresentation
• Overvaluation
• Fraudulent backing
• Liquidity risk
• Market manipulation

Every token would therefore need a verifiable connection to its claimed underlying asset.

9. Privacy

Public or widely distributed ledgers can create permanent transaction histories.

This raises concerns relating to:

• Data minimisation
• Personal information
• Financial privacy
• Compliance with the Digital Personal Data Protection Act, 2023.

The system must balance auditability with privacy.

How Can India Enable Safe RWA Tokenisation?

1. Create a Unified Regulatory Architecture

The Centre and States should establish clear rules defining:

• What constitutes a tokenised asset
• When a token represents ownership
• Who can issue tokens
• Who can trade them
• Investor eligibility
• Disclosure requirements
• Custody
• Taxation
• Dispute resolution

2. Tokenise Only Verified Assets

• A crucial principle should be: no clear title, no tokenisation.
• Before token issuance, authorities should verify ULPIN, cadastral map, registration record, title history, encumbrances, and litigation status
• This can significantly reduce the risk of tokenising disputed property.

3. Use Maharashtra as a Controlled Pilot

The proposed DELTA framework could function as a regulatory pilot rather than immediately creating unrestricted retail trading.

Initial experimentation could focus on:

• Government-owned assets
• Clearly titled commercial properties
• Institutional investors
• Limited-value transactions

Lessons can subsequently inform national policy.

4. Integrate with India’s Digital Public Infrastructure

Tokenisation should build upon existing systems rather than creating isolated databases.

A possible architecture is:

• ULPIN
• Digital land records
• Property registration
• Digital identity/KYC
• Tokenisation platform
• Regulated financial market
• e-rupee / regulated payment rail

Integration with India’s broader Digital Public Infrastructure can improve interoperability and verification.

5. Develop a Centralised Stamp-Duty Mechanism

• A mechanism similar to the treatment of dematerialised securities could be explored for collecting and distributing stamp duty associated with tokenised transactions.
• This would prevent stamp-duty administration from becoming a major obstacle to fractional digital transactions.

6. Establish Strong Investor Safeguards

Every token should have:

• Identifiable underlying asset
• Verified title
• Independent valuation
• Ownership disclosures
• Encumbrance information
• Risk disclosures
• Redemption/exit mechanism
• Dispute-resolution process

International Approaches

Jurisdiction	Broad approach
Switzerland	Legal recognition of DLT-based financial-market infrastructure
Singapore	Institutional experimentation through Project Guardian
Hong Kong	Exploration of tokenised deposits and asset settlement through Project Ensemble
UAE	Innovation-oriented framework with regulatory sandboxes
European Union	MiCA and DLT Pilot Regime provide structured regulatory frameworks
United Kingdom	Digital Securities Sandbox for controlled experimentation

The international experience suggests that legal certainty and controlled experimentation generally need to develop alongside technological adoption.

Way Forward

India should avoid treating tokenisation merely as a technological innovation.

The more fundamental objective should be to create legally enforceable, verifiable and interoperable digital representations of real assets.

A sustainable framework should rest on five pillars:

1. Verified Title
2. Legal Recognition
3. Regulatory Clarity
4. Secure Technology
5. Investor Protection

Only when these five elements operate together can tokenisation potentially convert dormant physical wealth into productive financial capital without merely transferring existing property disputes into digital form.

Conclusion

Maharashtra’s proposed DELTA Act represents an important policy experiment at the intersection of land administration, blockchain technology and financial markets.

RWA tokenisation could potentially address some of the traditional limitations of real estate by enabling fractional ownership, improving transaction efficiency and creating greater liquidity. However, the central challenge is not technological. It is legal and institutional.

A blockchain can make a record difficult to alter, but it cannot independently establish that the underlying title is valid. Therefore, India’s approach should prioritise verified land titles, clear legal recognition, Centre-State regulatory coordination, taxation clarity, cybersecurity and investor protection.

The long-term objective should not simply be a “tokenised State”, but a trusted digital asset ecosystem in which every digital representation has a clearly established legal relationship with the underlying real-world asset.