Yes, it's a form of digital rights management and the assumption is the implementations will be strong enough that it's easier to just pay back the loan than break the crypto-locks. Eg, to break most vehicle immobilizer systems requires replacing the engine (except for BMW cars where they screwed up). Immobilizers are often not particularly competent DRM systems - some manufacturers don't even use real cryptography at all - but they're good enough to stop most car thieves.
If you want to take things to an extreme, Bitcoin itself is just a form of DRM - the rights it manages are claims on quantities of value, and it manages those claims digitally to ensure you don't "copy" the value (double spend).
I don't have any personal problems with DRM - the idea that it's inherently evil is dogma and we should rise above it to examine the arguments on their merits. Locks of any form, whether digital or not, arise when the legal system cannot satisfactorily provide enough security because it's too hard to build and process a case against perpetrators of a crime. Without door locks burglaries would be a lot more common and most of them would go unpunished. Likewise, the legal system has shown itself incapable of handling copyright infringement even when the evidence is watertight, so content creators naturally resort to technical measures.
This leads to the question of whether the crypto-locks on smart property would be trustable (by the lender). Computer security systems of all kinds have a patchy track record but especially DRM.
I think it's absolutely possible to build systems that are good enough for this. The success of immobilizers show that even very weak digital security was a huge upgrade over analogue/physical locks and slashed car thefts. Systems built by experts tend to be even stronger.
These things come in generations. I'd expect the first few generations of smart property systems to have flaws that lead to them breaking. Over time defenders learn from experience and get better. We can see this with the development of pay-TV encryption, games console security, video disc security and so on. The difficulty of breaking later generations was orders of magnitude higher than for earlier generations. Eventually it reaches a point where the attackers go away. I've seen it happen multiple times.
Mike do patents, copyrights, trademarks for "Smart property protocol" only for Bitcoin blockchain,this should be under the control of the core team
Re: patents. You can't patent something that has already been disclosed (at least not in theory).
One reason I've been doing all this research is to try and ensure nobody actually does patent these features or protocols. Arguably Bitcoin has bigger problems to fix right now, but long-term public research is important to avoid trolls tying up the use of ideas that are too important to own.