If the off-chain data is "incorrect", what are you going to do? Can anybody mint those NFTs? What's the point then? The government is the only one who can kick you out of that house irl.
The minting process could be managed by the government or some entity using an on-chain contract or it could just be a manual process that the government does in conjunction with banks. The enforcement of the ownership records would still be held with the government. The point of having property records as NFT on-chain data is it enables easy to verify ownership of property records, transparency/auditability of property records, and easy transfers of property records to new owners.
Correct, which means that there has to be an ultimate source of truth that everyone agrees on that is independent of the blockchain. Which means there has to be an authoritative central agency of some sort to handle that. Which means that the blockchain has not, in fact, accomplished the stated goal.
So those don't look like things that NFTs make better in this space.