Landing an opportunity

The Land Titling Bill is long overdue

As any individual or company that has tried to buy property, especially in rural India, will tell you, this is a proposition fraught with all manner of risk. Land records aren’t computerised everywhere and, even where they are, they’re not necessarily up to date; in other cases, to save on stamp duties, a very high proportion of sales are conducted on power of attorneys that are not necessarily registered with the authorities. As a result, when you buy property, the principle of caveat emptor applies very strongly since you don’t know when the next “owner” will show up. Given the high share of construction in the country’s GDP, it is obvious anything that eases buying of property will increase economic activity and create more jobs. Which is why, several years ago, consultants McKinsey & Co had estimated land titling reforms would raise India’s by 1-2 per cent. More recently, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has made guaranteeing of land titles a necessary condition for getting any part of its Rs 50,000 crore corpus for urban projects. The logic is simple: the government guarantees the data in its land records and if someone buys a piece of land on the basis of official records and then suffers a loss, the government will compensate her for this. While the government can technically lose a lot of money due to this, the assumption is the increased economic activity as a result of guaranteed titles will far outweigh the possible losses to the government. When the government stands to lose revenue through incorrect records, that also puts pressure on it to fix the same.

While the is restricted to urban areas, the proposed draft (2010) seeks to spread this across the country. Under the proposal, the Titling Authority will get a fee for each title it issues and, presumably, use this to buy insurance cover in case it has to make a payment to a buyer who has been defrauded. The draft Bill is up for discussion and it will be interesting to see the responses from state governments that will, eventually, have to bear the burden as land records are maintained by states. Since it is unlikely that all states will see the benefit of increased economic activity being larger than the potential losses they could suffer, convincing everyone to come on board will be a stupendous task. After which, getting insurance companies to start insuring titles could also take some time — implementation will obviously begin from those areas/cities with a better record of accurate land titling data, and then slowly spread to the rest of the country. Equally obvious, states which are keen to give a push to industrialisation and want companies to come and buy land would do well to move on this at the earliest. The draft Bill proposes all this be done within an ambitious five-year period — after five years, it is proposed, it will be mandatory to get titles from the Titling Authority and register all changes in titles with it, failing which the land allotment can even be cancelled. Though the idea is to complete the work of cleaning up India’s titling process, and thereby reduce the lakhs of court cases on this, in a country with high functional illiteracy and where approaching government offices is so tortuous, this provision needs a serious rethink.

image
Business Standard
177 22
Business Standard

Landing an opportunity

The Land Titling Bill is long overdue

Business Standard  |  New Delhi 

As any individual or company that has tried to buy property, especially in rural India, will tell you, this is a proposition fraught with all manner of risk. Land records aren’t computerised everywhere and, even where they are, they’re not necessarily up to date; in other cases, to save on stamp duties, a very high proportion of sales are conducted on power of attorneys that are not necessarily registered with the authorities. As a result, when you buy property, the principle of caveat emptor applies very strongly since you don’t know when the next “owner” will show up. Given the high share of construction in the country’s GDP, it is obvious anything that eases buying of property will increase economic activity and create more jobs. Which is why, several years ago, consultants McKinsey & Co had estimated land titling reforms would raise India’s by 1-2 per cent. More recently, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has made guaranteeing of land titles a necessary condition for getting any part of its Rs 50,000 crore corpus for urban projects. The logic is simple: the government guarantees the data in its land records and if someone buys a piece of land on the basis of official records and then suffers a loss, the government will compensate her for this. While the government can technically lose a lot of money due to this, the assumption is the increased economic activity as a result of guaranteed titles will far outweigh the possible losses to the government. When the government stands to lose revenue through incorrect records, that also puts pressure on it to fix the same.

While the is restricted to urban areas, the proposed draft (2010) seeks to spread this across the country. Under the proposal, the Titling Authority will get a fee for each title it issues and, presumably, use this to buy insurance cover in case it has to make a payment to a buyer who has been defrauded. The draft Bill is up for discussion and it will be interesting to see the responses from state governments that will, eventually, have to bear the burden as land records are maintained by states. Since it is unlikely that all states will see the benefit of increased economic activity being larger than the potential losses they could suffer, convincing everyone to come on board will be a stupendous task. After which, getting insurance companies to start insuring titles could also take some time — implementation will obviously begin from those areas/cities with a better record of accurate land titling data, and then slowly spread to the rest of the country. Equally obvious, states which are keen to give a push to industrialisation and want companies to come and buy land would do well to move on this at the earliest. The draft Bill proposes all this be done within an ambitious five-year period — after five years, it is proposed, it will be mandatory to get titles from the Titling Authority and register all changes in titles with it, failing which the land allotment can even be cancelled. Though the idea is to complete the work of cleaning up India’s titling process, and thereby reduce the lakhs of court cases on this, in a country with high functional illiteracy and where approaching government offices is so tortuous, this provision needs a serious rethink.

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Landing an opportunity

The Land Titling Bill is long overdue

As any individual or company that has tried to buy property, especially in rural India, will tell you, this is a proposition fraught with all manner of risk. Land records aren’t computerised everywhere and, even where they are, they’re not necessarily up to date; in other cases, to save on stamp duties, a very high proportion of sales are conducted on power of attorneys that are not necessarily registered with the authorities. As a result, when you buy property, the principle of caveat emptor applies very strongly since you don’t know when the next “owner” will show up. Given the high share of construction in the country’s GDP, it is obvious anything that eases buying of property will increase economic activity and create more jobs. Which is why, several years ago, consultants McKinsey & Co had estimated land titling reforms would raise India’s GDP by 1-2 per cent.

As any individual or company that has tried to buy property, especially in rural India, will tell you, this is a proposition fraught with all manner of risk. Land records aren’t computerised everywhere and, even where they are, they’re not necessarily up to date; in other cases, to save on stamp duties, a very high proportion of sales are conducted on power of attorneys that are not necessarily registered with the authorities. As a result, when you buy property, the principle of caveat emptor applies very strongly since you don’t know when the next “owner” will show up. Given the high share of construction in the country’s GDP, it is obvious anything that eases buying of property will increase economic activity and create more jobs. Which is why, several years ago, consultants McKinsey & Co had estimated land titling reforms would raise India’s by 1-2 per cent. More recently, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has made guaranteeing of land titles a necessary condition for getting any part of its Rs 50,000 crore corpus for urban projects. The logic is simple: the government guarantees the data in its land records and if someone buys a piece of land on the basis of official records and then suffers a loss, the government will compensate her for this. While the government can technically lose a lot of money due to this, the assumption is the increased economic activity as a result of guaranteed titles will far outweigh the possible losses to the government. When the government stands to lose revenue through incorrect records, that also puts pressure on it to fix the same.

While the is restricted to urban areas, the proposed draft (2010) seeks to spread this across the country. Under the proposal, the Titling Authority will get a fee for each title it issues and, presumably, use this to buy insurance cover in case it has to make a payment to a buyer who has been defrauded. The draft Bill is up for discussion and it will be interesting to see the responses from state governments that will, eventually, have to bear the burden as land records are maintained by states. Since it is unlikely that all states will see the benefit of increased economic activity being larger than the potential losses they could suffer, convincing everyone to come on board will be a stupendous task. After which, getting insurance companies to start insuring titles could also take some time — implementation will obviously begin from those areas/cities with a better record of accurate land titling data, and then slowly spread to the rest of the country. Equally obvious, states which are keen to give a push to industrialisation and want companies to come and buy land would do well to move on this at the earliest. The draft Bill proposes all this be done within an ambitious five-year period — after five years, it is proposed, it will be mandatory to get titles from the Titling Authority and register all changes in titles with it, failing which the land allotment can even be cancelled. Though the idea is to complete the work of cleaning up India’s titling process, and thereby reduce the lakhs of court cases on this, in a country with high functional illiteracy and where approaching government offices is so tortuous, this provision needs a serious rethink.

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Business Standard
177 22

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