Should India adopt demat model for land titles?
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Barun Mitra
Nov 18, 2014, 11:57:20 PM11/18/14
to property-rights-forum
India's experience with securities shows a way to help create a market for land, by adopting the demat model for land titles, writes Ashok Lahiri in the Business Standard, on Nov 4, 2014
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Relative to how to improve markets for labour or capital, or even entrepreneurship, in India, the discussion on what to do with the markets for land is scarce. Land is the first of the four classical factors of production; you cannot produce anything - not crops, not even software (given the need for office space) - without land.
After independence, the debate was mostly about land reforms. Then it got focused on the three "R"s - relief, rehabilitation and resettlement - associated with acquisition for infrastructure, urbanisation and industry. This culminated in the controversial Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013.
Land titles got short shrift. How do you carry out land reforms if you do not know who owns what? Or, how do you implement the three "R"s if you do not know who to provide relief to, rehabilitate or resettle? Land title has been the proverbial elephant in the room for Indian policy.
Dematerialisation of securities has ushered in remarkable progress in Indian capital markets. Gone are the bad deliveries, deliveries held "under objection". No more buying of thick wads of paper with the risk of transfer and uncertainty about what you are buying. No more risk of theft, mutilation and the loss of certificates.
For most people, land is more important than financial securities. Yet, relatively, the arrangement about land continues to be extremely primitive.
The Seventh Plan (1985-90) launched two ambitious centrally sponsored pilot schemes - the Computerisation of Land Records, and Strengthening of Revenue Administration and Updating of Land Records. The 11th Plan (2008-12) combined the two and launched the National Land Records Modernisation Programme (NLRMP) in August 2008. It aimed "to modernise management of land records, minimise scope of land/property disputes, enhance transparency in the land records maintenance system, and facilitate moving eventually towards guaranteed conclusive titles to immovable properties in the country".
A visit to the NLRMP website reveals a horror story. Practically no progress, even in entry of textual data, in all states except Gujarat, Karnataka and Maharashtra. Delhi is no exception. Furthermore, in the column "If no, by which date it will be completed", it often mentions dates that are either pure gibberish or a date in the past!
Why are the records in such pathetic shape? Records exist in the names of persons long dead. Or, land has been transferred without mutation of the records. They are not up to date, and sometimes not even available. When available, they are often torn and brittle.
The reasons are not far to seek. First, there is an incentive problem. In olden times, land revenue was by far the largest item of public income. In 1856-57, for example, in total receipts of about £33 million, land revenue of £17.5 million was the largest contributor, followed by opium! Starting from Raja Todarmal, Akbar's minister of finance, right up to British colonial times, recording land rights was important primarily for the collection of revenues.
Predatory land taxation under various rulers, including the British, was considered a major cause of poor agriculture. It agitated people during the freedom movement. For example, after the poor harvest in 1917-18, Mahatma Gandhi, assisted by Sardar Patel, advised the peasants in Gujarat's Kheda district to stop paying land revenue. After independence, land revenue - a state subject in the Constitution - gradually became an insignificant source of revenue for the states. For instance, in Madhya Pradesh, its share in the state's own tax revenue declined from 43 per cent in 1957-58, to nine per cent in 1970-71 and further to 1.4 per cent in 1989-90. In 2011-12, for all the states combined, land revenue constituted 0.85 per cent of own revenue. There was no financial incentive in maintaining land records.
There are two more reasons for the lack of progress in the NLRMP. Updating of record of rights is a prerequisite for entering the data in the computer. And that requires a survey. Poor governance leads to popular fear of manipulation by the rich and the powerful. N C Saxena, a veteran civil servant, quipped that "the surest way for an incumbent government to lose an election in any area is to announce a survey in that constituency". Survival anxiety of governments, especially in the coalition era from 1989, has militated against progress. Furthermore, the Left has seen the computerisation and updating of land records as the "rightward drift in Indian politics" and virtual abandonment of state-led land reforms. What is difficult to understand is: how do you carry out land reforms if you do not know who owns what?
Perhaps in moving forward in the land titling system, there is a lot to be learnt from India's 18-year own experience with the dematerialisation of financial securities.
Following the enactment of the Depositories Act in 1996, voluntary dematerialisation of financial stocks started only from December 1996. Even now, if you do not wish to trade, you may hold the old stocks in paper form. Scepticism was reflected in an initial poor investor response. But with a bunch of dedicated professionals guiding its progress, the value of dematerialised securities crossed the $1-billion mark by June 1997. By end-September 2014, there were more than 22.4 million dematerialised account holders with a value of securities of about Rs 121 lakh crore ($200 bn)!
Why not have an Act on land depositories on the lines of the Depositories Act of 1996 for securities, and set up an organisation with a name such as the National Land Depository Ltd (NLDL)? The NLDL may be set up jointly by a few state governments, the central government and some financial institutions (both public and private). It may have branches in state capitals with the consent of the relevant state governments. Upon payment by the "land owner" holding a registered deed - correct or otherwise - the NLDL can dematerialise the ostensible land title on a tentative basis with the same status as the registered deed. The fee received may be shared with the relevant state government with jurisdiction. For a competitive market in fees, an alternative land depository (such as the Central Depository Services Ltd competing with the National Securities Depository Ltd) may be set up as well.
Once the land title has been dematerialised on a tentative basis, it may be put on the website of the depository for receiving objections within a period of one year. The relevant village patwari, district administration and elected leaders may also be informed to raise their objections. If no objection is received, the title will be moved from tentative basis to a title guaranteed by law. Once the voluntary dematerialisation of land records makes some progress, governments can think of subsidising small holders the fees payable for such dematerialisation.
The original article is available here. --
Relative to how to improve markets for labour or capital, or even entrepreneurship, in India, the discussion on what to do with the markets for land is scarce. Land is the first of the four classical factors of production; you cannot produce anything - not crops, not even software (given the need for office space) - without land.
After independence, the debate was mostly about land reforms. Then it got focused on the three "R"s - relief, rehabilitation and resettlement - associated with acquisition for infrastructure, urbanisation and industry. This culminated in the controversial Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013.
Land titles got short shrift. How do you carry out land reforms if you do not know who owns what? Or, how do you implement the three "R"s if you do not know who to provide relief to, rehabilitate or resettle? Land title has been the proverbial elephant in the room for Indian policy.
Dematerialisation of securities has ushered in remarkable progress in Indian capital markets. Gone are the bad deliveries, deliveries held "under objection". No more buying of thick wads of paper with the risk of transfer and uncertainty about what you are buying. No more risk of theft, mutilation and the loss of certificates.
For most people, land is more important than financial securities. Yet, relatively, the arrangement about land continues to be extremely primitive.
The Seventh Plan (1985-90) launched two ambitious centrally sponsored pilot schemes - the Computerisation of Land Records, and Strengthening of Revenue Administration and Updating of Land Records. The 11th Plan (2008-12) combined the two and launched the National Land Records Modernisation Programme (NLRMP) in August 2008. It aimed "to modernise management of land records, minimise scope of land/property disputes, enhance transparency in the land records maintenance system, and facilitate moving eventually towards guaranteed conclusive titles to immovable properties in the country".
A visit to the NLRMP website reveals a horror story. Practically no progress, even in entry of textual data, in all states except Gujarat, Karnataka and Maharashtra. Delhi is no exception. Furthermore, in the column "If no, by which date it will be completed", it often mentions dates that are either pure gibberish or a date in the past!
Why are the records in such pathetic shape? Records exist in the names of persons long dead. Or, land has been transferred without mutation of the records. They are not up to date, and sometimes not even available. When available, they are often torn and brittle.
The reasons are not far to seek. First, there is an incentive problem. In olden times, land revenue was by far the largest item of public income. In 1856-57, for example, in total receipts of about £33 million, land revenue of £17.5 million was the largest contributor, followed by opium! Starting from Raja Todarmal, Akbar's minister of finance, right up to British colonial times, recording land rights was important primarily for the collection of revenues.
Predatory land taxation under various rulers, including the British, was considered a major cause of poor agriculture. It agitated people during the freedom movement. For example, after the poor harvest in 1917-18, Mahatma Gandhi, assisted by Sardar Patel, advised the peasants in Gujarat's Kheda district to stop paying land revenue. After independence, land revenue - a state subject in the Constitution - gradually became an insignificant source of revenue for the states. For instance, in Madhya Pradesh, its share in the state's own tax revenue declined from 43 per cent in 1957-58, to nine per cent in 1970-71 and further to 1.4 per cent in 1989-90. In 2011-12, for all the states combined, land revenue constituted 0.85 per cent of own revenue. There was no financial incentive in maintaining land records.
There are two more reasons for the lack of progress in the NLRMP. Updating of record of rights is a prerequisite for entering the data in the computer. And that requires a survey. Poor governance leads to popular fear of manipulation by the rich and the powerful. N C Saxena, a veteran civil servant, quipped that "the surest way for an incumbent government to lose an election in any area is to announce a survey in that constituency". Survival anxiety of governments, especially in the coalition era from 1989, has militated against progress. Furthermore, the Left has seen the computerisation and updating of land records as the "rightward drift in Indian politics" and virtual abandonment of state-led land reforms. What is difficult to understand is: how do you carry out land reforms if you do not know who owns what?
Perhaps in moving forward in the land titling system, there is a lot to be learnt from India's 18-year own experience with the dematerialisation of financial securities.
Following the enactment of the Depositories Act in 1996, voluntary dematerialisation of financial stocks started only from December 1996. Even now, if you do not wish to trade, you may hold the old stocks in paper form. Scepticism was reflected in an initial poor investor response. But with a bunch of dedicated professionals guiding its progress, the value of dematerialised securities crossed the $1-billion mark by June 1997. By end-September 2014, there were more than 22.4 million dematerialised account holders with a value of securities of about Rs 121 lakh crore ($200 bn)!
Why not have an Act on land depositories on the lines of the Depositories Act of 1996 for securities, and set up an organisation with a name such as the National Land Depository Ltd (NLDL)? The NLDL may be set up jointly by a few state governments, the central government and some financial institutions (both public and private). It may have branches in state capitals with the consent of the relevant state governments. Upon payment by the "land owner" holding a registered deed - correct or otherwise - the NLDL can dematerialise the ostensible land title on a tentative basis with the same status as the registered deed. The fee received may be shared with the relevant state government with jurisdiction. For a competitive market in fees, an alternative land depository (such as the Central Depository Services Ltd competing with the National Securities Depository Ltd) may be set up as well.
Once the land title has been dematerialised on a tentative basis, it may be put on the website of the depository for receiving objections within a period of one year. The relevant village patwari, district administration and elected leaders may also be informed to raise their objections. If no objection is received, the title will be moved from tentative basis to a title guaranteed by law. Once the voluntary dematerialisation of land records makes some progress, governments can think of subsidising small holders the fees payable for such dematerialisation.
http://www.business-standard.com/article/opinion/ashok-lahiri-demat-land-title-114110401246_1.html
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