Reforming India’s land titling system

A gradualist approach stands a much greater likelihood of success with reforming a complex legacy system like land records.

Among all the problems faced while doing business in India, there is arguably none more daunting than that presented by incomplete land titles. Disputed ownership is commonplace, with many cases under litigation for decades. Buyers have to navigate a minefield to acquire clear land titles.

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A Bill to amend the Registration Act, 1908 in a bid to increase transparency of land ownership and its transactions is currently pending in the Parliament. However, despite its good intentions and apparent rational appeal, the sorry state of land records in India, mount several practical challenges to its effective implementation.

Currently a registered sale deed does not confer title ownership and is merely a record of sales transaction. It only confers presumptive ownership, which is liable to be disputed. This amendment would convert land registration into a “guaranteed title certification”. It would herald a paradigm shift in India’s land titling system.

Currently title is established through a chain of historical transfer documents that originate from the first owner. Accordingly, before they purchase land, buyers have to examine all the link documents that establish the title from its original owner. As can be imagined, owners, especially in urban areas, rarely have access to such a long chain of documents. This increases uncertainty and risks in land transactions.

The amendment would usher in the Torrens system of land titling, whereby title is established by a register of land-holdings maintained by the government. A registration transaction would extinguish all previous rights and become sanctified as a formal title transfer to the purchaser. Prospective land buyers will now only need to examine the land register and purchase from the recorded owner.

This has obvious appeal as it appears to maximise transparency and eliminate uncertainty, apart from considerable simplification of land transaction process. However, this assumes that it is possible to construct an initial register of land-holdings which can support the registration process. Unfortunately it is here that this reform is likely to stumble in its implementation.

For something so valuable, land records in most developing countries are archaic. No register, which reliably confirms title, exists anywhere in India. Small experiments in some states to build such register have not been successful. Existing registers suffer from problems arising from lack of updation, fragmentation of lands, informal family partitions, unregistered power of attorney transactions, and numerous boundary and ownership disputes. The magnitude of these problems gets amplified manifold in urban areas.

The creation of a land-holdings register requires that land parcels be identified, with their boundaries, and ownership established. The former requires maps of individual land parcels and their location within an area’s land grid, both correlated accurately with the prevailing ground conditions. The latter requires undisputed, litigation-free ownership rights. Both these records will then have to be publicly notified before it takes effect.

Proceeding in this direction with the existing records is certain to open up a Pandora’s Box of acrimony and litigation. But revising records is likely to be a long-drawn litigation-filled process, and certain to raise political opposition. The standard approach, like that done in states like Karnataka, Gujarat, and Andhra Pradesh, have been to carry out comprehensive one-time re-survey to document and digitize the latest boundaries, establish ownership by examining chain of documents, and then notifying them before entering in the land-holdings register. They invariably become embroiled in litigations and run into several practical problems. It is unrealistic to settle decades-old disputes in a short time.

So what is the way forward? Foremost, we need to acknowledge the difficulty of a time-bound, mission-mode strategy to build land-holdings register. A more realistic approach would be to let the records evolve over a period of time. In the circumstances, a two-track approach may be more appropriate.

New registrations should be done only with a digitised map of the individual land parcel and its location, and ownership established by certification of the documents by a competent authority. The registration will have to be publicly notified and appeals disposed, before the transaction enters the register. The legislative framework being contemplated can govern this process. All land-related transactions – new property tax assessments, utility service connections, mortgages and bank loans – should be brought under a similar policy framework. Further, existing land owners should be given the option of proactively getting their lands included in the register through this process.

However, given the pervasiveness of disputes and litigation, it may not be possible to clearly demarcate boundaries and establish ownership in many cases. Such registrations will continue under the current rules. The market will invariably price the land values to reflect the reduced risk from inclusion in the register. Incentives like lower stamp duty for transactions done under the amended process may encourage people to prefer the new process. Hopefully this two-track strategy will create adequate incentives for people to get their lands included in the register.

The mission-mode strategy of re-surveys, digitization, verification, and notification title could complement this two-track approach. It can be taken up in smaller towns where the land values are still low and development potential enormous, and therefore the marginal benefits from cleaning ownership records is the highest. It can also be done in villages where land records are more reliable and updated.

In a recent research paper, Jonathan Zasloff, Professor of Law at the University of California, Los Angeles, has argued convincingly that the embrace of the Torrens registration system is ill-suited for developing countries like India and “could represent another episode of failed economic development planning”. Instead, he advocates that complementary legislations and rules that clearly define the time period within which property interest claimants should assert their rights and greater clarity on adverse possession can help advance the reforms.

In conclusion, a gradualist and heterodox approach stands a much greater likelihood of success with reforming a complex legacy system like land records.

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