Sunday, August 22, 2010

For Electronic Trading of Land

The Article below appeared in Economic Times August 17th .   The Article discusses a very far reaching idea of Electronic trading of land. Many concepts and issues discussed in the article are not self explanatory and merit a larger article

Given that governments have a monopoly over large amounts of data and information, and given the advances made in information and communication technologies (ICT), there is an opportunity for it to enhance revenues significantly by moving to a paradigm of ‘Service Oriented Administration’ ( SOA).

The government, in collaboration with private sector partners can provide citizens with services that were hitherto impossible to provide, for which there are no brickand-mortar equivalents and which have the ability to enhance economic activity in the country.

One of the first such SOA initiatives that would arguably have the highest impact on the citizens could be next generation of land records that could be implemented through a Land and Property Exchange System (LAPEX ). The basic concept of such an exchange is that if stocks worth crores of rupees could be traded online with absolute security and privacy, why we can we not trade land and property through a similar online system?

Of course, the analogy between stocks and land is not straightforward, given the complexities involved in land and property records management. However, these differences are not insurmountable. An online LAPEX would open up the land and property market by bringing greater liquidity through enhanced visibility to available properties and greater visibility to potential buyers. 

It is a well known fact based on many studies that any improvement in land and property management would have a significant impact on GDP. States such as Karnataka, which already have a highly evolved set of land and property management systems in place, are well poised to take this next step. Such an initiative would allow citizens to buy and sell land and property online. The government of India has set up of Common Service Centers (CSCs) in rural India, where rural citizens can transact on the LAPEX.

Karnataka already has finely crafted IT systems for the current process of land and property management. This starts from the ‘Mojini’ computerised system for managing pre-mutation property sketches in rural areas and UPOR (urban property ownership records) for managing property ownership records (along with its map) in urban areas, to ‘Kaveri’ for managing the deed registration and stamp duty collection, to the internationally acclaimed ‘Bhoomi’ for effecting the mutation of the property.

Given this strong base and given that a considerable number of records are already “cleaned up”, it is an incremental step to setup LAPEX. Such an exchange could be set up on a public-private partnership basis, with no investment from the government and with the potential to earn hundreds of crores for the government through service charges.

The system would be optional. On the LAPEX, where someone can divide their property, find a buyer or seller, register their sale deed and perform the mutation with only a single visit required to the government office at the end of the entire process. Moreover, pre-mutation sketches and record of rights can now be kept in a secure, authenticated and digitally-signed format in a USB drive and can be traded 24X7.

In addition, it is also important for the government to grant (a) owners a priori right to sell properties where the government has no objections, (b) buyers who qualify on terms such as eligibility to buy agricultural property, a priori right to buy land, and (c) automatic mutation of property after a certain waiting period. Such granting of a priori rights give investors comfort, open up the land market and thus result in additional 1.2% rise in GDP.

Adopting the above process changes would result in emergence of a property record system which would make for easy transition to the Torrens Title System or more popularly called as a the title-based system as compared to the current deed-based one that involves registration of deeds and the need to have a chain of authentic deeds to prove ownership of a property.

The deed-based system makes it difficult to have a clear ownership of a property as each of the deeds in the chain of ownership must be clear in order for the final owner to have a true ownership of the property. Such a situation depresses the property market. The proposed LAPEX would virtually create the central registryof clean property records, an important component of title-based system. The central registry would then provide a near clear title of the ownership of a property.

In fact, it would provide an absolute clear title for all new properties created and registered with LAPEX. The transition to the title system, as and when the land laws are amended to provide for the same, would be fast and less painful, thanks to the LATEX coupled with new processes proposed in Karnataka , which would create cleaner property records

LAPEX along with the above process change from the government would create an explosion of land and property traded in the state. This will also lead to an enormous rise in the value of land and property in the state, thus significantly increasing the state domestic product.

(Jaijit Bhattacharya is at IIT, Delhi; Rajeev Chawla is the IAS officer who pioneered land records solutions, Bhoomi, Khajana and Mojini.)

(With inputs from S Chawla)

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