Fixing India’s Property Rights Mess

The Wall Street Journal online’s article “India Lands in a Mess” discusses the thorny implications of one of India’s most important roadblocks to modernizing the country’s real estate markets: the weakness of private property rights. Tied up with this shortcoming is lack of information about who holds legal title to properties and poor data on land values derived from assessments and transactions.

The land scarcity referred to in the article inflates urban land values, undermining business models that might develop socioeconomically diverse communities within urban centers. Hence, the well-known estimates that as much as 50% of city-dwellers in India live in slums.

This article doesn’t mention the lack of legislative and policy tools to force landowners not developing their land to sell or to free up underutilized public lands and buildings for development of affordable housing. Not only is this gumming up the development of potential markets, but also the justice system with the article suggesting 80% of cases in the lower judiciary relate to land disputes and fraud.

India’s legislative wheels are starting to turn, yet, as usual, with a considerable amount of grit in the gears. Mr. Mitra suggests that the tide is moving towards clarifying land rights, most recently with the draft of the Land Titling Bill of 2010, now open for public comment. This bill aims at digitizing land registers, cleaning up existing land conflicts and introducing title guarantees and indemnification mechanisms, among other elements. The article, interestingly, emphasizes the importance of political participation and widespread buy-in to ensure the success of both the policy aspects and the technical implementation issues.

In many developing countries, as emphasized here in India, real estate is considered a business for unsavory characters of questionable relationship to organized crime and the political establishment. This draft, for instance, may lead to new sources of fraud or fail to eliminate the tried and true – from duplicate paper and e-records, from working around duties imposed on real estate sales

At Smart Cities Advisors, we’ve often wondered about the impact of corruption on the development of the real estate industry. Construction and development have such a dramatic effect on citydwellers’ quality of life and livelihoods that the industry should be a prime candidate for progressive investment. We wonder how much potential mission-oriented investment has been turned off of housing, cities and sustainable property for not wanting to accept the financial and headline risk of corruption in projects… and how many bright, innovative minds have decided against a career in real estate development because of its dirty reputation… and how much capital more appropriately destined for inclusive projects could have been deployed in the absence of these market failures.

It’s worth considering how the dearth of law and ethics in this industry has undermined its potential positive influence in developing countries. We have set our sights on moving toward standards and identifying business stakeholders that recognize social and environmental goals as an opportunity and an integral part of doing business and setting a new standard in urban real estate. Sound crazy and idealistic? Maybe… Let’s see…

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