India’s Ownership Problem – Part 3

Without ownership - complete right to property, land titling and freedom to trade land - the necessary conditions to creating wealth are missing in India.

Continuing the series on India’s Ownership Problem: Part 1 and Part 2

We do not have ownership of our property.

A large number of people live in homes which they have no title to. As such, they cannot monetise the property that they own – which is as good as not owning it. Without having access to financial resources, it becomes very hard for people to rise out of poverty. In effect, what they own is not really theirs. It can be taken away by the government at any time.

How did it come to this? Here are the problems.

1. Right to Property

First, the right to property which was a fundamental right at the time of the drafting of the Constitution was converted into a legislative right in the mid-1970s by the Janata government. As a result, the state (as in any of the governments) can take away private property on a whim, as it has usually done with land, and most recently with our money during the demonetisation exercise.

2. No clear titles

The second problem is that of titles. Lack of clear titles is one of the biggest reasons for litigation. A dispute means that the underlying property cannot be monetised or used for productive purposes. Also, many people live in homes where the title to the property is not clear. This also applies to small shops. As a result, while they may occupy the space, the property itself cannot be converted into collateral for capital, thus limiting the ‘owner’s’ ability to monetise the underlying asset.

3. Arbitrary restrictions on transactions

There is a third issue also. The government puts arbitrary restrictions on transactions between two consenting parties. Take farmland as an example. It can only be sold to other farmers, thus limiting its value. This creates scams where farm land is bought by a middleman who is politically connected and can get the land-use changed for “non-agricultural” purposes. This simple change increases its value many times which is they pocketed by the middleman – everyone except the farmer who owned the land in the first place gains.

Without complete right to property, land titling and freedom to trade land, the necessary conditions to creating wealth are missing in India.