Page 49 - Banking Finance July 2022

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agencies work in isolation and often under archaic laws that this system shall serve as a certificate of full, indefeasible
have not evolved with the times. Furthermore, the and valid ownership in the court of law.
information collected from these various agencies is difficult
to collate and capture for a holistic view-taking point of view. Guaranteed titling systems have been developed and are
Most of the lenders spend precious man hours in deciphering prevalent in countries such as Australia, New Zealand
the data and on the basis of that take any credit decision. ,Singapore and UK. The system, which guarantees land titles
and ensures compensation by the state in case of any
4. Unclear Titles : It is not surprising that in such an disputes is a marked contrast to Indian land titling system
environment of vagueness of information land titles are which is presumptive and is based on title deeds and
frequently contested in our courts, which are brimming with property tax receipts to prove land ownership. Often these
pending cases of disputed property .A study by consultancy title documents do not follow the Mirror principle -which
firm McKinsey suggests that as much as 90 percent of land states that the land document must reflect the REAL ON
parcels in India are prone to disputes over ownership. When GROUND SITUATION. The Union Government has draft land
the titles are not clear, the lender runs the double risk of Title Act 2019 which prepared way for conclusive land titles
customer not being the owner of the collateral as well as and that in turn paved way for easy access to credit for
the risk that the title may not get easily transferred to the farmers and also reduce a large number of land related
lender in case of borrower's demise. litigations.

5. Prohibitory Costs : Cost of collateralization as well as 2. Unlocking value of vacant public land : The
Due-Diligence before and after the process is prohibitive for
biggest property owner in the country,
the lender. The rates of registration and stamp duties vary
Government of India, may not always have exact information
from state to state and are often considered to be highest
about the total land ownership it has. Unfortunately, this
in the world. Moreover liquidity of lands with disputed titles
scenario often occurs. However the ownership of large
may also be questionable.
tranches of government land can be incentivised by the joint
venture between public and private players. This may take
All these factors either in combination or individually affect
the form of any of the following:
the suitability of the land to be accepted or preferred form
a. Leasing : short-term leases, like parking-space contracts
of collateral
etc. where the lessee always does not have to make
any significant capital investment allows retaining of
Unlocking India's Land Markets and land as public assets and also enables intelligent recycling
other innovative solutions to unlock of land, as is done in China.
value of land as an asset b. Equity: Use of land as government equity could be
explored.
1. Titling System :
For many decades now we have been debating about
3. Smart Planning :
graduating to Torrens land titling system .Some of the key
A completely risk-averse model would suggest to follow a
features of Torrens system are:
conventional lease model which retains the land and also
1. The Mirror Principle : It indicates that the register of
gives steady revenues accruing. Examples include small part
titles MIRRORS the reality.
of land could be leased out to banks for ATMs etc. or to local
2. The curtain principle: It suggests that there is a curtain Resident Welfare Associations for playgrounds purpose etc.
over the past and a register of titles is full-proof evidence
that the title at present is clear and unambiguous and 4. Some Practical Reforms from bankers
there is no need to raise the curtain meaning the past perspective :
may not be investigated.
The whole gamut of valuations and other mortgage data
3. The Assurance Principle : It guarantees indemnification existingly available with the banks can be capitalized upon.
by the state against errors in title register. The Land There can be a creation of a shared technological platform
title certificate issued to the land/property owner under of all banks, Financial Institutions that captures all valuation

BANKING FINANCE | JULY | 2022 | 49