Towards a Title Registration System in Delhi: Why and How? Carol S. Rabenhorst The Urban Institute Washington, DC World Bank Conference: Challenges for Land Policy and Administration February 14-15, 2008, Washington, D.C.

Introduction to Delhi Population: 14 million (3rd largest in India) Size: 1483 sq km Government authority and characteristics: Not a state but the National Capital Territory (similar to Washington, DC) Governed by 3 municipal corporations Land and property issued managed by Delhi Development Authority (est. 1957) 9 districts and 27 sub-districts for document registration, including deeds

Current Tenure Characteristics in Delhi Freehold land (Old Delhi; pre-1947 titles; more recent colonies; leasehold conversions) Leasehold land (owned by development authorities) Apartment – sale deed and use rights; chain of title remains with developer Informal settlements – 10m+ people, over 70% Types: squatters, relocation settlements, unauthorized colonies, rural and urban villages All income levels No title requested or obtained No building permit requested or obtained Risk of demolition Nature of tenure constrains water and electricity supply and service

Current Land Administration System in Delhi Registration of sale deed and leases compulsory but often ignored No central registry for private urban land Records of government-owned land kept by many separate agencies Most land not surveyed Deed registration system, in effect since 1908 Registers transactions and transfers (except inheritance) Sale by power of attorney allows sales without registration, incentives to avoid fees and taxes Records maintained manually by date of registration, not by owner or property ID; difficult to trace chain of ownership (newer registration are computerized in most districts)

Requirements for Deed or Lease Registration in Delhi Document required to be registered (in duplicate) Two Passport size photographs of both parties. Two witnesses. Proof of identification of each party and witnesses i.e. election Identity Card, Passport, identity Card issued by Govt. of India, Semi govt. and Autonomous bodies or identification by a Gazetted officer. In case the property is/was under a lease from D.D.A., L&DO, M.C.D., Industries Department, Labour Department of Delhi Govt. etc., permission of lessor for registration of the document. No objection Certificate under section 8 of Delhi Land (Restriction and Transfer) Act, 1972 from Tehsildar of the Sub Division of the District to the effect that the property is not under acquisition. Income Tax clearance Certificate in prescribed proforma 34A, under section 230 of Income Tax Act, from concerned Income Tax Officer where the transaction exceeds Rs.5,00,000/- Permission from the Appropriate Authority in the prescribed proforma 37 I, where the transaction exceeds Rs.50,00,000/- under the provisions contained in section 269 of Income Tax Act, 1961.

Cost to Transfer Title as a Percentage of Value of Property Source: UN High Commission on Legal Empowerment of the Poor, September 2005

Consequences of Current Registration System in Delhi Title and possessory rights cannot easily be verified The property market is inefficient Property disputes are common Non-registration and undervaluation decreases government revenues from stamp duties (5%), transfer tax (3%) and property taxes No coordination between authorities Most households have no access to formal housing finance Mortgages made by deposit of title deed with lender, often not registered → increased credit risk Financial sector growth is lagging China (pop. 1.3B) : $356b in mortgage debt (from $0 in 9 years) ; 11% of GDP India (pop 1.1B): $18b mortgage debt, ≤2% GDP

Private credit as a share of GDP Source: Doing Business Database (2004) World Bank

Recommendations for Delhi Change to title registration system May require amendments or eventually a new law Examples of recent changeover: Hong Kong – beginning 2004 Ghana – beginning 2003 Scotland – beginning 1979 Reorganize institutional structure under Government of Delhi Undertake cadastral survey and first registration Guarantee of accuracy Open to public Computerize old records Models in India: Bhoomi project in Karnataka (WB) 20M rural records computerized 1995-2001; urban records now underway Time to register 45 → 6 days. Maharashtra Chandigarh Lower registration fees Consider other options to improve tenure, at least in short run

Principles of Title Registration Systems to be Adopted Interests transfer upon registration Except for statutory reservations, no validity without registration even with notice Priority determined by time of registration Government operated, financed with fees and government funding Establish guarantee by state Require information sufficient to identify property and other interests, establish chain of title Public access

Roadmap for Registration Reform Assess the legal and institutional environment Prepare functional specifications for agency Design procedures for systematic or first registration Fine tune the legal framework Design efficient registration procedures Procure survey and mapping information Assign unique parcel identifiers

Roadmap for Registration Reform, cont. Procure information systems Install system architecture and equipment Implement public information program Purchase and upgrade office facilities Train personnel Plan for maintenance and upgrading

Cost and Time Commitment Range of cost: $8 million to $195 million Average cost $15-20 million Time: 5 – 10 years, sometimes 20-25 Average allocation of costs:

Cost Recovery and Fiscal Benefits Proven increase in revenues Transfer taxes Property taxes Stamp duties Capital gains taxes Costs not recovered for first registration Willingness to register and pay fees based on perceived value and credibility of the system Relation of lower costs to higher revenues

Cutting duties increases revenue: example of Maharashtra, India

Summary of Findings Re-engineering a titling system takes a long time and a lot of money A good titling system is required for achieving: Best value from land A robust real estate market An efficient mortgage market with improved access to credit Increased investment in housing and small businesses Keys to success: Getting the institutional issues right Maintaining political commitment to policy reform Keeping the system as simple and efficient as possible

Results Government of Delhi is currently considering recommendations for legal and institutional reform, including change to title registration