Last week, the Rajasthan government led by Vasundhara Raje set in motion policy change, which if pursued to its logical conclusion, could revolutionize the existing concept of land and property ownership in the country.

It managed to steer through the state assembly The Rajasthan Urban Land (Certification Of Titles) Bill, 2016, which basically clears the deck for creating a guaranteed titling regime in the state.

At present, what Rajasthan and the rest of the country has is what Swati Ramanathan, urban planner and advisor to the Rajasthan government, describes as “presumed ownership"—the title in our possession is actually a record of a property transaction and not ownership rights. Which is exactly why so many of these transactions are disputed and end up in court. Not only do they preclude commercialization of the property, they also end up adding to the mounting backlog in courts—as they say, justice delayed is justice denied.

In an opinion piece published in Mint last week after the passage of the legislation, Ramanathan said, “The notion that a ‘sale deed’ is proof of ownership is misplaced. The registration of property at the stamps and registration department merely acknowledges that a transaction has taken place between two parties. It does not verify or guarantee that the seller is indeed the indisputable owner, nor that the buyer is now indisputably the new owner. It does not guarantee the existing nature of rights to the property, or that the property has no existing restrictions on rights, or that it has no existing mortgage or lien on it, no disputes or litigations in court."

This change from presumed to actual ownership of property rights is profound. Instinctively, it makes us think of our own flats and homes. Actually, it is so much more. The concept of titling, once decreed, has the potential to bring to commercial life what Hernando de Soto, a Peruvian economist and one of the pioneers of titling, called “dead capital"—assets created in the informal economy, inhabited largely by the socially and economically disenfranchised among us.

In an interview to Mint in 2007, de Soto estimated this to be worth about $10 trillion the world over. The trick is, like he pointed out, to incentivize people in the informal economy to accept the new terms of guaranteed titling. At the moment, the assets in the informal economy are protected through informal means—like the use of the mafia. A property owner has to be convinced that a legitimate title guarantees them far greater returns than what is available in the informal economy—and this inevitably begins with security of tenure at their existing domicile.

Under Rajasthan’s new titling law, the granting of legitimate rights to a property owner, which at present can be disputed, dramatically improves their ability to trade these rights legally. This is, however, based on people trusting the government’s ability to deliver on the promise of a guaranteed title. At the moment, the trust quotient between the people and governments in general is at an all-time low and it will therefore require enormous political heavy lifting.

This fundamental change in property rights is what is at the core of titling legislation passed by the Rajasthan government. To be sure, it has been in the official works for some time now. Raje moved on it in her last stint at the helm, but couldn’t make headway; simultaneously, the Union urban development ministry at the time came up with a set of guidelines for states desiring to make this transition to pursue through a titling policy. Presume this is a new beginning.

Implicitly, implementation of a new titling regime, especially if emulated nationally, will be another big step in moving the country towards a rules-based regime as opposed to the existing exceptions-based one, which is fundamentally flawed. And this undoubtedly is a precondition to creating a transparent market-based economy. It is frankly, of far more national import than the petty issues being hawked around, but it has unfortunately not got its due as yet.

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics.

His Twitter handle is @capitalcalculus

Comments are welcome at capitalcalculus@livemint.com

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