Thursday, March 7, 2019

Can Blockchain transform land records in India ?

The Indian land and property ownership records are a very sorry state of affairs. More than 40% of the pending cases in Indian courts are property disputes. Anyone in India who has tried to sell his land or house would tell you how extremely illiquid the land/property market is in India. Irrationally high property registration fee and archaic registry laws have not helped matters either.

For any capitalist economic system to work, guarantee to private property is the basic founding principle. Unfortunately, for millions of India, their most important private property - land/houses are highly vulnerable to theft by mafia & land sharks. Land/property ownership on paper and actual possession on the ground are highly divergent. It's extremely difficult to raise capital against property in India unlike any other developed country in the world. The situation is so bad that for any developmental or corporate work, the corporations depend on Indian Government to acquire land (through Land Acquisition Acts) for them, rather than buying land from the open market, like any other developed country.

India critically needs a radical overhaul of land/property ownership record system(s). Most researchers have claimed that implementing GST will result in a 2% increase in GDP growth. I can confidently say that proper digitalization (will define proper digitalization later) of property records in India will result in a much higher increase in GDP growth than GST implementation. 

The term "digitalization" of any official record, is very tricky, as it may mean either a complete process transformation or just storing a scanned copy of the paper records in a database, which leads to no real impact at all or it may mean something in the middle. There have been multiple failed efforts to digitize land/property records in India but all of them were half-hearted typical bureaucratic measures which do not utilize the latest technologies. Projects such as Aadhaar, have proven that the Indian Government is capable of executing rare technological feats, such as creating a biometric identification system for over a billion people. Payments systems such as UPI have shown that Indian government can build most technically advanced systems in the entire world. India has been able to achieve technology leapfrog in multiple sectors such as telecommunications, e-commerce etc. Hence it is extremely surprising that no one seems to be talking about reforming our archaic land ownership record system using the latest technologies.

Land is a State Subject in India and so each State has slightly different laws, land usage types and transaction processes. However, the basics are very similar in all states. Essentially there are two important types of documents - (1) Land/Property Registry document and (2) Area Land/Property Register. These, of course, are generic names and there are different terminologies in different places. I will explain both these documents in greater details below.

The "Land/Property Registry" (or a title deed) is proof of transaction between the seller and the buyer along with the transaction amount, registration fee etc. However, the thing to note is that the Registration Document is not the final proof of ownership. It is only a proof of transaction between one party and another. If anyone proves in a court of law, that the seller was not the original owner of the property, the buyer will have to relinquish ownership of the property even though he/she has a valid registration document. This can go back any number of steps - the owner before the current owner, the owner even before that etc. Hence there is always some risk associated with ownership of any property in India (except if you have bought it from the government itself). The other big problem of the registration document is that it does not mention the latitudes/longitudes of the property. While the registration document describes the property in wordings (surroundings) and in terms of plot number (or some such equivalent Official Land/Property Number) but not something which can be independently and scientifically verified such as latitudes and longitudes. This leads to a lot of problems when it comes to the division of property. Most of the land records do not have a non-duplicatable and reliable ID such as Aadhaar but have any of the unreliable archaic government IDs. Hence there are several disputes related to the identity of the buyer (person or a company) in whose name the Registry document has been generated.

The second important document is official Area Land/Property Register which essentially is a map of the geographic land area, divided into multiple plots along with the current ownership details as per government records, official land use and many other details. There is no integrated Area Land/Property Register for the entire country. There are multiple distributed land records, generally for each district. The quality of the Land/Property Register(s) and the amount of information available varies very widely with both geographic areas, legal jurisdictions as well as different durations of time. These are not GIS maps but a rather old style cartographic maps with verbal descriptions. Multiple deliberate errors have been introduced in these Land/Property Register(s) to enable land grabbing, illegal commercial property in residential-only areas, extortion, bribery and other types of frauds over the years. Even if someone proves in a court of law that he/she lost their title due to state error (along with private fraud), the state does not provide any compensation unlike in countries such as Australia. The boundaries in these maps are not very accurate (they are not linked to latitude/longitudes), especially in rural areas where boundary demarcations are not very clear. This is the major reason why GIS-based land record digitization attempts have not been very successful in India.

Apart from multiple types of frauds contained in individual Land/Property Registry documents and the official Land/Property Register(s), there are a huge number of unauthorized constructions in India for which no official records exist. These illegal constructions have also changed hands multiple times and there are no reliable records for any of them. The only proof that residents/companies occupying illegal properties have are utility bills, address in personal IDs etc., which are highly susceptible to frauds. Due to the heavy social costs involved, it is impractical to advocate for the demolition of all unauthorized constructions across the country. Also, the first step in any solution to the problem of unauthorized constructions in India has to start with having an accurate record of all unauthorized constructions and their current possession status. Creating such a record is extremely difficult. 

India Bureaucracy is extremely corrupt and cannot be trusted for correcting the system. They thrive and flourish because of these errors in the system and are constantly looking out for ways to find loopholes. The amount of corrupt coordination that the bureaucracy can manage in India is extraordinary and any type of manual investigations has proven to be futile in India. Various studies on the implementation of different government schemes in India have shown that corruption has been brought down to zero only in cases where - (1) The entire process is online and the citizen does not have to go to any Government department or (2) There is no monopoly and multiple agencies (including 3rd party agencies) have the authorization to complete the task. 

Blockchain is a revolutionary technology for creating shared/distributed databases between multiple parties who do not trust each other. Blockchain transactions are extremely costly and slow. Hence the ideal use case for Blockchain technology should be in cases where there are multiple non-trusting parties, transactions are of high value and some latency in any transaction is acceptable. Blockchain has few viable business use-cases till now (I don't think cryptocurrencies are viable business use-cases), even though the buzz surrounding it is very high. I believe Blockchain technology is ideally suited for solving the problems of Land/Property Registration in India.

Indian Land/Property Registrations fulfil all the important criteria of an ideal Blockchain use case -
  1. Multiple non-trusting parties: There are multiple parties which need to do multiple different types of transactions -  
    1. Land/Property Registration Department (State/District specific) - Issuing Land/Property Registry document and updating Area Land/Property Register
    2. Different types of Planning Departments - Categorizing land under various uses-cases (land use type), carving out new pieces of land, future planning, forest conservation etc.
    3. Cartographical Mapping Departments - Mapping the land/property records (with actual  Latitude/Longitude on the ground. 
    4. District Court, High Court and Supreme Court (Court Administrative wing) - Deciding arbitration cases and changing both Land/Property Registry document(s) and Area Land/Property Register(s)
    5. Different Complains Departments (for Citizens and Companies) - Raise official complains (both to the bureaucracy and courts) on the official Area Land/Property Register and playing a crucial role in determining whether a piece of land/property is under any dispute or not. 
  2. High-Value Transactions: Government receives very high registry fees for documenting each transaction. There is enough margin in these transactions to justify the use of extremely expensive Blockchain technology
  3. Transaction Latency: Significant latency is acceptable for Land/Property transactions
India needs a dedicated Private Blockchain Network which will be at the centre of all processes related to Land/Property ownership, record, disputes and planning. This has also been recommended by NITI Aayog recently. Using a private and permission blockchain network to create and maintain Land/Property Register, it is possible to solve all the following problems independently - 
  1. Ensuring atomicity of all new transactions across a wide variety of stakeholders. Lack of atomicity of transactions, across all the different records, is the biggest loophole that land sharks use on gullible people. In the first step, all new transactions will be recorded both in the new blockchain-based system and the old system. 
  2. Incorporating the legacy Land/Property Registry documents (available with bureaucracy or people or company) into the new system without introducing more frauds by bureaucrats. The process should work even if limited information is available in multiple different formats
  3. Incorporating the legacy Area Land/Property Register with the new system without introducing more frauds by bureaucrats.
  4. Permanently link all new (and old) Land/Property Registry documents with Area Land/Property Register based on all the various numbering schemes (Official Land/Property Number) used over the years, with the ability to provide a complete history of ownership details at the touch of a button.
  5. Creating a complete process for registering official complains (to bureaucracy or to the courts) on the latest versions of Area Land/Property Register, along with the ability to collate and track all complain(s) for a particular Land/Property.
  6. Creating a mapping between official land/property number with a common cartographical GIS map having latitudes/longitudes by combining data from multiple surveys different Land Registers etc, highlighting all errors/mistakes
  7. Creating a parallel system for storing details of unauthorized constructions and their ownership transfers without providing any legal status to them and incorporating data from multiple surveys.
The beauty of Blockchain technology is that it is a completely decentralized solution. There is no central database with any entity. Creating multiple systems specific to different stakeholders and trying to achieve atomicity of transactions is very very difficult. However, with Blockchain technology, it is easier to coordinate between different completely independent government agencies because of its inherent features of Smart Contracts, Direct to Doer (D2D) architectures, ability to audit transactions without dependence on any participant as well as ensuring transactional confidentiality. 

Mapping the land/property records with Latitude/Longitude requires heavy manual work and multiple surveys. It is not a simple one-step process. It can also lead to creation of new Official Land/Property Numbers. This requires a very flexible architecture and ability to handle various corner cases. Any large-scale attempt by the government to map land/property number with latitude/longitudes will lead to multiple litigations and deliberate errors by bureaucracy. Hence the system should be able to incorporate data from multiple surveys without any legal ownership changes. Ownership disputes must be handled subsequently.

I dream of a day where buying Land/Property anywhere in India, should be as easy and secure as buying a share. Once this basic asset with the people become a liquid asset it will lead to unprecedented growth in the Indian economy.  

No comments:

Post a Comment

Search This Blog

Followers