Land Markets in India: Distortions and Issues

INDIA INFRASTRUCTURE REPORT 2009: LAND - A CRITICAL RESOURCE FOR INFRASTRUCTURE, Nirmal Mohanty, Runa Sarkar, Ajay Pandey, eds., 3inetwork, Oxford Univ Press, New Delhi, 2009

7 Pages Posted: 30 Nov 2012

See all articles by Sebastian Morris

Sebastian Morris

Indian Institute of Management, Ahmedabad - Economics

Ajay Pandey

OP Jindal Global University - Jindal Global Law School (JGLS)

Date Written: June 01, 2009

Abstract

There are certain inherent problems with land because of its peculiar characteristics, which impede the natural emergence of a well-functioning market. The legal and regulatory framework can potentially overcome these problems. In India, despite some reform efforts, the land market continues to be highly distorted and inefficient. Land records are inaccurate, outdated, and incomprehensive. There are widespread uncertainties relating to land titles, which have hurt the market. Transaction costs are significantly high by international standards, which have discouraged formal land transactions. Initiatives which could have made the market function better have not been taken; while some regulations have been introduced which have introduced or magnified the distortions in the market. A major negative consequence of this underdeveloped and distorted market is that promoters of industrial and infrastructure projects have eschewed market negotiations for land acquisition and have favored the use of eminent domain powers. While reforms have begun in many areas, an area that has been left untouched relates to regulatory restraints on land use. The most notable has been the requirement of NAC. Because the clearance is typically given after land is transferred from one party to another, there is a significant transfer of wealth from farmers to project proponents, which has been the source of a great deal of social discontent. The elimination of this restriction on land use would go a long way towards making the land market a great deal more efficient than it is now.

Keywords: India, land, acquisition, hold out problem, infrastructure, public policy, urban policies, land use, rents

JEL Classification: H4, H1, O2, R3, R14

Suggested Citation

Morris, Sebastian and Pandey, Ajay, Land Markets in India: Distortions and Issues (June 01, 2009). INDIA INFRASTRUCTURE REPORT 2009: LAND - A CRITICAL RESOURCE FOR INFRASTRUCTURE, Nirmal Mohanty, Runa Sarkar, Ajay Pandey, eds., 3inetwork, Oxford Univ Press, New Delhi, 2009. Available at SSRN: https://ssrn.com/abstract=2182490

Sebastian Morris (Contact Author)

Indian Institute of Management, Ahmedabad - Economics ( email )

Vastrapur
Ahmedabad 380015, Gujarat
India
+917966324805 (Phone)

HOME PAGE: http://faculty.iima.ac.in/~morris/

Ajay Pandey

OP Jindal Global University - Jindal Global Law School (JGLS) ( email )

Jindal Centre 12 Bhi12 Bhikaiji Cama Place
Near Jagdishpur Village
New Delhi, Uttar Pradesh/Haryana 110 066
India

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