India has to attack causes of land litigation. Modi’s Ease of Doing Business depends on it

India has to attack causes of land litigation. Modi’s Ease of Doing Business depends on it

If policies are based on insufficient evidence, this may lead to wastage of India’s already low state capacity.

Modi addressing from podium

Prime Minister Narendra Modi addressing a session on India's Business Reforms, in New Delhi | PIB

An important task for the Narendra Modi government in its second term will be to improve the ease of doing business on two counts – contract enforcement and property registration. India is currently ranked 163rd and 166th, respectively, on these fronts. Both these factors are greatly impacted by India’s persistent problem: high number of land litigations.

Reduction in property-related litigations is crucial for reducing judicial delays, a significant bottleneck to growth. While the former requires the Modi government to make land markets more efficient, reducing delays depends on improving judicial efficiency. Attacking the causes of land litigation could, therefore, yield significant improvements on both these issues. In order to do so, however, we need an in-depth understanding of the composition and causes of property-related litigation.

India’s issue with land

Recent studies have pointed out that land litigation predominates among all cases in the Indian judiciary – more than two-thirds of litigations are related to land or property. Studies have also highlighted the poor state of land records in India. These studies have been used to argue that (a) land titles are unclear and lead to litigation; (b) the judicial process needs urgent reform to reduce land litigation; and (c) we have too many land laws that are at times in conflict with each other.

Also read: Indian courts clogged with land disputes because laws keep conflicting each other

These studies are, however, insufficient to help the government take informed policy decisions. What could help is an understanding of the nature of such litigations instead of focusing on the quantity of litigations related to land and property. For instance, there is no empirical benchmark to test whether the proportion of land dispute cases in Indian courts is high or low. Two-thirds sounds like a high number, but what is the ideal percentage that policy makers should strive to achieve?

Scholars have held that the high number of property disputes, and the proposed legal and administrative reforms – better land titling, better management of cases by the judiciary, and rationalising conflicting laws – are panaceas. However, some of these correlations may only be partially correct. If policy actions are taken on the basis of insufficient evidence, this may lead to wastage of our already low state capacity, and misplaced responses could create additional inefficiencies in the land market.

Looking at the root cause

Litigation occurs because a legal injury is caused to someone due to the acts or omissions of others. Litigation is therefore a sign that a certain exchange between members of the society has not been conducted as per law. The overall composition of litigation within a particular domain, therefore, points to the prevalence or absence of certain kinds of economic activity. Studies based on India and elsewhere (the United States and Austria) have pointed towards a significant correlation between the volume and the nature of litigation on the one hand, and economic growth and development on the other.

For example, the US National Center for State Courts found that in 2016, in 15 of the US state courts, 60 per cent of all contract cases were disputes between landlords and tenants (contract cases accounted for about 47 per cent of the total case load). This means that just landlord-tenant disputes constituted about one-fourth of all civil cases in these states. Based on this data, one could argue that there is a problem with US state laws governing the relationships between landlords and tenants. However, one could also argue that tenancy is a common economic activity within the US, and it is natural that a substantial proportion of disputes are between landlords and tenants.

Also read: Modi may wait before pursuing land and labor reforms

Similarly, when one looks at the asset ownership profile of Indian households, it is clear that land/immovable property is the most commonly owned asset in India (in many cases, it is the only asset owned by Indians). In such an economy, it is only natural that a high proportion of disputes would be related to property transactions. If Indian households were to grow more prosperous and diversify their asset portfolios, one may expect the nature of cases before the judiciary to change to reflect this economic reality.

From this point of view, the high proportion of property-related litigations possibly points to the fact that transactions in land and immovable property comprise a significant chunk of economic transactions in India. It must also be kept in mind that India is undergoing rapid urbanisation, migration, and real estate growth. This means that land markets are becoming increasingly dynamic, with a larger volume of exchanges occurring on a daily basis. It is then difficult to argue, especially in the absence of more granular evidence, that property-related litigation is disproportionate to the major economic activities one sees within India.

In-depth analysis needed

This is not to argue that the poor quality of land records and the existence of conflicting laws do not have a bearing on land disputes. However, the precise extent to which both these issues affect litigation is hard to determine in the absence of any granular analysis of the nature of litigation.

A number of laws affect litigation in land that has nothing to do with the quality of land records or conflicting requirements in existing laws. These include laws pertaining to the registration of title deeds, laws of succession and inheritance, laws requiring the payment of stamp-duty, and others related to land ceilings, rent control, eviction and illegal possession. Such cases and their overall contribution to the judicial backlog need to be studied carefully in order to effect meaningful policy responses.

Also read: India’s new govt should focus on easing land acquisition rules

A good example of such analysis is the CPR-Land Rights Initiative study on land acquisition cases. The study identifies land acquisition cases as a specific set of property-related cases that take up a significant chunk of the Supreme Court’s time and identifies issues like procedural irregularities that lead to a high number of land acquisition cases. This study can, in turn, point to specific issues that policy makers can address in order to reduce litigation related to land acquisition.

Similar studies that can uncover the nature of land and property disputes are required before taxpayer money is spent to undertake legal and judicial reforms.

The author is a Senior Research Analyst in the political economy programme at Carnegie India. Views are personal.