Unless you’ve been living under a rock for the past 15 years, you know that India (along with China, Brazil, and Russia among others) has leaped frogged it’s way into the mainstream of economic conversations. The massive middle class, which is very young, spends a lot of money. It’s revving the engine. Foreign investors, largely by the way of big institutional players and to a lesser degree individual NRIs, have had a significant affect on GDP growth rates as well. India is the place to be, so they say (a statement which I have resoundly concluded over two years is much more hype than reality).
Let’s talk about buying and selling land where all kinds of good things are happening. Before I got knee-deep into it the last two years here, my concept of land was that it is cheaper than the value of the constructed home and it is relatively painless to buy and sell. Really, anyone who has money or can finance the investment, can own it.
This is how it is in the States. I have learnt that is not nearly the case in India. You see, in Hindustan, there are many types of land and transacting is a major pain in the ass. Land can be plain-ol-land, one which anyone can buy or sell as they please. In New Delhi, as I presume is the case throughout other cities in India, there are acres and acres for government use. Lutyens Delhi is where a lot of government offices are located. Both plain-ol-land and government use is common in developed countries.
Then there is what is called agricultural land. This is where farmers grow the crops that feed the nation. As India grows, much of agricultural land surrounding major metros is being bought for private use. Real estate companies build houses or apartments. They do commercial development as well. Actually, it’s not just near major metros. It is happening in small towns that were formerly villages as well. The drivers are migration of huge amounts of people over a decade or two from the villages to the metros, increased wealth of the rich and buying power of the middle class, and a still-infant movement towards independent families. This meant cities had to spread out as more housing was required (vertical development has only happened in ernest in Mumbai and some smaller, growing cities).
All this is fine and hunky dory. I would suspect this is how all developed countries also grew. The thing, though, with agricultural land in India is that it can be authorized or unauthorized. That is, private developers or investors bought many acres from farmers and built on it. But the land’s status still may not have changed as far as the government is concerned. If it is still unauthorized, then legally it’s still farm land where buildings cannot come up. Forget the fact that huge colonies have been built this way, literally thousands and thousands of acres nationwide, all that land is illegal for anything but farming.
With agricultural land, the transaction is managed by village-based legal record-keeping mechanisms. If the land is unauthorized, also known as unregularized, then it gets very complicated. Even I don’t understand all of it, but I am learning. If the land is unregularized, then you are taking a risk by buying it. The government can legally demolish a house you build. In fact, Delhi had a major demolition drive over the last few years to get rid of this type of construction but only in some specific areas and under some specific criteria. Not all unauthorized construction was aimed for demolition (impossible to do politically and impractical to do logistically).
You buy it still because the reality is that after years and years and bunch of buildings being made, the government has no recourse but to “regularize” the land. This means they legalize it and it is no longer considered agricultural. You built on it while it was illegal and you and your hundreds of thousands of fellow colony dwellers forced the government to take this step. After all, you are demanding regularization. The government might as well get taxes on all this property too! Regularization also means, you can get government facilities like water, electricity, sewage, mail, etc. Until then, these were most likely “stolen” by being tapped into or separate arrangements were made to build pipes and generators (which has a whole host of issues that come with it).
Now, when it comes to buying and selling agricultural land, you have to be very careful. You would think that when a land is bought, there are clear boundaries demarcated. You know where your property starts and ends. That is just a no-brainer to this 1.5 Generation Indian. And that does happen probably most of the time. There are instances, though, when something very strange happens. Hundreds of acres get developed into a colony. Rather than buying a specific plot, when people buy land, they buy a percentage of the colony. They then take a piece of land equivalent to that percentage and claim that plot as theirs. And they build on it! How about that for clear titles?!
Of course, not every piece of that colony is built out. People may have bought space but not constructed. That is when it gets really hairy. If you have not constructed a house, then you hopefully constructed some kind of boundary. Usually, it’s a wall a few feet high. If you didn’t do that, then anyone who owns any percentage of a specific part of that colony may come and claim it.
Let me give an example. Say there is a colony of 100 acres. You bought 5 percent, i.e., 5 acres. You didn’t build a farmhouse. You just let the land sit. You didn’t construct the boundary wall either. Someone else who owns 4% of the 100 acres now comes and says that your land, the 5 acres you bought and the plot you claimed, is really theirs. They own a part of the colony too after all, right? If they claimed the same land you did and you stopped paying attention, what happens then? Ah, the fun! You now own disputed land because someone is claiming the same property plot you are. There are absolutely no records made during the transaction saying that that specific plot, located at such and such a spot, is the one you bought. You just bought 5% of the 100 acres! And you just claimed the 5 acres that you saw no one else had claimed yet!
If this manner of owning land and demarcations isn’t enough to contribute to chaos, India’s use of black and white money adds a lot of masala to any transaction. White money is legal money. It’s something that can be tracked. A check or a wire would be white money. Black money is cash. You cannot readily track where cash goes. Black money has historically been used to subvert income tax payments.
Imagine what happens to the transparency and provability of a transaction in an unauthorized and illegal piece of farmland with improper demarcations and record-keeping when the buyer, the seller, and the broker are doing a large percent of the transaction with black money! You bought something and paid a shit load for it! In cash! You may or may not have gotten proper papers. You don’t have a check that was cashed or a wire that was sent across as proof of the purchase. It’s a receipe for disaster!
There’s a lot more to this than what I have described, including the way records are kept, the way land is regularized, but this is how the damn thing works with unauthorized and unregularized land sometimes! Ah, how can you not love it!
