One of the most common causes of civil conflict in the country is property disputes. While property-related litigation can drag on for a long time, cluttering the courts, it also results in land being kept idle. As a result, capital is underutilised, causing opportunity costs to mount.
Uncertainty about the actual owner is very common in India, which leads to a rise in legal conflicts. As a result, the government is considering implementing a property demat account.
What is a land demat account?
If you want to trade stocks on the stock market, you must first open a demat account. This account keeps track of the equities you have bought as well as your personal information.
If an individual owns 1000 shares of a firm, for example, those shares are registered in a Demat account that is exclusive to them, making ownership hard to dispute.
A land demat account works in the same way. It keeps track of all the properties a person owns, reducing the likelihood of ownership conflicts. The only difference is that instead of showing stock holdings, it shows property purchases made by the individual.
Benefits of having a land demat account
One of the most notable advantages of having a demat account for land is that it almost eliminates the issue of ownership conflicts. Through this, mortgage financing companies and banks will be able to check the registry to see if the title deed is clean.
They'll make sure the title deed isn't used as security for another lender or registered in someone else's name. No one else may claim ownership of a property if it is recorded in someone's demat account for properties.
The second issue that a land demat account addresses is land property fraud. The government will establish a central registration system to help in the detection of home loan fraud.There is no space for property or home loan fraud with such strict ownership records.
Challenges for land demat account
The problem today is to ensure that the owners of such immovable property have a clear title to their property. This has proven to be so difficult that neighbouring countries such as Sri Lanka and Thailand have sought, but failed, to follow this strategy.
These countries, like India, have had their land ownership vested in individuals rather than the government for generations. In nations like the United Kingdom and Australia, the government owns land.
The Torrens system is dominant in these nations. It is a system in which, rather than recording deeds to show ownership of land, the state immediately issues title to a person. The objective of implementing this method was to eliminate any doubt regarding who owned a piece of property.
One possibility is that the central government leads the way in developing infrastructure, such as a central repository or register, to maintain track of millions of computerised records of property and land deeds.
All states may easily access these land deeds now that they are available in electronic format. The challenge for states would be to use whatever administrative power they have to ensure that the title verification process is impenetrable.
Why is the Indian government promoting demat account for land?
In Indian capital markets, dematerialization of securities has ushered in significant development. Bad deliveries and deliveries kept "under objection" are no longer an issue. No more buying large wads of paper with the danger of transfer and not knowing what you are getting. Theft, mutilation, and loss of certificates are no longer a concern.
Land is more significant to most people than financial assets. Yet, in comparison, the land organisation remains exceedingly basic. As a result, the Indian government is pushing for the use of demat accounts for property since it eliminates the risk of fraud and disputes.
The central government can lead this process, and the NLDL (National Land Depository Ltd) can be established by a group of state governments and financial institutions. With the permission of the respective state governments, it may open branches in state capitals.
The NLDL can dematerialize the apparent land title on a provisional basis with the same status as the registered deed upon payment by the owner of the land.
Is holding a demat account for property investment the future of India?
Rajasthan, as a case study within India, sought to solve this issue by modernising its legal and administrative infrastructure. Rajasthan's objective was to manage the components that go into creating a single database for the state's landholdings, tax data, ownership, and all property transactions.
The specifics of the property records had been entirely digitised, and the aim was to verify these documents in order to confirm the request for dematerialization.
The final stage would be to publish any title information in order to settle any issues.The state then recommended that the property title be guaranteed for three years following the Demat request to ensure that there were no conflicts. Due to a change in governance, this plan has been put on hold for the time being.
Land demat accounts are expected to simplify the real estate industry by weeding out bad actors given the country's history of property disputes, property and home loan fraud.
When you have a land demat account, you may retain detailed records and documentation of the property you own, have purchased, and have sold.
Disputes over ownership may be resolved far more quickly this way, which eliminates the need for protracted litigation. Similar to a demat account for stocks, this property ownership database tracks the acquisition and sale of immovable property.