Constitution Day: Decoding India's Property Rights
The right to own property was a fundamental right according to the original draft of the Indian constitution. However, there were provisions that allowed confiscation of property, if the government found it reasonable. For example, the government could confiscate property to avoid concentration of wealth. Through amendments made over time, the right to property remains a constitutional right today.
As we celebrate Constitution Day of India today (India adopted the Constitution on November 26, 1949), let us look at how important property rights are to us.
Right to affordable homes
In a country where urban land is scarce, there are many ways in which homes can be made affordable:
- By building better transportation networks and infrastructure that unite tracts of land separated by water, land can be used more extensively. This can also be done by building water mains, sewerage and other public utilities.
- To utilise land better, a higher floor space index (FSI) can also play a crucial role. When land is not enough to meet the need for floor space, it is easy to build more floor space on existing land if government allows it.
While India's track record in these two aspects may not be strong, property rights have also played a role in keeping homes in India pricey.
- Property rights are widely seen as a right of the wealthy, and not that of the poor.
Consider this: one of the ways in which greater floor space can be built in many Indian cities is by densification of slums. In fact, the only way to build greater floor space without violating any law at present is by constructing taller buildings in around slums areas. But, this is unlikely to happen because slum dwellers do not have clear property titles. Further, while many slum dwellers squat on land owned by others, much of this is property traded in the market. Most of them pay land rent. Moreover, they squat on idle land. When urban land is scarce, valuable urban land remaining idle in the central city is absolute waste of resources.
- Stronger property rights are also a solution to many urban woes. Gurgaon, for example, is India's hottest office space market. New office district with over 20 million square feet is coming up in Gurgaon. But, water supply, electricity and sewage systems in Gurgaon are not efficient. For instance, private providers of water, electricity and sewage system dissipate ground water, pollute the atmosphere and dumb the waste in public land. However, the solutions of many of these problems lie in private property rights.
George Mason University economics professor Alex Tabarrok points out that if private real estate developers were allowed to own large tracts of land, they would have built city-wide infrastructure. DLF, Tabarrok points out, is not likely to dump sewage in property owned by Ansals, another private developer. For this to happen, it should be easier to convert agricultural land into non-agricultural land. Mixed land use should be allowed more easily.