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What Happens if Real Estate is Also Dematerialised

Property disputes are all too common. Litigation that relates to real estate can be dragged on for decades with no solutions in sight for plaintiffs. In India, titles of land that are unclear lead to substantial road-blocks to the economic progress of the country, bringing disputes, fraud to do with mortgage and underuse of capital in its wake. To deal with such encumbrances, the Indian government has proposed that people have a demat account for land.

Why would dematerialisation for land work?

What the Indian government wishes to do is to create a central registry for the dematerialisation of all land/real estate. In simple terms, this translates to a demat account for land or the ownership of land. In 1996, the government established a national depository with the aim of attracting foreign investment and making sure that unnecessary paperwork is eliminated, thereby encouraging investment. Years later, the value of securities that are electronically formatted has risen by leaps and bounds, wiping out the badly timed delivery of stocks and shares.

This is where a real estate demat account comes to the forefront. By replicating the same concept of the national depository for shares, the government is working on a plan to make every real estate title electronic. Naturally, for land too, one would have to have an online demat account where land titles would be stored.

The Purpose of a Real Estate Account

Steps leading to a demat real estate account for individuals had a start. The goal of the Indian government is to work with lenders to form a central registry holding real estate records. For one thing, this would prevent home loan fraud. This would enable finance companies/banks to monitor the registry and determine clarity of titles. It will also help to discover if title deeds have been offered to other lenders as collateral. Furthermore, it will prevent the most common fraud, whether the title is in an alternate entity’s name.

Present Challenges

Although a demat account for land would be one solution for maintaining transparency in land holding and transactions thereof, there are certain pitfalls for its execution. In India, the subject of real estate is state-governed. However, certain laws relating to real estate are solely in the hands of the Central Government. For instance, the Transfer of Property Act is under the purview of the Central Government. These are archaic laws needing revision for dematerialization to work. Other issues that pose problems are administrative - states lack the machinery for processes of title verification.

Taking Stock of the Situation

While states are maintaining land records in digital formats, the real challenge is in assuring immovable property holders of their due titles. In foregn countries, a centralized registry works because all land titles are held by the sovereign on a common ground. In case this plan works out in India, it will save a lot of property owners and the government a lot of grief. In the meantime, you can start a demat account with a premier broker, Motilal Oswal.