Unlocking value of disputed property
In almost every city I go I see in the busiest commercial streets or in the poshest of localities a plot of land desolate, dark and crying hoarse that its disputed. When I compare the posh houses or busy shops around with this sad piece of land one can't help but be disappointed at the cost of lost opportunity and locked economic value. Such disputed properties are found everywhere but the more expensive and valuable it is, bigger the incentive for people to fight years of legal battle on it.
Here is a proposal to tackle this issue in a creative fashion. We will not shortchange the property owners and also bring back the value in the economy. So here goes - If a property dispute exceeds 7 years in court, the court hearing the case can appoint a financial institution (like the ubiquitous SBI) to auction the property and put the proceeds in a fixed deposit (FD). Henceforth, this FD will be treated as the disputed entity in lieu of the property. The government (or the court) could be the trusty of the FD till a settlement is reached.
As you would notice this proposal has no government intervention (except for passing a law to this effect) reducing corruption in the process. The property is released for realizing its economic potential and the proceed of the auction too comes inside the banking system in cash. Now even if the case drags on for many more years this money will flow in the economy through the bank and is available for credit.
I think some few thousand crore worth of economic value can be released and thousands of jobs will be generated in construction and retail segment. This is not considering the value of extra money put in the bank.
What do you think - hare brained or a pragmatic solution?
If you have access to better legal/constitutional advise or want to pick holes in the proposal or better - have some suggestion please add a comment below or send me a mail. Based on the response I plan to setup an online petition and then approach some MPs to table a bill.
Here is a proposal to tackle this issue in a creative fashion. We will not shortchange the property owners and also bring back the value in the economy. So here goes - If a property dispute exceeds 7 years in court, the court hearing the case can appoint a financial institution (like the ubiquitous SBI) to auction the property and put the proceeds in a fixed deposit (FD). Henceforth, this FD will be treated as the disputed entity in lieu of the property. The government (or the court) could be the trusty of the FD till a settlement is reached.
As you would notice this proposal has no government intervention (except for passing a law to this effect) reducing corruption in the process. The property is released for realizing its economic potential and the proceed of the auction too comes inside the banking system in cash. Now even if the case drags on for many more years this money will flow in the economy through the bank and is available for credit.
I think some few thousand crore worth of economic value can be released and thousands of jobs will be generated in construction and retail segment. This is not considering the value of extra money put in the bank.
What do you think - hare brained or a pragmatic solution?
If you have access to better legal/constitutional advise or want to pick holes in the proposal or better - have some suggestion please add a comment below or send me a mail. Based on the response I plan to setup an online petition and then approach some MPs to table a bill.
posted by Saurabh Chandra at 10:12 PM
5 Comments:
Cool idea ... But the key to your solution is the financial institution. Which organization will it be? Who decides? Government ??
Second, are the wishes of the claimants taken into consideration. What if both the claimants do not want sell the piece of land.
And if mutual agreement between the claimants is the answer to above q's, I am sure the case would not have lasted all these years.
I think the financial institution(FI) is not that important since it is just holding the money in custody. I suggested SBI since it is spread all over india. So the choice of FI is part of the law and not subject to anyone's agreement. But the second point is relevant - if the parties involved in the dispute really want the property they will suffer. Maybe this can act as incentive for such people to come to a settlement. Unfortunately economic efficiency and sentimental attachment are difficult to balance.
1. A matter remains sub-judice for years partly because of the fact that there are such a large number of cases and a low number of courts/judges. (For eg. I once heard that if you file a case in Supremem court today, it takes almost three to four years to get a hearing date)
Sometimes there is stonewalling by one or other party in the court, but there is a limit on how much you can do that, and several times the court takes that party to task for this attitude.
2. Courts act as an abitrator in case of dispute. It is a vital institution of any civilised society. Now passing such a law which says that if a matter remains subjudice for 7 years, then the court will intervene and take over the land to auction it will undermine the very basic nature of justice and will act as a disincentive to the process of peaceful settlement of dispute.
3. This option is available today also. It takes will on both sides to overcome their ego and come to a negotiating table.
4. The cost of lost opportunity is not lost on the owners. The irony is that as time passes the stakes for both the parties increases, as the value of the real estate appreciates over time. Hence they are less willing to accept a settlement which does not give them complete ownership.
5. Sometimes people fight not for the value but because of the sentimental value attached to the land. They would not like a third party to take ownership of it. Sometimes its not about money.
I think that a better solution is to have a faster resolution through the courts. This can only come if the number of courts/judges etc is increased. I am sure you must have read umpteen times how Government has shot down proposals to increase the size of courts etc., or the fact that no political party talks about judicial reforms. There is a vested interest here. More number of courts would mean a faster disposal of all the corruption cases filed against bureaucrats and politicians of the country. So they dont want to talk about it.
HimS
Well, the proposal is good, but there are the probs of sentimental value attached, as pointed out by others, and lack of will to sell. There's also the consideration of money. There's no question of negotiation here, as expressed by HimS, because there IS no negotiation, the dispute remains the same, the proposal only seeks to transfer it to a placeholder (the FD, in this case), instead of splitting it or some such solution. But my concern here is, the appreciation in real estate is generally much higher than in FDs or any bonds and stuff (a bond is actually a much better solution here...sorta like a mortgage). Maybe invest in the debt market, or diversified MFs, available as equity. Anyway, the point is, one has to convince the owners that this is really a solution for their problems, and they aren't going to end up getting less than what the property is really worth when (and if) their matter is finally settled. I think there is a provision for something of this sort in the US, but I'm not sure. This really is a problem, I always think about how such pieces of land are lying vacant and in a pretty bad state all over the country. In Bangalore, one can see lots of examples all over and around MG Road...Dickenson road has two such plots, in just the stretch between MG Road, and the first signal. (One is occupied by some people, in a very old and desolate house, and the people are poor, u can see naked kids bathing and women hanging clothes and stuff. The property and plot is worth CRORES. (It's JUST off MG Road). And the other is being used as a parking lot. Useful, but much under-utilised, nevertheless...
Anyway, this is a good start, a good idea. Do try and refine it, with a more concrete financial basis, and security.
gobho
alternatively, the government can put the land to use in any manner that it deems fit. some of these could be leasing, using for one of its affiliates ( iocl, bsnl, govt. emporia selling ssi produce, etc ). with a soft option for vacating / renewing of contract on settlement and also protecting the interests of the person in whose favour the final decision has been made. one, obviously, wouldnt want to run into another court room battle.
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