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Distortions in land markets and their implications to credit generation in India

Author

Listed:
  • K.P. Krishnan

    (Department of Land Resources, Government of India)

  • Venkatesh Panchapagesan

    (Indian Institute of Management, Bangalore)

  • Madalasa Venkataraman

    (Indian Institute of Management, Bangalore)

Abstract

Land and buildings are a preferred collateral for lenders in India due to its ease of valuation and disposal in the event of default. Yet several distortions afflict Indian land markets that make this exercise non-trivial. These distortions - some structural, some regulatory and some information driven - are costly and have far reaching implications on credit availability as lenders adopt conservative policies ex-ante to mitigate these costs. We examine some of these distortions in the Indian land markets in this paper and highlight their significance to the current debate on reforming bankruptcy framework in India. The first part of the paper discusses structural, regulatory and informational gaps that limit lenders' ability to lend against land as well as liquidate after default. In the second part, we propose some opportunistic and structural reforms in the land markets that could enable borrowers to effectively monetize land in credit markets.

Suggested Citation

  • K.P. Krishnan & Venkatesh Panchapagesan & Madalasa Venkataraman, 2016. "Distortions in land markets and their implications to credit generation in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2016-005, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2016-005
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    References listed on IDEAS

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    More about this item

    Keywords

    Land as collateral; collateral registries; land titles; prior liens and encumbrances; valuation; state vs. central government;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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