Estimating economic value to the state from land title regularisation: Evidence from India

Background and objectives

Nearly one in every six urban Indian residents lives in a slum that is created on encroached land. More than half of this land belongs to the government which often, for a variety of political, social and legal compulsions, is able to neither retrieve the land nor formally hand it over to the slum dwellers. The ensuing limbo has created abject living conditions and a power structure that extracts rents from residents who are already poor to start with.

While arguments to give up land have been made before for social equity reasons, there are also clear economic reasons, as popularized by the seminal work of De Soto, that motivate the regularisation of land titles for the urban poor. Our objective is to assess the economic value to the government from regularising land titles to the urban Indian poor. We propose to:

• Estimate the direct economic benefits to the state from providing secure title to slum dwellers, i.e. taxes that the state can raise directly and indirectly;
• Estimate the income that will be generated by providing utilities and services formally to slums;
• Estimate indirect benefits such as improvements in income potential to residents with more secure title;
• Estimate the value of land that will be given up using a hedonic land price model.

Combining benefits and costs, we aim to show that there could be strong economic rationale for governments to regularise land titles to the slum dwellers.

Approach and Timelines

We plan to do field surveys of three representative slums in Bengaluru (the fifth largest city with as much as 10 percent of its urban population living in slums) that differ in the strength of ownership rights for this study. The 2011 Census defines three categories of slums: notified, recognised and identified. In addition to various other attributes, these three types of slums differ in their implicit ownership rights which we plan to exploit for this study.

The two major data components of our survey are:

1. Validating the physical boundaries of the slums
2. Collecting personal data on demographic, social and economic attributes including the security of ownership as well as data on infrastructure availability and quality

Using this data, we plan to build a cross-sectional model that highlights the relationship between title security and economic variables like income and investments. To determine the direct economic benefits to the government, we plan to make reasonable assumptions derived from real experiments on providing land tenure security in other countries. For this we plan to draw from the experiences of various other countries that have used similar approach. We expect our model to guide us on the size of additional revenues that the government can hope to get that are directly attributable to land title security.