Sanjay Balan
There is a refreshing whiff of fresh air in the Islands today. After a long time, one gets a feeling that things are moving again. Citizen issues are being heard, old problems are being looked at and there seems to be a willingness to find solutions instead of simply explaining why something cannot be done.
There is optimism around, and this change deserves appreciation.
It is in this positive atmosphere that a recent news item caught my attention and made me think. An FIR has reportedly been registered in connection with a suspected fake e-stamp/e-bond used in a land transaction at Dollygunj valued at about Rs. 1.61 crore. The matter is under investigation, so obviously no conclusion can be drawn about anybody’s guilt. But the incident raises a larger question.
How did property registration, once a fairly simple affair in these Islands, become so complicated?
There was a time when stamp duty here was around 1.5% and registration fee around 0.75%. Land transactions happened in the normal manner and POA sales or elaborate Agreement-for-Sale arrangements were hardly a feature of the local market. There may always have been occasional allegations of undervaluation, but stamp-duty scams and endless valuation disputes were certainly not part of everyday Island life.
Then came higher stamp duty, higher registration charges and circle rates. Perhaps the logic was simple: if 1.5% brings some revenue, 6% should bring four times as much. Unfortunately, economics has an irritating habit of not following simple multiplication. When formal compliance becomes disproportionately expensive, behaviour changes—transactions slow down and people start looking for cheaper routes.
That does not mean high stamp duty causes fraud. Fraud remains fraud. But Government should certainly examine whether its own policy is creating an incentive to avoid the normal route.
The bigger problem, in my view, has been circle rates which in many places simply do not match the real market. I have personally come across cases where land could realistically sell for less than half the notified circle-rate value, including a case involving property of the sitting MP.
A property which may actually fetch Rs. 40 lakh can be officially treated as worth Rs. 80 lakh or Rs. 1 crore, forcing stamp duty on an artificial figure. The problem does not end there because income-tax law also uses stamp-duty valuation as a benchmark, creating tax consequences and notices (though transaction was genuine). We first create a valuation fiction and then make the citizen explain why the market does not agree with it
There is another contradiction which has become increasingly obvious.
Earlier, banks placed considerable reliance on Revenue valuations. But once valuation became mechanically tied to circle rates far removed from actual market reality, banks could hardly treat those figures as the true value of their security. What matters to a bank is what the property can actually fetch if the borrower defaults.
A bank cannot auction a Government notification. It has to auction the land.
If land can fetch only Rs. 30 lakh, a paper valuing it at Rs. 1 crore will not produce the missing Rs. 70 lakh. This is what makes the Cooperative Bank episode relevant. Police have reported that although the Bank’s policy required the lower of the Tehsildar’s and private assessor’s valuation to be considered, higher allegedly forged or manipulated valuations were used in several cases. The alleged wrongdoing is a separate matter, but the episode should still make us ask a larger question: when an official valuation system becomes detached from what land can actually fetch, are we not creating fertile ground for trouble? A fiscal benchmark introduced for stamp collection should not gradually become a fictional declaration of economic value for every other purpose.
Circle rates can also be unrealistic in the opposite direction. The 2019 notification fixed agricultural land in parts of Campbell Bay Tehsil, Great Nicobar, at around Rs. 113–Rs. 150 per sq. metre. Today Great Nicobar is at the centre of a major infrastructure-development programme and local stakeholders themselves have complained that prevailing rates are too low.
So the same system can make land officially too expensive in one place and too cheap in another. A circle rate cannot become market reality merely because it is printed in a Gazette. Land values change with roads, infrastructure, commercial activity, tourism, development prospects and actual demand. They have to be reviewed periodically from real transactions and local conditions.
There is another side to this which Government itself may one day have to confront. Suppose Government says a piece of land is worth Rs. 1 crore and makes the citizen pay stamp duty accordingly. Tomorrow Government needs the same land for a public project. Can it then say, “Actually, when we have to pay, it is worth only Rs. 40 lakh”?
That would be interesting arithmetic.
Under the 2013 Land Acquisition law, stamp-duty value is one of the statutory benchmarks relevant to compensation. A valuation system therefore has to make sense both ways. If a rate is unrealistic when a bank lends, unrealistic when Government acquires and unrealistic when an owner actually sells, perhaps the citizen is not the real problem.
Perhaps the rate needs another look.
The proposed Stamp and Registration amendments bring us to another issue. At first glance, they look modern. There is digitisation, electronic authentication, anti-fraud protection and a number of new safeguards.
All welcome.
But a modern-looking law is not necessarily an easy law.
Take Powers of Attorney. Because POA sales have been misused elsewhere, the new framework can impose conveyance-level duty on certain sale-related POAs. But a genuine POA is still only an agency. An elderly, ill or mainland-based owner may simply appoint a trusted person in the Islands to complete a future sale.
If the principal dies, the attorney dies, the authority is revoked, permission is refused or the buyer backs out, no sale takes place and no land changes hands. Yet the stamp duty has already behaved as though everything happened.
That is an expensive way of solving an exceptional problem.
There are other drafting issues too. One provision dealing with crop mortgages actually uses the expression “more than three months, but more than eighteen months”. Another creates confusion between a Lease and a “Lease and Licence Agreement”. There are overlapping provisions regulating document writers and even internal questions about who will prescribe parts of the digital-verification system.
These may look like small errors sitting quietly inside a Gazette. They will not remain small when citizens start standing at registration counters. Every unclear sentence eventually becomes an objection, a clarification, a reference to a higher officer, an appeal and, sometimes, a court case.
That is where the larger policy question arises.
The Prime Minister has repeatedly spoken of Ease of Living and Ease of Doing Business, and in May this year the Council of Ministers specifically discussed reforms aimed at improving both. If that is the direction nationally, our own reforms should also ask a simple question: does this provision make life easier for the honest citizen and genuine entrepreneur, or does it add one more layer merely because someone, somewhere, may misuse the system?
This question is particularly important in the Islands because land is one of our most valuable economic assets, yet putting land to productive use is often far more complicated than simply selling it.
An entrepreneur who wants to build something on his land may run into questions of land use, diversion, subdivision, development permission, construction approval, earth cutting and a chain of related procedures. At some point, selling the land and taking the money may begin to look much easier than trying to create an enterprise on it.
That is not the economic behaviour public policy should encourage.
We should be making it easier for people to use land productively – for tourism, housing, warehousing, agriculture, services, small industries or other lawful business -rather than creating a system where land becomes merely an appreciating asset to be bought and sold.
The solution need not be complicated.
Keep stamp duty reasonable. A Parliamentary Standing Committee on Ease of Doing Business specifically suggested bringing stamp duty down to 2% so that the cost of property transfer is reduced. Lower rates do not automatically mean proportionately lower revenue if more people choose the formal route.
Cap registration fees. Registration of a Rs. 5 crore property does not require five times the administrative effort needed to register a Rs. 1 crore property. Maharashtra has long used an ad valorem registration fee subject to a Rs. 30,000 ceiling, which shows that a sensible cap is perfectly workable.
Most importantly, fix land values realistically and revise them periodically. Our own land-revenue framework already provides a basis for looking at actual transactions, locality, land use and other real indicators. Let realistic land values become the foundation of the system rather than occasional figures which may remain too high in one place and too low in another.
Then use technology where technology is really useful. Fake e-stamp? Verify it electronically. Forgery? Prosecute it. Impersonation? Use secure digital authentication. A POA which is actually a disguised sale? Tax it accordingly.
But a genuine POA should remain a POA.
The present Administration has an opportunity because the mood today genuinely feels different. This is not about blaming today’s Administration for decisions taken years ago. On the contrary, the encouraging change we are seeing gives hope that old systems can now be looked at afresh without anybody having to defend them merely because they already exist.
Sometimes the best reform is not another complicated rule. Sometimes reform simply means undoing unnecessary complication.
Reasonable stamp duty, realistic land values, capped registration fees, genuine digital registration, simpler rules for productive use of land and strong action against actual fraud would probably achieve much more than building another layer of restrictions around every exceptional case.
And let the ordinary honest citizen -and the ordinary entrepreneur -get on with his life.
That, perhaps, would fit very well with the fresh air that finally seems to be blowing through these Islands. (The writer Mr. Sanjay Balan, though retired from government service, he continues to blend governance insight, land-law expertise, and candid public commentary in service of Island development) (Note: Views expressed in this column are writer’s own)
