# 4. LAND TRANSACTIONS AND STATE RESPONSES

# **4.1 Land sale transactions**

Land can be transferred from one party to another through sale/purchase, gift, inheritance, mortgage and tenancy. The last two are of a temporary nature and are excluded from discussion in this section. Data are not available from which to assess the relative volume of each type of transaction in Orissa. Discussions with revenue inspectors suggest that sale/purchase transactions constitute nearly 80 percent of all annual landrelated transactions in a village, while gifts comprise 10 percent, and inheritance the remaining 10 percent (around a half of which result in partitioning of a land holding).

Throughout rural India, land markets are incomplete, imperfect and often (though decreasingly) interlinked, resulting among other things in the persistence of marginal and sub-marginal operational holdings which can neither be easily added to nor disposed of (Meams, 1998). The situation in Orissa is consistent with this trend. A recent study reported that only about seven percent of farm land changed hands (through 88 sale/purchase transactions) over the period 1955-95 in a village in Sambalpur district (Sarap, 1998). There were wide fluctuations but the maximum area sold in any year was three acres. Based on a longitudinal survey of two villages in Cuttack and Dhenkanal districts over the period 1965-95, Swain (1998) also reported that around 5- 7 percent of village land was bought and sold. Thus, in general, the land market in Orissa is thin, with wide fluctuations in levels of activity.

A land sale has first to be registered before mutation of the RORs of the transacting parties can be effected. This section analyses the various processes in executing land sale transactions to identify the limiting constraints on land transfers, and specifies and attempts to quantify the transaction costs involved. The section also examines, in light of recent research, whether removal of these constraints or reduction of transaction costs would indeed help to facilitate land sales and increase access to land by the rural poor.

# _4.1.1 Registration_

The prevailing system of land registration in India, developed under the British colonial administration, is governed by the Indian Registration Act, 1908, which provides for the registration of deeds in the case of transfers of immovable property including land. Subsequently, various regulations were passed at different times to suit local needs and facilitate registration of documents. The registration system aims to provide a public record of land ownership to protect individuals from being deceived by entering into transactions relating to properties previously disposed of, and to provide notice of the existence of certain continuing interests, encumbrances, and claims.

Sales of immovable property<sup>18</sup> are first executed on a non-judicial stamp paper of the prescribed amount<sup>19</sup> . This constitutes the 'sale deed' and is necessary to make the transaction effective under the law. The value of the stamp paper is also known as the stamp duty. Stamp duty is fixed as a proportion (currently at 4.2 percent) of the total value of the transaction. In addition, a stamp duty surcharge is levied at varying rates as shown in Table 4. The stamp duty is payable by either the purchaser or the seller, subject to agreement between them.

18 Along with wills, power of attorney, movable assets, etc.

- 19 Stamp papers are a monopoly of private vendors. Recently, a shortage of stamp papers has led to charging of illegal premiums by the vendors and widespread attempts to undervalue the transaction. In order to reduce such transaction costs, a proposal to introduce franking machines for supply of non-judicial stamps in Orissa has recently been approved by the Cabinet (J.K. Mohapatra, Revenue Secretary, GOO, personal comm.).

28