At a conceptual level, computerization of land registries can possibly affect the operation of property rights institutions and credit markets in two ways. First, it can lower the cost of registering property transfers by reducing the processing time required and by eliminating discretionary side payments that have traditionally been associated with property registration. Second, it can make it easier for third parties such as banks to access information on property rights by making records, including abstracts of past transactions, so-called encumbrance certificates (ECs), available online. To the extent that this will increase the benefit-cost ratio of registering property transfers, it can prompt more owners to register their transactions, thereby reducing the level of informality. Also, easier access to information to ascertain the ownership status or existence of pre-existing liens on any property that might be offered as collateral can reduce banks’ cost of extending credit, thus possibly leading to an expansion of credit supply - either by lending to customers who had previously been ineligible or by extending more credit to existing ones. As computerization did not alter the quality or nature of the underlying information or other elements of the transaction costs of registering property, the nature and magnitude of predicted effects is likely to differ depending on initial conditions, for example between rural and urban areas.

To empirically test these predictions, we use annual data on the volume of registered sales and mortgages by sub-registry office (SROs) from 1997 to 2007 as well as quarterly data on credit supply from the Reserve Bank of India, aggregated from individual branches to the block level, for an 11-year period that covers the state-wide roll out of this intervention. As computerization affects the cost of accessing information or making changes to it, rather than the quality of the underlying data, our primary emphasis is on credit effects, a focus that is also warranted by the fact that in past studies credit effects have proved to be most elusive. Transaction data are then used to explore the plausibility of our results. Moreover, we use the fact that taxes (‘stamp duties’) to be paid upon property transfer were changed in 2005 throughout the state but differently for rural and urban areas, to compare the size of computerization effects to those of a known reduction of the costs of transferring land.

We find a computerization-induced credit increase of some 15 percent in urban areas but no credit impact in rural areas. This is consistent with evidence of a significant increase in the number of registered mortgages -but not sales- due to computerization in urban areas but no measured effect of CARD on registered land transactions of any type in rural ones. By comparison, reduction of stamp duties had a consistent and quantitatively large impact on all types of transactions in rural and urban areas. Clear evidence of credit effects in part of our sample highlights that property rights affect economic outcomes. At the same time, our results also highlight that credit effects will depend on the quality of the underlying information and the resulting reduction of transaction costs associated with accessing property 3