Computerization of Land Registration in Andhra Pradesh Klaus Deininger and Aparajita Goyal DECRG, World Bank

Main Question Do improvements in information increase lending activities undertaken by banks? Computerization of land registration undertaken by AP government: Leads to a reduction in transaction costs incurred by banks Makes information easily accessible to lenders

Background Registration and Stamps department one of the oldest departments of state government Registers documents that endorse various types of transactions citizens undertake: sale, purchase, mortgages, leases of property wills, divorce, adoption, power of attorney market valuation of immovable property Issue of encumbrance certificates (states all transactions carried out in respect of a particular immovable property for a given time period) 387 Sub registry offices (SROs), lowest administrative units, in AP providing these services

Background Before computerization, all transactions manually recorded and stored Process of registration and property valuation idiosyncratic Bribes, non-standard registration fees After computerization: Property valuation carried out by well-specified algorithm Standardization of registration fees, removes sub-registrar’s discretion All transactions from the year 1983 digitized. Key documents such as encumbrance certificates, market valuation and deed details available publicly. Allows banks to easily access information on market valuation, land transactions to validate borrowers claims.

Conceptual Framework Banks ability to use collateral is contingent on a formal and low cost way to unambiguously identify land ownership Vast literature on positive links between secure property rights and long term investments on land, labor supply participation, women’s empowerment (Besley 1995, Field 2007, Panda and Agarwal 2005, Goldstein and Udry 2006) However, our study different: Not a titling program, but reduction in transaction costs Looks at the supply side, whether a reliable source of land registry information increases credit disbursed by banks

Data Quarterly Data on credit disbursed by all commercial banks in each taluk of AP (source: Reserve Bank of India) Quarterly from Q1:1997-Q1:2008 (1067 taluks in AP and 45 quarters) Few Taluks unidentified as per Census 2001. Remaining account for 94% of the total credit disbursed. Dates of Computerization of 387 SROs (source: Registration and Stamps Department, Government of AP) Multiple taluks within each SRO. Village matching to determine which SRO each taluk belongs to. (source: Census 2001)

Summary Statistics,Timing of Computerization

Empirical Strategy Estimate: γi : Taluk fixed effects control for time invariant taluk characteristics θt : Quarter*Year fixed effects Compit: Indicator variable for whether taluk i computerized at quarter t

Work in Progress Trying to acquire data per SRO on the number and types of transactions both before and after computerization Look more deeply into the effects of introducing a transparent process of registration (brought about by computerization) on the number of registered land transactions undertaken. Impact of plausibly exogenous reduction in registration fees (from 14% to 9.5%) on the number of transactions registered (whether demand for registration is price elastic).