Issues of Fuzzy ownership
It is based on two notions. One, a general social acceptance that a particular person has a right to use the property; and two, the possibility that in due course the general acceptance will be converted into a legal acceptance.
But there are real impacts of this fuzziness in ownership. First, there is the negative impact of uncertainty over ownership in utility terms. Second, there is the negative impact on the possibility of land improvements by the fuzzy owners. Third is the impact on the potential for using land and property as capital.
The government’s own resettlement and neighborhood improvement programs have an important bearing on the above. By recognizing and regularizing such informal property rights the government can overhaul the use of property by the poor.
Consider the aspects related to what we call fuzzy ownership or fuzzy property rights. The fact that there is uncertainty over duration of tenure and the duration of land rights has a negative impact in many ways. Note that such fuzzy property rights are bought and sold, but the property prices in such areas tend to be lower. Once uncertainty is removed property prices will increase benefiting both the owners and the government (if it decides to levy value based property taxes). For the government the issue is of acceptance of property rights that are already accepted by those living and working in these areas. Another aspect is that of property as capital. An important aspect of this property is that, it is sold and bought, loans are given for it, and property improvements do take place despite the fact that property rights have not been allocated in a legal manner.
This paper therefore proposes to add another dimensions to the work of De-Soto. Fuzzy property rights provide the same set of benefits as formal property rights, only that the benefits are lower. The implications for policy will also be discussed briefly.
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