NOTES AgriculTurAl & rurAl DEvElOpmENT 43634 Land Policy and Administration Armenia Title registration project iSSuE 39 fEbruAry by gAviN ADliNgTON AND ANu SAxEN 2008 Since becoming independent in May 1991, the prOpErTy OwNErS, rEAl Government of Armenia has sought to consolidate ESTATE AgENTS AND bANkS politically, promote market reform, and redefine the ArE SATiSfiED. government's role in the economy. In Armenia, the Title Registration Project (TRP) provides One of the areas pursued was land reform. Agricultural an example in which effective project design and the land was distributed free-of-charge as private property commitment of the implementing agency--the State to more than 310,000 farmers. The area was allocated Committee on the Real Property Cadastre--led to in proportion to family size and with a five-year ban on successful implementation and sustainable results. reselling the land. Following land distribution, private agricultural land accounted for 366,000 hectares or ObjEcTivE approximately 26 percent of all rural land. The overall aim of the Project was to promote private This approach resulted in the fragmentation of sector development by implementing a transparent, agricultural holdings, with families owning parcel-based, easily accessible, and reliable noncontiguous plots. Land use was inefficient, owing registration system for land and other immovable in part to the low rate of use of agricultural machinery. property. The system was to provide a chronological Making land use and farming more efficient would record of property owners and their rights and require the establishment of a functioning land obligations. The availability of this information was market. Granting farmers the right to sell, exchange, expected to reduce the transaction costs of title and lease their land would enable them to use it as transfers and mortgage financing and lead to more collateral and to consolidate family plots. secure property rights for parcels registered in the system. This in turn was expected to lead to higher land and real estate value, increased productivity, and the consolidation of fragmented rural land ownership. Increased use of property as collateral was expected to bring about general improvement in the efficiency of rural and urban real estate markets. The project was also intended to promote least- cost registration procedures by building on existing property information databases (adding only market- relevant information to these databases), and by contracting private surveyors. Securing property rights and increasing the efficiency of property markets are project objectives that remain highly relevant in Armenia, and highly relevant to the World Bank's country assistance strategy, which emphasizes support for private sector led economic growth. THE wOrlD bANk OpErATiONAl long slump of 1998-2000. If the growth rates of the past cADASTrE iN plAcE three years are sustained, the active market will exceed the 5 percent mark in 2008­a measure considered very The project has successfully established an efficient active by international comparisons. and reliable cadastre and title registration system for immovable properties, a modern map production uSiNg immOvAblE capability,and a highly competitive and professionally prOpErTy AS cOllATErAl operating private surveying industry. Registered mortgages rose rapidly when it first became Source: Implementation Completion Report (IDA-31350), June 2004 possible to pledge property in 1999 and 2000. They then declined by 16 percent in 2001 as the market settled Almost all of the country's 2.5 million privately-owned and a banking crisis affected a number of lenders. land parcels and buildings had been surveyed when The economy then improved and people used their the Project was completed in 2004, with1.136 million property to invest, with registered mortgages increasing property records in the central database. Today the 38 percent in 2002 and 48 percent in 2003. Most database contains around 1.8 million property records. mortgages are in urban areas. Response times to client Although land-based agri- requests have been sharply cultural mortgages account- reduced and information is ed for only about one fifth now provided within a day. of all registered mortgages Registration of real estate in 2003, urban properties transactions generally takes are commonly mortgaged one day and about three to raise funds that are days for more complicated invested in farms. cases. The Ararat valley remains Modern operational param- the prime area for land- eters for a real estate mar- based mortgages in agri- ket were successfully put cultural areas. Lending into place as well as the rates now range from 10 institutional bases for to 16 percent per annum, secure property owner- matching the lower end ship, transfer, mortgaging, of the range anticipated in and effective and equitable the staff appraisal report, taxation. As a result of the (1-3 percent per month) publicity and information program implemented by the and far below the rates of 40 percent and more that pre- State Committee on the Real Property Cadastre (SCRPC), vailed when the project commenced. While the Project the opportunities available to property owners to trans- did not determine interest rates, it did successfully play a act and invest in land are now public knowledge. A legal role in bringing these developments to pass. framework has also been established that eliminates the need for title insurance and the costs to property own- A NATiONwiDE NETwOrk ers of paying lawyers' fees involved in handling property Of iNfOrmATiON AND rEgiSTrATiON cENTErS transactions. A nationwide network of 47 Information and Registration Before 1996 the property market was largely dormant. Centers (IRC) supported by the Central Information Today the real estate market is growing rapidly. While Center was established. All staff is fully trained, and all the active market is small, with about 1.8 percent of offices are equipped and operating effectively. Client all properties sold, leased or mortgaged in 2003­that satisfaction rose commensurately, indicating that service figure was more than double those at the end of the standards had greatly improved. 2 mODErN SurvEyiNg contracts were professionally managed mETHODS iN uSE by the SCRPC mapping center and the PIU. Using the private sector lowered Systematic registration requires the unit costs of surveying. substantial survey and mapping work, and this was undertaken by the TrANSAcTiON mapping center, where the capacity fEES rEDucED to produce up-to-date maps fostered by 50 pErcENT the development of a competitive private surveying industry. The rapid growth in registered transactionshasresultedinconsiderable The territory of the Republic of Armenia revenue growth. Income from state is divided into ten marzes (regions), duties increased 37 percent in 2002, which implement the government's and 19 percent in 2003 despite the regional policy, and coordinate the activities of local fact that the registration fees were reduced by 50 percent. branches of the executive authority. Two very important The average fee for a transaction is about US$15. During surveys warrant mention. The first was undertaken to the life of the Project the annual revenue from transaction establish accurate administrative community boundaries registrations, including sporadic titling was over $1 million. in two marzes, consisting of 194 communities. The survey By 2007 annual revenue had risen to $7,875,419. was necessary because maps derived from the individual community surveys frequently led to discrepancies SuSTAiNAbiliTy-- (overlaps or gaps) in the boundaries between them. iNTEgrATiON AND The second survey was undertaken to reassess the land cOmmiTmENT categories in four marzes, consisting of 375 communities. Administrative and technical capacity throughout That survey was necessary because the existing land the entire system is high. The findings of customer classifications were outdated and land use had changed satisfaction surveys and mission reviews indicate that since the previous update several decades earlier. the SCRPC has reduced its fees by 50 percent or more, Particularly affected were people paying taxes on land as and drastically shortened turn-around times for all client if it were irrigated when it no longer was. The SCRPC is services. The impact of these measures is evident in the now carrying out similar work in the remaining marzes significant growth in the number of client transactions using its own funds. and in significantly improved customer satisfaction. This lays the groundwork for a client-oriented, reliable and In support of the core survey and mapping activities, the high-quality service function. project was also to provide modern technological inputs, notably improvements in the geodetic network, access The user fees collected by the SCRPC cover the cost of to satellite imagery and aerial photography, orthophoto IRC operations and maintenance. The system's financial mapping, and photogrammetric processing of imagery. viability will further improve as the volume of transactions The work to improve the geodetic network continues, and continues to increase (annual increases of about 20 a national geodetic framework that meets international percent are likely for the foreseeable future), while staff standards is in place and connected to the EUREF costs are reduced once the initial systematic registration framework. All the digitizing, processing and mapping effort with its heavy workload is completed. equipment is actively used, and the map production underway is based on state-of-the-art technology. The technical and operational aspects of the cadastral information and registration functions and the mapping cApAciTy builDiNg Of facility are of high standard. Because the Project was privATE SEcTOr SurvEyOrS integrated into the SCRPC from the beginning, no real transition from project implementation to regular A highly competitive and professional private surveying operations of the SCRPS was necessary. Management industry was successfully promoted. Survey works were was fully committed to the operations and to developing competitively tendered, and 100 different companies the SCRPC into an effective cadastral agency. These carried out the work under 358 separate contracts. All factors made Project outcomes highly sustainable. 3 At the technical and operational level, the main data, and checked whether the required construction transitional issue will be the shift from the heavy focus on permits had been obtained. This required considerable systematic registration and the one-time effort needed time and effort and seriously delayed the completion of to establish the national title registration system to the cadastral records. client-driven modus operandi of dealing with sporadic registration of market transactions. The institutional Automation is not necessarily a precondition for providing capability for this is in place, and the growing volume of effective service, such as a one-stop window or one- such activities handled by the IRCs in the past few years day turn-around on routine client services. Indeed, suggests that this will be easily accomplished. aggressively moving towards client-friendly service is more essential for increasing system efficiency and user Lessons Learned acceptance than is the transition to a fully computerized environment. The project benefited from being implemented by a single agency which enjoyed very strong leadership. This meant Institutional inertia can be overcome by strong leadership. there was no need to navigate through inter-agency Inherited bureaucratic practices and procedures with rivalries and to balance conflicting vested interests. long tradition initially impeded the transformation of the This is in marked contrast to problems experienced in SCRPC from a governmental administration to a client- countries with dual systems such as Bulgaria, Croatia, oriented service agency. Persuaded by Bank missions and Romania. The importance of committed leadership and recognizing the need for change, SCRPC leadership is underscored by other successful cadastre projects in identified a number of specific and well-targeted actions the region such as Kyrgyzstan, Moldova, and Slovenia. in key areas and made sure these were implemented. A major problem delayed implementation of the Project Reducing turn-around time on most service transactions when,followingappraisalabout320,000propertiescould to only one day (even with a paper-based system) was only be registered and titled once various documentation a dramatic departure from past practice and greatly problems were resolved, including missing permits, improved the public image of the service. illegal construction or modification, and encroachment A systematic cadastre is necessary for an effective and on neighboring parcels or public land. A law was enacted to deal with these problems, but so far there equitable property tax administration. The transition has been reluctance by property owners to "regularize" economies experienced a spate of uncontrolled and their problems. Their reluctance is probably attributable often unrecorded real estate development led by a rapidly to the costs of sorting out all documentation related emerging entrepreneurial class. Only a systematic cadastre problems valued an average of US$265 per property in can effectively capture this development, include it in the Yerevan and US$156 elsewhere, and the obligation to property tax base, and eliminate widespread tax evasion. pay property taxes once all documents were cleared. The Project proactively involved the private sector A number of difficulties were also encountered in titling through competitive contracting, generating substantial and registration. Assessing and establishing the legal efficiency gains and cost savings. It demonstrated status of properties and recording them in the cadastral the importance of establishing transparent contract database were more difficult than had been anticipated. management, preferably during a pilot phase. The Since the cadastral records are also needed for tax success of the Project and sustainability of its results assessment purposes, the SCRPC surveyed the floor suggest it as a useful practical example for future and plans of each property, recorded various other building ongoing land registration projects. The ARD Notes series on Land Policy and Administration aims to disseminate results from research and Bank ESW, describe innovative operational practices, or point towards areas meriting further analytical attention. Significant contributions to their publication and content come from the DFID-World Bank land policy partnership, the World Bank-FAO collaborative program, the Knowledge for Change Trust Fund, the Global Land Tools Network, the multi-donor trust fund supporting implementation of the Gender Action Plan, and the Norwegian ESSD Trust Fund. The views expressed are those of the author(s) and not necessarily those of the World Bank Group or supporting institutions. THe WorLd BanK 1818 H Street.NW Washington, DC 20433 www.worldbank.org/rural