Interesting post by Prateek Misra and Bhargavi Zaveri.
They says key to any market is the liquidity aspect of it. In Indian securities market we have come a long way in terms of becoming more liquid. In land markets, we have actually gone in the opposite direction:
In the world of finance, the implicit value of a security or asset lies in its marketability, or the ease with which it can be converted into cash. Laws enacted by the State and rules of exchanges which impede transferability are viewed as regressive. Financial reform has conventionally focused on increasing the marketability of securities and reducing the transaction costs attached to the transfer of securities. On the other hand, land reforms which have been undertaken in India largely since the 1950s, have failed to create a liquid land market by imposing several restrictions on transferability. This is because Indian land reforms were not motivated by the need to create a land market. On the contrary, the outcome of land reforms has increased transaction costs and reduced the transferability of land. Any conversation on the creation of a land market in India must, therefore, begin with the reforms which have hitherto been undertaken.
I think one also has to see the political economy of the two markets.
It makes sense for polity to make securities market more liquid as after all they are the biggest borrower from the market. Whether it is government securities or equities of govt owned companies, the demand for funds is huge. The govt need a ready buyer of its securities to satiate its expenses binge. The buyer demands liquidity so that it could also sell the securities much easily. The govt is also scared that if it is not quick enough, the funds will go elsewhere.
There is no such urgency in land markets. Land being a finite product and mostly owned by the government, the idea is to keep inflating the value of the same. This means laws which make overall experience a tiring one for the buyer which even eats up more time in the process. These delays keep inflating the price as shortages continue to remain..