What Land Acquisition Bill means for you as a home buyer

This increase in urbanisation has fuelled demand for housing at the fringes of existing cities. Gurgaon,Noida and Ghaziabad at the fringes of Delhi; Vasai-Virar,Thane,Panvel around Mumbai; Sholinganallur,Porur and the area along the Grand Southern Trunk Road in Chennai are such examples. This phenomenon is not confined to the principal metros,but several tier-II and tier-III cities too are witnessing rapid expansion.

How is this demand for housing being fulfilled? Developers enter the space in two ways. One,they purchase parcels of land at the fringes directly from farmers and aggregate it. For instance,thats what DLF did when it developed Gurgaon into the city that it is today. The other route is for state authorities to acquire lands and then sell parcels of land that has been earmarked for housing to developers. Most developers are taking this route currently,to build townships,which have become attractive given the huge demand-supply mismatch.

When land is developed,its value will always rise and so will the price of undeveloped land in the vicinity that would be up for grabs. Most land developed this way is usually agricultural land that would have been acquired many years ago,for a fraction of the value it commands currently.

This has led to resentment among farmers who feel that they have been shortchanged by the authorities by acquiring their lands ostensibly for a public purpose but have sold it at a high price to developers,who in turn make a profit selling the house to you.

A roof over your head often involves displacing the roof off anothers. It is this resentment,which culminated in the events witnessed recently in Greater Noida.

Now with a series of incidents involving the acquisition of land and compensation the latest being the crisis in Greater Noida,the government has finalised the contours of the Land Acquisition and Rehabilitation and Resettlement Bill that while facilitating land acquisition for industrialisation,infrastructure and urbanisation also seeks to address concerns of farmers and those whose livelihoods are dependent on the land being acquired. This Bill has implications for you as a home buyer,in case you plan to buy into a township that may be developed.

A key feature of this Bill is that in case of purchase of over 100 acres of by private developers,provisions of resettlement and rehabilitation as envisaged in the Bill will kick in.

So any township developer who buys over 100 acres of land will have to provide benefits for displaced families that may include land,house,monetary compensation,skills training and preference for jobs. Those displaced have been categorised as Land Owners and Livelihood Losers.

If the land is acquired in rural areas,the compensation to be paid would be not less than six times the market value. Besides there are separate packages that have to be given to the erstwhile land owners and to those whose livelihoods will be lost as a result of this purchase. In the case of livelihood losers,some of the conditions are: subsistence allowance of Rs 3,000 per month for a year for each family,Rs 2,000 per month as annuity for 20 years indexed to inflation,a resettlement allowance of Rs 50,000,mandatory employment for one member per family or Rs 2 lakh.

Not surprisingly,developers have slammed the provisions of the Bill,should it become law in its present form. The Confederation of Real Estate Developers of India (CREDAI),the apex body of developers with more than 6,000 members are against private transactions being brought within the ambit of the Land Acquisition Bill. LK Jain,national president,CREDAI said,It is detrimental to urbanisation. Private transactions should not be covered within this law. The compensation package that is part of the Bill will only end up increasing costs and will result in higher house prices. It would be difficult to increase housing stock if developers are forced to build on plots below the 100-acre threshold.

RR Singh,president,National Real Estate Development Council (NAREDCO),a self-regulatory body under the ministry of housing,feels that the sector will not be affected as such because the demand is so high that developers will address it,but costs for the home buyer will increase. Any payment that is made as part of the settlement will be passed on to the consumer, said Singh.

He also feels that the provision of annuity payments will have to be modified as it cannot be applied in its present form in the case of the realty sector. Annuity payments are fine in case of industry,for they generate income and can pay a part of that to the farmer who has lost his livelihood. In the the realty sector,a developer will himself take five to six years on an average to develop the land,that too after all clearances,which can take between six months to two years. After the land is developed,builders move away and the township is not even theirs. In such a case how can they pay on a continuous basis? asked Singh.

Will this mean the end of affordable housing? Affordable housing is the segment where demand is highest. No developer can afford to overlook that. They range between 300 to1,200 square feet. With costs going up,the consumer will have to move into a smaller flat for the same price, said Singh.

Santhosh Kumar,CEO-Operations,Jones Lang LaSalle India believes that the farmer would stand to benefit,if the intent behind the law is properly implemented. The end consumer will be affected. The only solution to that is for the government to create infrastructure and open up land parcels to address the demand-supply mismatch.

L.Ramakrishnanexpressindia.com