New land acquisition Bill could double real estate prices, developers worry

Land Bill could double realty prices

The Bill states that the compensation amount in urban areas would be not less than twice that of the market value, whereas in rural areas it would be not less than six times.

  • New Delhi,  August 30, 2011  
  • |  
  • UPDATED   17:16 IST

Real estate developers are strongly opposed to the New Land Acquisition and Rehabilitation and Resettlement (LARR) Bill, 2011, saying it would put enormous financial burden on them, making homes costlier for buyers by at least 100 per cent.

The Bill states that the compensation amount in urban areas would be not less than twice that of the market value, whereas in rural areas it would be not less than six times the original market value.

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"Private land deal for townships is proposed to be covered under the LARR Bill. Bringing private land transaction under the ambit of LARR is unwarranted," said Lalit Kumar Jain, president, Confederation of Real Estate Developers' Associations of India (Credai).

"Negotiations between private developers and land owners are on market basis and mutual at the time of buying the land. Therefore, imposing conditions on private developers at par with government (the way or rate at which government acquires land) is unjustified," Jain said.

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Developers say that the new land acquisition Bill has many clauses that will escalate land prices by as much as 60 per cent and that of the finished product by 100 per cent, making affordable housing unviable.

"In R&R benefits, the stipulation regarding giving 20 per cent of the developed land back to the landowner will make township projects unviable for middle-class homebuyers," Jain said.

"This single clause will increase the effective cost of raw land by as much as 60 per cent, and take housing out of the affordability range of middle-class buyers. There is no need to intervene in free market mechanics of land markets," Jain said, adding that it will finally translate into 100 per cent cost escalation.

"Government intervention in free markets will make real estate projects unviable and drastically reduce the supply of affordable, organised sector housing," said Pankaj Bajaj, managing director, Eldeco. "The result will be either super premium housing or unauthorised slum housing," he said.

Another area of trouble for developers is that the proposed Bill states that R& R provisions will apply only when the private firms buy land equal to or more than 100 acres on their own and if they approach the government for partial acquisition of the land for public purpose.

This limit, developers say, is too low and must be extended to a minimum 1,000 acres so that they can opt to develop townships.

Bajaj also criticised the provision of the blanket ban on the acquisition of multi-cropped land as being impractical, especially in North India where most land falls in this category.

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Developers are also opposing the clause that states that land will not be transferred to the developer till the LARR Act is completed.

"This will hold up projects for years as many of the steps are procedure-driven. The delay will dry up the supply of land and also increase its cost substantially," Jain said.

It would force the developers to abandon affordable housing project and shift to luxury projects.

"If these provisions are accepted, the biggest sufferer would not be the developers - who would shift to luxury housing - but the common man. In the absence of availability of land, organised developers will have no choice but to do small luxury housing projects," Bajaj said.

The ministry of rural development has already posted the Bill on its Website for public comments and suggestions.

Courtesy: Mail Today