Personal Finance

Balancing development and land pricing

Our Chennai Bureau | Updated on August 06, 2011 Published on August 06, 2011

Acquisition of land with the consent of land owners is a welcome step; but pricing has to be done in a transparent manner so as not to affect the people.

The New Land Acquisition Bill has in principle been welcomed by the Assocham, but there are areas of concern that need to be addressed, says Assocham' Real Estate Committee Chairman, Mr Navin Raheja.

In an e-mailed statement, Mr Raheja, also the Chairman and Managing Director, Raheja Developers, says, the acquisition of land with consent of land owners is a welcome step. Protecting the fundamental rights of the land owners is important.

However, fixing the compensation at six times the best value of registered sale in the area in the last three years will only increase the cost of setting up the industrial establishments, infrastructural projects and townships.

Reacting to some of the provisions of the Draft National Land Acquisition and Rehabilitation and Resettlement Bill 2011, he said this could also lead to rampant speculation by investors when development plans get released at an early stage.

Unscrupulous investors can get some of the land conveyed in their favour in such areas, manipulate and multiply by excessive profiteering at the cost of development.

Lag in development

The Delhi-Mumbai industrial corridor is a case in point, Mr Raheja told Business Line. Though the project has been announced for some time land acquisition by the Government is yet to happen. Investors could pick up land in the area and make a killing in the coming years.

Also, industrial and infrastructure development is essential for the inclusive growth of the economy. Just about a fraction of the available land is needed for industry but such development will represent the general good. So land pricing has also to be balanced to ensure projects are not affected by overpriced land.

Mr Raheja said that there must be an open debate of all the stake holders such as the industry, the Government, the land owners and also the media to devise a path which is transparent and pragmatic while protecting the fundamental rights of the people.

Open debate needed

“In my personal capacity, I would like to suggest that every State should be required to put up land for development on e-portals with land offered or available for development projects. Such a Web site or any other information system that is easily accessible to everyone, where the land owners can collectively offer their land for sale, quote their demanded price so that the industry and the Government is free to choose and negotiate with the group of such land owners/village panchayats on the rates and other terms . Such a transparent competitive process can help industry decide as to where to put up the industry/township/SEZ/infrastructure project depending upon sustainability and other factors.”

In short, acquisition of land should be based upon the willingness and the price quoted by majority of land owners, say 70 to 80 per cent in an open and transparent manner. If the buyers find it tough to purchase the balance land, then the governments can step in.

However, in most cities the Government acquires land for infrastructure and industrial development.

This increases the burden and cost of social and industrial development. As a result the infrastructure and industrial development becomes slow and expensive. The cost of production of industrial units also goes up due to high capital cost of setting up factories. The financing of these activities will be tough too as there are no norms for financing the land cost.

This also adversely affects real estate development as additional burden of land cost will make housing expensive.

In fact the land in the open market too would become expensive. Just to benefit a few people, the burden of excessive cost of production and development will be borne by all the countrymen. Thus, this needs to be looked into rationally, he said.

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