Can the Land Acquisition Bill Make housing affordable ?
Most of us are desirous of buying a dream home, but the rising property prices are making this dream rather far-fetched and for some, even impossible. Although home loans are available in today's times, stiff interest rate cost has been a deterrent for many property buyers - be it in the residential segment or commercial segment. Moreover, the situation of sky high reality prices at present has been heightened by real estate developers by sitting on huge inventories (unsold flats), and as a consequence there has been a slack in the realty sector.
While there were expectations that the Land Acquisition Bill (which was passed by the Union Cabinet last week) will mend this, there seems to be a new row over it, fuelled by realty industry protecting their interest. They are realising that that the proposed Land Acquisition, Rehabilitation and Resettlement Bill (LARR Bill) will not make their lives easier; but instead be detrimental to the new projects. According to the proposed LARR Bill, consent of at least 80% of the land owners is required for any private project. However if the land is developed under Public Private Partnership (PPP), the consent required from land owners would be at least 70%, while their would no consent required for Government projects. Besides the consent, the Bill also provides for a higher compensation and rehabilitation package for land owners, which we believe is fair and protects of interest of land owners who may want to sell. The aforesaid Bill states that the entire process of compensation should be completed within a period of 5 years of the date of proposal, or else the transaction would stand cancelled. Moreover, there also is a provision in the aforesaid Bill for return of unutilised land; which the present Land Acquisition Act, 1894 does not provide for. As per clause 95 of the aforesaid bill, when any land or part thereof, acquired under this Act remains unutilised for a period of 10 years from the date of taking over the possession, it shall return to the land bank of the appropriate Government by reversion.
While there were expectations that the Land Acquisition Bill (which was passed by the Union Cabinet last week) will mend this, there seems to be a new row over it, fuelled by realty industry protecting their interest. They are realising that that the proposed Land Acquisition, Rehabilitation and Resettlement Bill (LARR Bill) will not make their lives easier; but instead be detrimental to the new projects. According to the proposed LARR Bill, consent of at least 80% of the land owners is required for any private project. However if the land is developed under Public Private Partnership (PPP), the consent required from land owners would be at least 70%, while their would no consent required for Government projects. Besides the consent, the Bill also provides for a higher compensation and rehabilitation package for land owners, which we believe is fair and protects of interest of land owners who may want to sell. The aforesaid Bill states that the entire process of compensation should be completed within a period of 5 years of the date of proposal, or else the transaction would stand cancelled. Moreover, there also is a provision in the aforesaid Bill for return of unutilised land; which the present Land Acquisition Act, 1894 does not provide for. As per clause 95 of the aforesaid bill, when any land or part thereof, acquired under this Act remains unutilised for a period of 10 years from the date of taking over the possession, it shall return to the land bank of the appropriate Government by reversion.
There are views in the realty industry that the consent provision is rather steep and with high compensation and rehabilitation package, to be provided to land owners there could be resistance to acquire land. There is also fear that if retrospective implications are applied to the Bill, the compensation clause may lead to old cases being re-opened and erstwhile land owners could bargain for a higher price and thus hold the process. There also seems to be apprehension over clause 95 being inserted in the aforesaid Bill (as explained above). It is estimated by some in the industry that cost of acquisition of land may go by, as much as 150%, leading to escalation in their project cost. It is noteworthy that land cost constitutes typically around 20%-25% of the total cost in case of building projects, but they are substantial in case of other infrastructure projects such as airports, road amongst others.
We are of the view that certain provisions in the LRR Bill such as on consent, compensation & rehabilitation indeed protect land owners from the domination of real estate sharks who often adopt unscrupulous practices which are in their interest. Yes there are estimations that property prices could go up, but that too can be managed if the real industry shows the will by taking efforts to reduce property prices and sell the unsold inventory at reduced prices, which will facilitate the real estate industry to revive and also get the economy moving. Earlier, Finance Minster - Mr P. Chidambaram had urged the Government owned banks to put pressure on real estate developers to lower property prices in order to get the economy moving. The FM told bankers to make builders realise the need to complete projects according to schedule and lower the prices of apartments that are ready for possession but which are left unsold. But despite this prices haven't reduced rates, but instead property builders on the grounds of rising input cost and stiff borrowing have kept property prices lingering high. We think it is high time that we have a real estate regulator, whereby:
We are of the view that certain provisions in the LRR Bill such as on consent, compensation & rehabilitation indeed protect land owners from the domination of real estate sharks who often adopt unscrupulous practices which are in their interest. Yes there are estimations that property prices could go up, but that too can be managed if the real industry shows the will by taking efforts to reduce property prices and sell the unsold inventory at reduced prices, which will facilitate the real estate industry to revive and also get the economy moving. Earlier, Finance Minster - Mr P. Chidambaram had urged the Government owned banks to put pressure on real estate developers to lower property prices in order to get the economy moving. The FM told bankers to make builders realise the need to complete projects according to schedule and lower the prices of apartments that are ready for possession but which are left unsold. But despite this prices haven't reduced rates, but instead property builders on the grounds of rising input cost and stiff borrowing have kept property prices lingering high. We think it is high time that we have a real estate regulator, whereby:
· Malpractices can be tackled; and
· Transparency can be infused (about the size of the property, time of completion of project, means adopted to finance the project and charges for common areas amongst host of other initiatives).
Also affordable housing should be given more incentives in order to push low cost housing and discourage high end luxurious flats in densely populated cities.
Best Regards
Prakash Nair
www.keralites.net          |
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