Impractical circle rates would compound Land Acquisition

In the recent times, a lot of debate has been accentuated on land acquisition in India. Over the past few years, a lot of projects have either been stalled or shelved owing to non-availability of land. According to estimates by Certes Realty Limited, projects worth upwards of 1.5 trillion are stuck for land.

The current government has proposed about ten significant changes to the LARR Act which include increasing the compensation to the land owners between 2 and 4 times. That brings us to the question of the base for the compensation, which in most cases is the circle rate or the Collector Rate, as referred to in many districts.

Unfair pricing of land, when acquired by the government, remains at the core of the debate. This has led to many a litigation, social agitations and intellectual debates. However, in this author’s humble opinion the core of the problem being the archaic mode of land valuation based on circle rates, has not been addressed.

The circle rate is normally fixed by the District Administration based on historical data which again is a derivative of the registered sale deeds in the district. A policy which originally was intended to curtail black money has worked exactly to the opposite. The circle rates remaining low, land transactions for non-agricultural users have attracted black money.

Let us now look at what ails the system of circle rates which could also become a point of contention during the implementation of the revision under the The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

  • There seems to be certain arbitrariness in the fixing of circle rates. It does not account for locational factors, economic activity around, physical features, agricultural productivity and availability of infrastructure etc. on the land being acquired.  As an example; if the circle rate of a district in any state is fixed for rupees ten lacs per acre the land adjoining highway and the land away from physical connectivity are both valued the same. Although the market value might differ to the tune of 1:10.
  • There seems to have been no periodic updates using scientific matrices to evolve geography specific circle rates. As an example; states where tribal holdings are high versus agricultural land of individual farmers get assessed differently.
  • There seems to be no uniformity of practices while arriving at the circle rates. The prime reason possibly could be that land always has been a state subject under federal governance structure.
  • Land, when developed for urbanisation purpose, the State Urban Bodies always acquire in acres but later are either sold allotted or auctioned in square meters. This significant arbitrage is no longer a secret. Land owners rightfully think that the circle rates are deliberately retained at a lower level. The Parliamentary Standing Committee examining the LARR Bill, almost admitted that the registrations of sale deeds are happening at a much lower value than the actual admitted price thereby denying both the state and the land owner of significant revenue.

Now what is the way forward when India realising that to sustain a GDP growth upward of 8.5% and to create 10 – 15 million jobs year on year, urbanisation is the need of the hour and this inevitable truth would have to become the leading principle for us to devise a scientific methodology for acquiring land in the future. Some of the suggested solutions could be as follows :

 

  1. Digitised Land Data using GIS mapping to determine market value based on existing and proposed infrastructure.

Scientific tools can also form the backbone to record details as soil type, land productivity, type of primary secondary and tertiary income and proximity to other avenues of livelihood.

The second is encouraging PPP mode of development through land pooling.

Contrary to earlier adopted method where the government acquired a land and sold the land to the private sector to develop, it would be beneficial to all stake holders if the state only acts as a facilitator between the developers and the land holders and pool in their resources for urbanisation purpose. The state or Urban Development Agencies could frame favourable policies and remove obstacles for the farmer to pool his land on mutually agreed terms with any developer and get to become a stake holder in the project thereby earning a perpetual income from the land which could be many times more than the agriculture produce. Also such land pooling exercise would not remain victim to the vagaries of nature for farming. Globally it has been seen that land owners when give an economic interest into  development of land end up getting a fair valuation and sustain cash flow.

Introduction of private sector experts in to planning:

Whether it is for the determination of the correct valuation of land or the monetisation there of, private sector experts have not really found a contributory with the state urban bodies. If a true PPP mode can be evolved on a non-partition, non-conclude of interested manner it would augur extremely well for the cities of the future.

This current government has announced ambitious plan for the creation of 100 smart cities in India. It would be remain a pipe dream or a retrofit exercise if smart planning is not incorporated in to the plans and no smart plan can afford to exclude the interest of all stake holders which means the land owners too.

In conclusion, we have to go back to basics by addressing one critical point at a time which might assuage the land owning community starting with digitising land records and a scientific method for circle rates would be a great start.

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