How the interest of the landowners were periodically undermined by the policy makers
With the tabling of the standing committee report on the LARR Bill 2011, the debate has widened whether development of urban areas are considered “A public purpose, or are the private developers engaged in a profit making commercial venture”.
Should the government, government agencies & Urban authorities invoke the Urgency clauses to acquire the fertile land from the farmers, at abysmally low prices, and subsequently either allot or Auction the land on Open market valuations basis, thereby, pocketing the profits OR, in other words, depriving the farmers of their legitimate commercial value of the asset.
In the first place, there is a distinct difference between “Acquisition” and “Purchase” by the state. Excepting in Northern part of Australia (to protect the interest of the Aborigines), Perhaps no nation other than India “Acquires” land. They are purchased, by paying a fair valuation to the landowner, keeping in mind the social, & economic rehabilitation. Why should it be any different in India?
The doctrine for Land “Acquisition” was limited to Railways, Roads, irrigation canals & such public purposes, but, was subsequently amended to include “Or Company”, which further was amended in 1933 to include “the erection of dwelling houses for workmen employed by the Company or for the provision of amenities directly connected therewith”.
The amendments made in 1984 extinguished the differentiation of acquisition of land for ‘public purpose’ and for Company or private enterprise. Coupled with the burgeoning urbanization needs, the states started acquiring land (please note, NOT purchasing) with a vigour not commensurate with the zeal on other socially important obligations. In many cases, acquiring much more than the immediate necessity, and, at prices, which were unfair to the landowners.
If we trace the history of real estate developments & developers in India, the growth of large Real estate development firms also coincides with the amendments in the land acquisition policy. IN THE 1960s, the state took upon itself the responsibility to create residential dwelling units since the private enterprise wasn’t strong enough. During the 80s, the private enterprise started displaying their presence in the Real estate sector, and with the economic advancements in the 90s & this century, most of the supply in Real estate came from the private sector. This period also saw the incremental role of the state to acquire land, for furtherance of the economic interest of the private developers (Intended, or Unintended remains a perennial debate).
The gullibility of the developer community to get the most valuable input for a cheaper price, not just deprived the actual owner of the rightful price, also gave rise to corruption & nepotism. Developers weren’t demanding enough when the policymakers’ foisted needless demands, licensing policies, delayed approvals & out of pocket expenses, which instruments only increased the prices of the finished products. All the fanfare, with which the “Low cost housing”, affordable housing & such products were announced, didn’t thrive. The incremental input cost (read OOP expenses) only ensured that developers were creating the supply of middle income & luxury homes. A random survey of the current developments in cities like Gurgaon, Pune, Bangalore, Mumbai or any such evolving markets would prove this point.
Land prices contribute to almost 40% of any project. Typically, from the date of allotment, acquisition of the land to completion, the time taken is not less than 5-7 years. Add the cost of money, Energy cost & maintenance of high cost real estate, we do know that almost 65% of any corporates OPEX is dedicated towards Real estate.
This pushes our argument to the moot point again ~ “In whose interest is the government acquisition of land”? The landowner was paid a pittance, a lot of land which acquired gets encumbered by unscrupulous elements, the buyers of unauthorized colonies get duped, the developer buys land costlier & waits for years sometimes for all development approvals, the end occupier pays more for his dream home / Office, the investors & institutions take higher risks funding them etc.
So, who benefits?
Is there a pattern in the slow down in decision-making, the increase in the land acquisition by the government & the incremental complaints of corruption & nepotism? Readers decide.
Specialist firms purchase land for specialist developers, that being the trend globally. A case in point is the hordes of moneybags & family run businesses (including from the political & bureaucratic families) entering the domain of development, and more specifically that of Townships, SEZs, special purpose projects like Power, Ports, other infrastructure. Another report of the same author on SEZs point out the abysmal failure of the SEZ policy, and less than 10% of the proposed projects actually taking off. The question to raise being ~ “Did SEZ developers enter into the domain for the Land asset being given by the state at less than market valuation?”
It is a considered opinion of this author, who has been working at the ground level of the Delhi Masterplan 2021, that the government has no business to grab land from the farmers, in most cases @20% of the market valuation, converting the land and auction / allot / sell the same at prices which are in some cases 20X of the price at which acquired from the farmers.
Never too good to point fingers, but, why did it take independent India’s policy makers & leaders117 years to amend a bill, which was created by the British to fulfill their myopic perspective to rule India.
The author is the founding Partner of CERTES REALTY LIMITED, a Delhi NCR based Real estate advisory and land consolidation organization and can be contacted on email@example.com