The land acquisition rehabilitation and resettlement bill, 2012

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We have long heard tales of stupendous conflicts between farmers, developers and government regarding acquisition of land for development purposes. The echoes of these stories are so profound that no one can give them a miss at all. Farmers give land to the developers, developers buy that land and create resources for development, and consequently government intervenes and creates a scope of growth within the defined parameters. But, the situation is totally contrasting than it sounds; also the repercussions of this process are very extensive leading to its impact being manifolds. No one has been able to stream away from the discrepancies in this system.

Uncovering the process

Land acquisition refers to the process by which government forcibly acquires private property for public purpose. The Land Acquisition Act, 1894 (1894 Act) governs all such acquisitions. Additionally, there are 16 Acts with provisions for acquisition of land in specific sectors such as railways, special economic zones, national highways, etc. The 1894 Act does not provide for Rehabilitation and Resettlement (R&R) for those affected by land acquisition. Currently, the R&R process is governed by the National R&R Policy, 2007. In this year, two bills were introduced in the Lok Sabha: one to amend the Land Acquisition Act, 1894, and the other to provide statutory status to the R&R policy. These Bills lapsed with the dissolution of the 14th Lok Sabha in 2009.

In May 2011, the National Advisory Council recommended combining the provisions of land acquisition and R&R within a single Bill. In July, 2011, the draft Land Acquisition, Rehabilitation and Resettlement (LARR) Bill was published by the Ministry of Rural Development for public comments. In September 2011, the government introduced the LARR Bill in the Lok Sabha. This Bill will replace the 1894 Act.

The core sense

LARR Bill, 2011 seeks to repeal and replace India’s Land Acquisition Act, 1894. The Bill seeks to enact a law that will apply when:

  1. Government acquires land for its own use, hold and control.
  2. Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose. The purpose of the Bill includes public-private-partnership projects, but excludes land acquired for state or national highway projects.
  3. Government acquires land for immediate and declared use by private companies for public purpose.

LARR Bill, 2011 aims to establish the law on land acquisition, as well as the R&R of those directly affected by the land acquisition in India. The scope of the Bill includes all land acquisition whether it is done by the Central government of India, or any State government of India, except the state of Jammu & Kashmir.

The unwrapped facts

According to real estate experts, Cushman & Wakefield, acquiring land is a complex procedure and the archaic 1894 Act has been incompetent (for a long time) in addressing the complexities of acquisition and settlement. Recent disputes in Uttar Pradesh, West Bengal, Andhra Pradesh, Orissa and Karnataka exemplify the outcomes of disharmony among various stakeholders. The proposed LARR Bill, 2011 is a major improvement over the previous 1894 Act. Apart from offering better compensation and addressing the concerns of land owners and livelihood losers, the Bill tries to make the whole process of land acquisition easy and transparent. Key features of the bill include higher compensation for land, a comprehensive R&R package, special provisions for SCs/STs, restrictions on acquiring crop land among others. The proposals included in the Bill are likely to impact the residential and commercial property markets, though with a time lag.

The compensation plan for the land owners and livelihood losers may be an expensive proposition especially for private and smaller building companies as the Bill appears to be mostly focused on land acquisition for infrastructural projects and large scale commercial projects. Also the Bill has to be aligned to the existing land acquisition norms of various states given the fact that ‘Land’ will continue to remain a ‘State list’ item. The proposed Bill does not talk of any process streamlining, thus setting up of a medium to large scale industry may still be a very tedious process as it requires consent of 80 per cent of the project affected families resulting in active transactional negotiations with large numbers of land owners. There is a scope that unwarranted delays and higher compensations could impact infrastructure projects hindering urban growth and development.

Some of the main issues that the LARR Bill, 2011 has to further address are irregularities in land records, inaccurate land values and multiple land titles. Once the Bill becomes an Act, the states can draft their own policy around the national Bill; therefore, the impact of the new LARR Bill, 2011 will be varied across India. While this is a step in the right direction, there will be many more aspects to formalise before the Bill can come into effect. If the ambiguities are not addressed the bill can be counterproductive.

A significant viewpoint

Confederation of Real Estate Developer’s Association of India (CREDAI) lays down the following points:

  1. Restrictive Land Policy will lead to Unplanned Growth and Slum- Incorporating R&R for all private projects above 50 acres will severely restrict the supply of land for organised housing. Urbanisation is an uncontrollable force. If we do not facilitate it in an organised manner, all the incremental population will be housed in slums with dire consequences for our economy. Housing prices will further become unaffordable. In the long run, even farmers whom this bill seeks to protect, will suffer hugely as development of fringes of urban centre will largely be in the form of unauthorised developments and they will not realise the true economic potential of their lands. Government should do away with the numerous onerous and artificial impediments placed in the way of free commercial transactions. This will be harmful for the economy, the urban middle class, lower middle class and ultimately the farmer.
  2. Alternative Solution: Cashless Transaction– An alternative way of compensating the original landlord/farmer whose land is being acquired for any project which is commercial in nature – toll roads, housing, etc included- is to offer the landowner an opportunity to become a share holder in the new venture. In any case, the valuation of the land including solatium, etc. has to be first determined. Thereafter, the landowner could make his choice for taking his compensation in cash or as share in the project or as part cash and part share. In no case the share holding of the land owner should be more than 49 per cent of the total share capital of the project. This will ensure that the promoter of the project is able to implement the project with his expertise while the landowner could also gain incrementally from the increased value of a completed project. This is a better and sustainable mode of benefitting the landowner rather than stipulate unsustainable and unmonitorable conditions like long term annuity compensation or 20% of the developed land to be given back as further compensation. As such, government has announced compulsory reservation of 20 per cent developed land even in private housing projects for EWS housing construction under Rajiv Awas Yojana. This kind of one-sided, ill- thought out doles may sound very altruistic and pro-poor; but, these are unsustainable and ‘will kill the goose that lays the golden egg’. The Real Estate sector in spite of all hurdles is now contributing more than 11 per cent of GDP and has strong linkage with 250 types of industries plus the finance and insurance sector. It is the second largest employment providing sector. Rapid urbanisation and population increase would need much more affordable space creation in quick time.

The closing questions

Sudhir Kumar, an eminent High Court Lawyer gives in his conclusive perspective- Whenever we consider the usage of 1894 Act the problems of Bhhatta Parsaul and Greater Noida in Uttar Pradesh and Singur and Nandigram in West Bengal prominently persist in the news. However, the real problems of land owners, the government and the private players along with the people are not seriously discussed yet. The present Bill is considerate in analysing many problems but this Bill too is dented with various conditions that it imposes in the form of clause over land owners and land users. To begin, there are two main questions, firstly, whether the Bill is fair enough in answering all the problems that prevail in the present scenario of Indian economy and in the previous 1894 Act. Secondly, with the coming of this Bill will the land owner have the freedom to choose any other option rather than unquantified money on land price developed and distributed by the State government under the 1894 Act?

Even after collecting the compensation from the hands of district officers or land acquisition collectorate; the land owners have to fight another long battle under section 18 of 1894 Act for further enhancement of their compensation from the District Court to High Courts. There are numerous judgments to these effects issued by the Hon’ble Supreme Court and High Courts of various states.

Sometimes, if the State government fails to develop the said acquired land for a long term of time, which generally do happens, then there is another tedious battle of cancelling the notification of lands acquired under the 1894 Act. But, are the land owners actually practicing farming on their land or do they sell the land quickly to other private individuals in order to get more amount than what the government prescribes after making their assessments, such questions are still not answered in the present Bill. Moreover, what is the benefit factor for new land users if the notification of land is cancelled and each new user has invested their money? Another thing which could be mentioned here is the rising heterogeneity among the original land users and the new land users, as the compensation policy in the matters of land acquisition is still not acceptable by both the people involved in case. The analysis has to be made along with some amendments; that whether the Bill is able to answer the problems of farmers, land owners, land users, industries, agricultural productivity and the social brigade at all. In the stage of analysis, what could be the broader line for answering various issues raised in various litigations before the courts or among the land owners and land users? The analysis could never bring a solution however the probable solution can be made. But, it’s very important to clarify the role of government, their intention and their officer’s role who are involved in such process. At present, there are many more issues that could be raised in time manner and the debate on the sanctity of new Bill shall always be maintained.

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Land Acquisition Bill may push up property prices by 30%

NEW DELHI: Real estate developers say the passage of the Land Acquisition Bill could push up property prices by as much as 30% in projects where land is yet to be acquired.

The Bill, passed by the Lok Sabha on Thursday, aims to provide higher compensation of four times the market value for land sold in rural areas and twice the market value for land in urban areas, among other benefits to land owners.

While developers agree that the Bill will increase transparency in land deals, they say the higher compensation to land owners could make several real estate projects unviable. While large projects of over 50 acres will become difficult to execute, even prices of smaller parcels of land that do not come under the purview of the Bill could double, they add.

“The process of acquiring land for projects will become tedious, especially in the case of large land parcels,” said Lalit Kumar Jain, chairman of Confederation of Real Estate Developers Association of India.

Developers say the worst hit could be lowcost and budget housing projects. “The idea of low cost housing was to get cheap land. If land prices shoot up, so will the prices of the finished product,” said Niranjan Hiranandani, chairman of Mumbaibased Hiranandani Group.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012, will replace the Land Acquisition Act of 1894. It needs clearance from the Rajya Sabha and the President to become law. Besides ensuring fair compensation, the Bill says that land acquisition for public private partnership (PPP) projects will require the consent of 70% of the landowners while private projects will need the consent of 80% of the owners, conditions that will leave little room for forcible acquisition of land. The Bill also says that if the land is sold to a third party, 40% of the profits will have to be shared with the original owners.

According to the Bill, affected “families” would include farm labourers, tenants and workers who have been in the area for up to three years before the land acquisition. Such persons will have to given a job or compensation of .Rs 5 lakh, an allowance of.Rs 3,000 a month for a year, besides other allowances as part of the rehabilitation and resettlement (R&R) package.

This means that a private company acquiring land will have to first seek the consent of 80% of the land owners before approaching the government to acquire it. Once cleared, it will have to offer an R&R package, too.

One of the amendments to the Bill allows a buyer to leas land, instead of buying, as suggested by BJP leader Sushma Swaraj. “For the real estate industry, the addition of R&R component will be a big financial burden,” said Sanjay Dutt, executive managing director of South Asia at Cushman & Wakefield.

The Bill has drawn protests from developers, who maintain they always ensure full consent of the seller in any land deal. “A willing buyer and a willing seller should be exempted from the Act, as in such cases there is always 100% consent and the best market price for the land is paid,” said Rajeev Talwar, group executive director at DLF

“Going through the government compulsorily will only add to the cost and time taken and will put unnecessary burden on the buyer. The government should rather make it easier for the private sector to operate.” To insulate against any increase in land price, several developers have adopted the joint development model, where landowners and developers share profits as well as risks.

For developers, the cost of land is expected to increase significantly, impacting project cost and margin.