by Mr. Anuj Puri, Jones
Lang LaSalle India
The Land Acquisition
Bill, which the new Bill now supersedes, is a century-old law with many archaic
elements & loopholes. The new Land
Acquisition Bill essentially champions the cause of the marginalised section
and puts in place many safeguards and checks.
The Parliament has
now passed the new Bill with amendments like exclusion of irrigation projects
from the compulsory Social Impact Assessment study within a period of 6 months
from the date of acquisition, and tweaks in Clause 25 of the Act pertaining to
the determination of compensation.
In India, a majority
of land acquisition-related disputes / litigations have erupted from the unfair
& highly subdued compensation to
land owners, and lack of thorough and clearly-defined rehabilitation& resettlement policy for those displaced due
to acquisition and acquisition of land in regions / areas inhabited by scheduled
castes and other tribal people.
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| Anuj Puri, JLL India |
The new Land
Acquisition Bill addresses all of these
concerns. It has aggressively ramped up the valuation to twice the guidance
values in urban areas & 4 times the
Guidance value in rural areas.
The law clearly
states that no one shall be dispossessed until and unless all payments are made
and alternate site for resettlement and rehabilitation have been prepared.
Also, it prohibits the acquisition of land in scheduled areas without the
consent of the rural authorities, or ‘gram sabhas’.
In case of land
acquisition for PPP projects or for a private player, the Bill requires consent
of no less than 70 % & 80 % of those
whose land is sought. It also stipulates the provision of 40 % profit sharing with
original owner in case of sale of land to the third party for a price higher
than compensation paid.
Through all these
provisions, the new Land Acquisition Bill attempts to address the
conventionally prime reasons for litigation and grievances. Hence, litigation
and related costs can be expected to decline.
Taking a holistic
view of the Bill & its potential implications on the Indian real estate and
infrastructure industry, there seem to be 2 opposing forces at work here. On
one hand, legal complications and grievances related to land acquisition are
expected to subside, thus streamlining the acquisition process.
On the other, a sharp
increase in land-related costs will lead to hugely enhanced financial burdens
to developers, since the Bill add to add to the cost of projects, that too
substantially in some cases.
In a developing
economy such as India, where infrastructure-related projects & urbanization are of paramount importance,
enhanced project costs resulting from the new Bill might be a severe setback
for infrastructure development and urbanization attempts. The enhanced
compensation clause and the R&R clause will have a direct cost implication.
The consent clause holds the potential to delay the start of such project.
In fact, many
infrastructure projects might eventually be rendered non-viable and the private
sector - already not too interested in partnering with the Government in wake
of delays & regulatory complications
- might be even further discouraged from considering any potential partnership
with the Government in PPP projects.
Given the fact that
the provisions of the Bill will be applicable in cases of land acquisition of
50 acres in urban areas or / 100 acres in rural areas, most residential,
commercial & retail projects will be
immune from these clauses as they occupy an area smaller than stipulated in the
Bill. Also, most of these projects were initiated after adequate compensation
to landowners and with their 100 % consent.
Nevertheless, an
important trend in the real estate industry that will further pick up is joint
development. Many developers looking to safeguard profit margins and share the
risk will now follow the joint development route.
Thus, in a nutshell,
the infrastructure industry - and its players - will be more severely impacted
than real estate industry. As far as institutional capacity to implement the
key reforms of Bill is concerned, it does not seem that we have the
infrastructure and systems in place to effectively make all the reforms work on
the ground. The law and order machinery will need to be augmented. Also, many
regulatory mechanisms will need to be initiated or made robust for continuous
monitoring.
About the author
Mr. Anuj Puri,
Chairman & Country Head, Jones Lang LaSalle India
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