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Land acquisition conflicts reiterate need for transparency

Land acquisition conflicts reiterate need for transparency
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First Published: Mon, Jul 25 2011. 10 35 PM IST

Updated: Mon, Jul 25 2011. 10 35 PM IST
Land acquisition has become a contentious issue with conflicts arising frequently in different parts of the country— Nandigram, Singur, Bhatta-Parsaul and Shahberi to name a few. The science behind land aggregation is extremely opaque, thanks to lack of proper land records and archaic laws governing land-related issues.
The value of land depends on the potential of income it can generate. Typically an agricultural land will be much cheaper as potential income is lower than any land which is made available for real estate development. The fact that the land records and local area master plans can be manipulated encourages some policymakers and private land aggregators/developers to collude—agricultural land is then aggregated at low prices in areas with an inside knowledge of an impending change in land use which will drive the price up. The farmers and land owners of course do not have this valuable information. As a result, farmers sell land at prices which are cheaper and therefore end up feeling cheated when prices soar after change of land use.
The impact
The loopholes in land related laws are detrimental to the economy. The landlords get inadequately compensated in some cases, and the soaring price of land after change of land use hurts the end-users who purchase real estate after development of the area. In cases where farmers protest and get a favourable judgement like it happened in Singur or Shahberi, the general confidence for future investment into new areas necessary for the larger economic development of the country suffers a huge setback.
Turmoil such as these have a direct impact on real estate prices in the area as it is very difficult to convince the builders, in case the situation improves after government intervention, to restart or launch new projects. It will be extremely difficult for the builders to convince the customers that all is well and settled and their investment is safe in such areas. Investors have already started shying away from disputed areas such as Noida Extension where the sales have come to a halt even in projects which are safe at the moment. With the extensive media coverage, homebuyers are now definitely more aware and doing their homework before getting lured by low-cost projects to ensure their investment is safe.
Some measures ahead
In order to arrest the issues and conflicts arising out of land acquisitions, the Centre plans to introduce an amendment to the Land Acquisition Act of 1894. The first amendment to the Land Acquisition Act was made in 2007, which lapsed with the dissolution of the 14th Lok Sabha.
The solution
The solution to the problem lies in driving transparency in the market. Clear and transparent rules of acquiring land, compensation to land owners and rules around approvals and governance around delivery of end products to consumers is urgently required. This will increase competition in the development market as more businesses would enter the development sector. Fair market competition will create healthy bidding for land, ensuring adequate compensation to land owners and ensure quality and delivery of products at competitive prices to the end-user, benefiting the economy as a whole. Confidence in the sector would promote flow of foreign direct investment and local institutional money into the sector, thereby easing up financing woes of the sector.
The extent of the problem cannot be quantified, but one thing is certain—if the government does not act now, conflicts such as those arising in Singur and Shahberi will only increase and will be a huge impediment to the growth and economic development of the country.
Anshul Jain is chief executive officer, DTZ International Property Advisors.
We welcome your comments at mintmoney@livemint.com
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First Published: Mon, Jul 25 2011. 10 35 PM IST