Mint Conclave | Land Bill: striking the right balance

Mint Conclave | Land Bill: striking the right balance
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First Published: Wed, Dec 14 2011. 10 38 PM IST

Photo: Bloomberg
Photo: Bloomberg
Updated: Wed, Dec 14 2011. 10 38 PM IST
New Delhi: Land acquisition has become a contentious issue and in some parts of India led to protests by farmers. The protestors have questioned unfair compensation paid for their land and forcible acquisition by the government. The National Land Acquisition and Rehabilitation & Resettlement Bill, 2011, aims to address rehabilitation and resettlement (R&R) by providing safeguards for both landowners and those who risk losing their livelihood while clearly defining the “public purpose” for which land can be acquired by the government. It also adds a clause prescribing a specific timeline for compensation. A panel of experts discussed the Bill at a Mint Clarity Through Debate conclave on 9 December. Participants in the debate, moderated by Mint deputy managing editor Anil Padmanabhan, wereOm Chaudhry, chief executive officer (CEO) and founder, FIRE Capital Fund;Romi Roy, senior consultant and urban planner, Delhi Development Authority (DDA); Manish Kashyap, managing director, transactions, CBRE South Asia; and Rohtas Goel, chairman and managing director, Omaxe Ltd. Edited excerpts:
Do you think the land acquisition Bill seeks a balance between the stakeholders, Rohtas?
Photo: Bloomberg
Goel: I welcome the land acquisition Bill. But it proposes six times the rate in rural areas and two times in urban areas. I am not only talking about real estate, industries and other sectors like schools, colleges, offices—nobody will be able to acquire the land if the law is applied. For example, if today’s land rate is Rs.50 lakh per acre, after the rule comes into practice, the rate would be Rs.3 crore per acre. The government is asking us to pay three times the present rate.
Why does the government want to increase the rate? The reason that the government is giving for the rate to be six times or two times is they are charging below the market rate or the circle rates. But there is a difference between circle and market rates. I request the government that you make the circle rate on par with market rate. Then there will not be any need to increase the rate of compensation to six or two times. No industry can acquire land.
Manish, do you agree with him?
Kashyap: Land acquisition is a very important issue before the government. And like he said, the rates will inhibit the growth of industry, also for anyone who is trying to set up his own business. But there are some good provisions that the Bill has. You know, rehabilitation and resettlement is a big issue that the Bill addresses, keeping in view the way it should be done and with the right process. And a lot of the money that the government is talking about to give to farmers through the Bill will in some way go to the farmers in a staggered manner. The money will be given to them over a period of time rather than upfront. I think the Bill has brought a very good point.
Rohtas said he has got concerns, but since the farmers are not present on this panel, so let me be the devil’s advocate. Do you think he is fair in saying that farmers are being paid too much or the government has been unfair in favouring the farmer?
Kashyap: It’s a difficult call. Because I think the Bill needs to be looked in totality, not just in numbers. Like I said, if they finally come up with the four times’ provision, but they are also saying a large part of the four times will not be given to the farmer at that point. So the farmer at that point of time might be getting a part of the money. So one needs to see the details in the Bill, to exactly understand the payment structure. Then there has to be consent of the 80% of the farmers in an area, which will drastically reduce the number of litigations. At this moment, there are a lot of litigations. So largely speaking, the Bill addresses the concerns of the industry and the farmers. Obviously, when you are trying to strike a balance, there will be a faction, which will make both the sides unhappy.
Om, how do you see it? You are juggling funders and generating resources for developers.
Chaudhry: If I take a view from the point of the fund, I take a step back and look at the larger requirement. The engine of growth is going to be development, construction is required. So, if you are going to get to 10% GDP (gross domestic product) growth rate, which we aspire to, we have no option but to push our urban development forward. We are a services-centric economy. Unless urban infrastructure is in place, we fall short. So in order to make that happen, land is the raw material.
Fortunately or unfortunately, land in India is a highly emotive subject. Whether it is you or me, a bunch of farmers, it is emotive and, therefore, highly explosive. And India is a democracy, so this is nothing that government is forced to do but is something that is what farmers at large who own land are pushing for. And that is a response to that need. If you look at it from the development viewpoint, we are not going to get the desired result.
Is this the end of the dream of the middle class, who want to own a house?
Goel: Because of this land acquisition Bill, first farmers are going to get rehabilitated and resettled, they are getting annuity income also. If these things are being given to them, the land should be acquired either by government or by the developer at the market rate. I strongly advocate this.
If the land is not acquired at the market rate, then you have to forget affordable housing. In 2030, Indian urban population will reach to 590 million from the level of 340 million in 2008. And that too, a majority of this population will comprise of the young generation. And 70% of GDP will be contributed by this population if this population is employed. Are we geared up to take this population and provide them housing?
If today’s housing demand is met by just 3% of the urban land, and 1% of this land is fertile, the rest is non-fertile. So if this land is acquired, where is the problem.
But do you think the kind of problems we saw in Noida suggest that it is the end of the road? Om, I am curious to know your thoughts on this.
Chaudhry: It is not that I am unhappy. Like I said, unless you free up the locked parcels of land, you are not going to get growth in the sector and the economy. So that is something that is required to be done. However, we are going 20 years back, there was this Licence Raj, you were trying to be a protectionist. I am choosing my words politically…as the subject is politically sensitive.
However, you cannot put at risk the growth of the economy by addressing one section of the population. Now what is happening is whatever work is done over the past 10 years is suddenly put at risk because you are trying to force something which is not driven by market forces. Wherein today’s world, do you see something that is determined.
If I may just jump in, so your investors, whom you get your funds from…are they kind of drying up seeing this mood in India?
Chaudhry: See, the mood in India, whether it is FDI (foreign direct investment) in retail, what is going to happen in India with land reforms or potential availability of land…because the funding is there, you know we had $20 billion that got committed over the last 10 years. But a lot of it is not utilized. You don’t see vertical building coming out of that fund. And the reason for that are land title ambiguity, non-availability of land, and the regulatory process. We have done deals involving more than thousands of acres.
So the investors are drying up because they are getting into a situation when one cycle of funding has been over if we see it from 2005, when the FDI opened for real estate in India. So this is the time to look at the report card. So we are at a stage when you have done a lot of the heavylifting, where you have gotten people comfortably resting in the sector and country and suddenly you shake that a little by saying that this is not going to be sustainable.
And a lot of it is also the dimension of practicality. And if we are going to pay annuities to farmers till 20 years, what happens if someone goes to the court in the 17th year. So it is something that needs a lot of discussion and debate.
I think we both seem to be differing on this. So we should get in a mediator like Manish. How do you see this?
Kashyap: You know, I am not an expert on policy and land acquisition norms. But I must say one thing—the most important thing from developers’ and Om’s perspective is the easiest way to ease pressure and create more housing for the middle class. Everybody is ensuring there is lot of construction is going on. But everyone assumes, if there is so much construction going on why are the prices not coming down.
The fact of the matter is there is 4 million sq. ft of commercial leasing happening in Gurgaon every year, year-on-year, 40,000-45,000 jobs are being created year-on-year. The thumb rule that you apply globally is that for every 100 sq. ft of commercial space that you create you need to create another 500 sq. ft of residential space. This means year-on-year, you need to create 20-25 million sq. ft of residential space. But it is just isn’t coming up.
But Manish, I think we should accept one thing that Rohtas is also alluding to is the fact that we have reached the limit of land acquisition as of now if we do not fix the issues. So developers cannot be removed, farmers cannot be ignored. Is affordable housing the way out of this complex battle; government has its own way, farmers also think on a different line. There are the consumers whose expectations are growing by each passing day. So Romi, from the point of urban planning how do you see this?
Roy: I do not know the details of this Bill and everything, but how we want to see growth. Firstly, we do not want to see untended sprawl happening in the city, so just taking land and hitting at building at two FAR (floor-to-area ratio) is not what we should be doing because that is inefficient use of land. We need a certain amount of bylaws that provide us land, which currently are not there. Our norms actually promote low density housing. So this should be addressed.
What should be the criteria for acquiring—one is industry, but acquisition of land for general use as commercial, housing and space to play, we need an infrastructure in place. We need a transport system in place. In NCT (National Capital Territory), largely Delhi, we have done so much housing in Bawana, Narela and some other area, and there is no basic infrastructure there. Even in developed Dwarka, there is no water. There are no proper bus systems and other things in place.
If we are pushing the affordable housing in the outskirts of the city, we are actually making the urban poor poorer because the person who was able to commute daily is now spending Rs.100 daily. And dense development is based on infrastructure and not just random acquisition.
But as in principle, affordable housing means denser format of housing. They are bigger homes. Does that make sense to you as an urban planner in principle? Before we ask Rohtas whether it makes fiscal sense to build affordable housing, we want to hear your view.
Roy: Many would agree that the biggest demand is for lower-income housing and lowest income category of housing. So the problem that we see being in DDA, earlier the government took it upon it themselves. They acquired and built it. But now the housing need is 90,000 homes per year. And we are definitely not building. We must have built just 15,000 homes in the last five years.
So it is very clear that government alone cannot remain the sole developer of housing. The private sector has to come in. Now does the private sector get interested in this, how does the government make developers’ interested in building affordable homes?
We ask this question to Rohtas. How would affordable housing interest you? Does it interest you at all or can you make it financially viable to suit your requirements?
Goel: See, there is a market for affordable housing in India. There is maximum demand for this kind of housing. But the ingredient for the housing is land and second is construction. After the land acquisition bill, I am sorry to say, I think it is not possible to acquire land. As far as construction is concerned, construction two years before used to cost me Rs.800 per sq. ft. Now it is costing me Rs.1,400 per sq. ft. Moreover, the cost of raw materials such steel, cement, sand, etc., has appreciated more than 50%. So I am unable to understand how this segment will survive.
So if the government wants that yes, urban population is increasing and there is need for housing and employment. This will require infrastructure. The cost of this infrastructure would be $1.2 trillion. That means Rs.60 lakh crore in the next 20 years. Are we ready for that? That means the government has to be the facilitator not the controller or the problem-maker for the developers. Neither the government is developing nor is it allowing us to develop.
That is not what Romi meant.
Chaudhry: Anil, if I could come in here. It is actually not just the issue of land and what cost the land comes at. If you look at urban development process, the stages that it needs to follow, it needs land first. You create, you govern and then you sustain. So it is the starting that has to be a planned.
Now, when we say we want to address the basic needs of affordable housing. There is a huge shortfall in this category. Whether it is tier I city like Delhi or a tier II city, all of them need to start with plans put in place. If you see the markets in other nations like Singapore, they would have a concept plan. Each sub-city would think about a plan.
We at FIRE Capital have thought of satellite towns, which are gated communities in the outskirts of the city. So we have all kinds of offering as per the needs of homebuyers. But the homebuyers are not willing to take it up because of the distance from the city. So that is the comprehensiveness of a planning.
devesh@livemint.com
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First Published: Wed, Dec 14 2011. 10 38 PM IST
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