Mumbai: Roadblocks to land acquisition for infrastructure projects, especially in urban areas, can be overcome by allowing owners a share in the gains in real estate prices after the development takes place, said a quarterly report by IDFC Ltd released Tuesday.
Land pooling and reconstruction (LPR) involves the acquisition of smaller plots for infrastructure and public facilities, instead of acquiring large chunks.
Ritu Anand, principal advisor and chief economist at the infrastructure financing firm, said pooling small holdings was a “more democratic” route in a country such as India that has seen large-scale protests over land acquisition.
IDFC said last year that nearly 70% of 190 infrastructure projects were delayed because of issues related to land acquisition.
Under the proposed model, “fragmented land holdings are pooled together and out of each plot, only about 40% is taken away, mostly for roads and public spaces. Sixty percent of the land is given back to the owners,” Anand said.
“Land owners are more than happy to pay some fees on 40% of the land because they see that the value of land appreciates after a road is built,” she said. “We think that 48% of the infrastructure in the area can be financed through the LPR scheme if everything goes well.”
The report points to similar models in Ahmedabad where part of the land is used for commercial purposes and land owners can also pay betterment charges to fund infrastructure in the area.
The Gujarat model was based on the Bombay Town Planning Act of 1915 that allowed use of LPR for infrastructure development, based on which large tracts of Mumbai’s suburbs were developed. However, the advent of the Maharashtra Regional & Town Planning Act 1966 led to the abandonment of LPR.
The IDFC report also recommends building a road at the start of any infrastructure project because it automatically leads to development, pushing up prices for the surrounding land.
Ramrao Mundhe, senior researcher (policy and infrastructure) at Delhi based Indicus Analytics Pvt Ltd, said the return of land that isn’t used by the government will act as a boost.
“Many times we have seen that the government holds unnecessary land which causes a lot of protests and it prevents developers from entering the project. Giving back unnecessary land will help a great deal,” he said.
“The government has to take the stakeholders together, only then will it be effective. They can probably take the help of NGOs if needed, which is what is happening in the Jawaharlal Nehru National Urban Renewal Mission (JNNURM),” Mundhe said.
IDFC says the Guajarat experience can be replicated elsewhere. “Promotion of LPR can be part of JNNURM, all we need is political will. Amendments to state town planning acts may be required especially if these do not allow plot reconstruction and levy of betterment charges,” the report said.
However, charging the public for betterment of an area could be problematic.
“Most of the urban development schemes are managed by municipalities currently because the PPP (public-private partnership) model has not taken off because people have a problem in paying for services,” said a senior official at a public sector bank who is in charge of infrastructure financing. He declined to be named.
“It is only when people see the benefits that they come in to pay,” he said.