Ambiguities in new real estate Bill

By: Sanjay Dutt, Executive Mmanaging Director, South Asia, Cushman & Wakefield

The Union cabinet may introduce the final version of the much awaited Land Acquisition, Rehabilitation and Resettlement Bill in the monsoon session of Parliament. Earlier, the ministry had sought suggestions and recommendations from other ministries and government agencies on various provisions introduced in the Bill.

The Bill was introduced in Parliament in September 2011 and is currently still under review, before it is formally tabled for enactment. Once it becomes an Act, each state will draft its own policy around the national Bill; therefore, the impact of the new Bill will be varied across India. While this is a step in the right direction, there will be many more aspects to formalize before the Bill can come into effect.

There have been concerns that the Bill would push up the cost of land acquisition across the board. Also, the process of acquiring land and starting development is expected to get substantially delayed because of the new provisions. Typically, most developers acquire less than 50 acres in urban areas and less than 100 acres in rural areas. These are the threshold prices the Bill has proposed and, thus, they would remain out of its ambit. The Bill mainly aims at catering to requirements of land for infrastructure projects and large commercial projects, such as a special economic zone, which do not have a direct and major impact on consumers themselves. Hence, let us look at the Bill’s impact on the landlords and the farmers.

The positives

Key features of the Bill include higher compensation for the acquired land, a comprehensive rehabilitation and resettlement (R&R) package for even those who are not landlords but are still dependent on the land for their livelihood (mainly landless farmers/workers tilling the land for landlords), special provisions for scheduled castes and scheduled tribes and restrictions on acquiring crop land, among others.

The Bill restricts the acquisition of multi-crop irrigated land and change of usage after award of land, which are welcome safeguards as they will help prevent the diversion of rich, fertile land and land banking for speculative profits. Additionally, the clause requiring consent of 80% of the families being affected, even if the government is acquiring the land will provide empowerment to those affected.

Problem areas

Estimation of fair market value difficult: The Bill proposes to fix the compensation to be paid to landlords in rural areas at four times the market value of land; for urban areas, the compensation is two times the market value of land. However, the method for calculation of the fair market value of the land is flawed. This is because the market value of the land is to be derived from the records of land transactions in the last three years. In the absence of an active and transparent land trading market, the correct current market value would be hard to estimate. Also, in rural areas, the value of a piece of land is not an objective attribute, but a subjective one. For farmers, the potential value is derived not just by the produce but its value as collateral for loans, as an insurance against food price fluctuation through self consumption and by the social prestige associated with ownership of the land.

No safeguards behind offers of employment, alternative housing: The Bill proposes that an R&R package must be provided whenever the government is acquiring land for its own use and when private companies are acquiring 100 acres or more in rural areas and 50 acres or more in urban areas. Besides proposing payment of various amounts under various headings, one member of the family could be offered employment within the project proposed to be developed on the acquired land. The employment to be provided under the package may be open to abuse as it does not specify the type of employment and does not offer any protection from subsequent termination. Employers can end up terminating farmers within short periods of time stating their incompetence in the given job, which may not even match their skill set.

The Bill provides for alternative housing (having a plinth area of 150 sq. mt in rural areas or plinth area of 50 sq. mt in urban areas) to be provided wherever a displaced person loses a home. There are no safeguards provided about the location, quality and amenities, among other things. Additionally, if one loses a larger home, there is no provision for that.

How will return of land, if required, be processed? The Bill proposes that the land is to be returned to the landowner, if it is not used for the purpose stated at the time of acquisition within five years. While this is a welcome initiative, it does not provide for the mechanism and does not elaborate on how compensation paid and the R&R package implemented is to be treated in this case.

Clarity of title: Some of the main issues that the Bill has failed to address from the landlords’ perspective are related to the irregularities in land records and multiple land titles. In the absence of proper ownership records, identifying the true owners and beneficiaries of the compensation and R&R becomes a prolonged and difficult task, depriving those affected.

However, if ambiguities are not addressed, the Bill may be counterproductive.