Friday, August 30, 2013

Land bill will mean four times compensation, "adversely affect" real estate, industry projects: CRISIL

By Our Representative
The CRISIL Research -- which has made a quick assessment of the impact of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012 (formerly known as the Land Acquisition, Rehabilitation and Resettlement Bill, 2011) on real estate,  infrastructure and industry -- has said that the Bill will lead to “increase in the gestation time of projects and overall costs.”
The Bill was passed in the Lok Sabha on August 30, 2013. The bill, which replaces the century-old Land Acquisition Act, 1894, proposes a unified legislation for acquisition of land and adequate rehabilitation mechanisms for all affected persons.
A CRISIL note says, “With the rehabilitation and resettlement (R&R) clauses of the Land Bill, CRISIL Research expects land prices to increase as the expectation of land owners will be higher. The land acquisition process will be longer and project gestation period will increase. Currently, the proportion of supply (which comprises projects of over 50 acres) to total planned supply in the top 10 Indian cities is 25 per cent “ (see table).
In case of industrial and infrastructure projects, CRISIL Research believes that “the overall project gestation time as well as costs will increase. Our interactions with industry players suggest that the overall project costs will increase by around 3-5 per cent. It expects this increase in overall costs to impact the viability of such projects.”
The top consulting firm CRISIL's comment comes close on the heels of NGOs registering their protest exactly for opposite reasons. They point towards inadequacies in ensuring consultation with people before land acquisition (click HERE to see National Alliance for People's Movement's view).
CRISIL has commented on the basis of the provision of the compensation policy, which “calls for payment of four times the market value of the land in rural areas and two times the market value of land in urban areas.” CRISIL adds, “The market value of the acquired land is based on (i) market value specified in the Indian Stamp Act, 1899 for the registration of sale deeds; or (ii) average of the top 50 per cent of all the sale deeds in the similar type of land situated in the vicinity; (iii) or the amount agreed upon as compensation for acquisition of land for private companies or PPPs.”
Further, “the value of the assets (trees, plants, buildings etc) attached to the land being acquired will be added to this amount. The Bill proposes that in cases where the ownership of an acquired land is sold to any person, without any development made, 40 per cent of the profit made will be shared among all the persons from whom the land was acquired.”
CRISIL says, “The provisions of the Bill relating to land acquisition, rehabilitation and resettlement will be applicable in cases when the government acquires land, (a) for its own use and control, (b) to transfer it for the use of private companies for public purpose(including PPP), and (c) on the request of private companies for immediate use for public purpose. The term ‘public purpose’ in the Bill includes, (a) strategic defence purposes and national security, (b) roads, railways and ports, built by government and public sector enterprises (excluding private hospitals, private educational institutions and private hotels) (c) project affected people, (d) planned development or improvement of villages, and (e) residential purposes for the poor and landless.”
CRISIL also regrets the Bill's provision for "consent of 80 per cent of the landowners in case the land is acquired by private companies and 70 per cent in case the land is acquired under the Private-Public Partnership (PPP) mode." It has also not liked the "process of obtaining consent", which will "have to be carried out along with the Social Impact Assessment (SIA) study." All of it put together, it reiterates will lead to a compensation which is "four times the market value in rural areas and twice in urban areas.”

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