Impact of land acquisition bill on the real estate scenario in India
The LARR Bill is expected to majorly affect the development of large infrastructure development projects, industrial projects, integrated township projects and if they are brought under the ambit of this law.
While the populist objective is to ensure people losing land should be adequately compensated, the obverse that this will help the acquirers of the land to be more assured of the acquisition process and there by rule out problems of unwarranted claims and issues of inadequate compensations. The provisions of the Bill will be applicable in cases of land acquisition of 50 acres in urban areas or 100 acres in rural areas.
The compensation for land acquisition will now at least double in urban areas and will go up by 4 times in rural areas, according to the new LARR guidelines. Thus, the cost of land acquisition will surely go up for all projects irrespective of them being government or private or public-private-partnership (PPP) projects as they will have to adhere to the new norms. Further, the clause of mandatory consent of 80% of owners for private projects and consent of 70% landowners for PPP projects will delay the process of land acquisition and the projects in turn.
As land titles are not clearly documented in our country, it will take quite some time to change the current situation.
The bill is expected to add to the cost of a project substantially as the expected time taken for acquisition of land thereby delaying the entire process. Apart from the existing requirement of going through the regular the legal and regulatory process which usually adds up to the time and cost factor of any major large scale project.
Impact on infrastructure & urbanization
Infrastructure projects are the ones that will receive the sharpest blow. In many instances, this rise in input costs is likely to yield the projects unviable. As it is, the infrastructure projects are under pressure, especially those in the rural areas as it is difficult to monetize them; so the private sector is not interested in them.
The growth of India is largely dependent on the infrastructure development which the government cannot take up single handedly and co-operation of private sector becomes necessary. The consent clause will delay the start of the project; further making the required returns from the project difficult to achieve. Thus if India's growth story is to continue then a user development fee will have to be charged and the price of utilities like electricity, water etc. will have to go up to rake in the revenues.
All in all, this is a laudable reform by the government for providing equitable sharing of profits while also moving a step closer to laissez faire kind of environment.
The high rate of migration and natural growth rate of our population in urban areas highlight the need for building new cities as existing ones are overburdened. Satellite towns depend on the parent city for their work and employment requirements, while the need of the hour is to build self-sustaining urban centres.