LARR Act Will Have Retarding Effect on Realty Sector

Sunil Mantri, President, National Real Estate Development Council (NAREDCO) and Chairman, Mantri Realty.
The segment of ‘affordable housing’ will remain a cherished dream and the trend of joint development may pick up among the realty players, views. 

Availability of land has been a crucial concern mounting over the construction and realty spectrums. What will be the impact of Land Acquisition, Rehabilitation and Resettlement (LARR) Act?
Facilitating the acquisition of land is literally a prerequisite to economic growth and development. Be it for the development of infrastructure, greenfield projects or for meeting the demand for housing and commercial spaces, the first vital step is the acquisition of land. Accordingly, in what seems like an effort to give a fillip to economic growth and development while being fair and equitable, the Government has now enacted the LARR Act.

Prior to the recently passed Act, a 120 year old British law, The Land Acquisition Act, 1894, prevailed. The terms of the 1894 Act were loosely defined and widely open for interpretations. It was largely silent on resettlement and rehabilitation and out-rightly banned the acquisition of multi-crop irrigated land. This situation led towards the need for an Act to set standard norms for the transfer of land. However, after reviewing the clauses included in the Act, the terms laid out appears rather impractical and are bound to result in avoidable delays and exponential cost increases, defeating the very purpose of the Act.

What according to you are the major loopholes in the Act?
While the LARR Act is an attempt by the Government to introduce more clarity and fairness in land acquisition, especially for the private sector, its major clauses run contrary to the intentions. Moreover the Act’s applicability is mostly focused upon the large scale acquisitions of land, viz. 50 acres in urban areas and 100 acres in rural areas. The Act specifies that the acquiring company or agency must get the consent of 80 percent of the land owners who will be displaced if it is a private company and 70 percent if it is a public-private partnership (PPP). The clause, however, creates an uncertainty in the requirement for consent of the landowners.

As a Punjab state government panel had pointed out, when private companies purchase land, the rehabilitation package is already included in the market price of the land, so there is no need to give this package to landowners. Besides, the Rehabilitation and Resettlement costs, which are excessive will lead to higher project costs and in turn will have to be passed on to end users. This will effectively defeat the government’s intension to provide affordable housing to the masses.

According to National Real Estate Development Council (NAREDCO) what will be the Act’s impact on the country’s real estate sector?
As a whole, the LARR Act will have a retarding effect on the real estate sector. The Act’s implementation will result in higher development costs, increase in housing prices and delays in project execution. The segment of affordable housing on the other hand will remain a cherished dream and the trend of joint development may pick up among the realty players. Further, in order to contain real estate prices, the government may have to offer higher FSIs to developers and undertake distinct measures to correct the Act’s ill-effects.

Being the President of NAREDCO do you suggest any policy modifications in the LARR Act?
Farmers should be empowered as stakeholders in what comes up on their land and should not be alienated. Moreover, a special purpose vehicle (SPV) could own the land, wherein the farmers could own half of the SPV and the other half by project developer. The project could lease the land from the SPV and the rental income would flow to SPV shareholders. As the project matures, the SPV would go up in value and farmers could, after a lockin period, sell their shares to encash the appreciation. Besides, the principles of Land Pooling need to be applied, which was initiated by Delhi division of the Ministry of Urban Development in September 2013. Such a scheme will meet the criterion of ensuring that sellers receive a fair deal and at the same time it will not hike project costs or result in delays.

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