REPORT ON LAND MARKETS IN INDIA Submitted to Prof. Bhargav Adhvaryu on 5th March 2012 By Neeraj Mehra (Roll no. 19) Course: Land Acquisition and Environmental Impact Adani Institute of Infrastructure Management
One of the biggest hurdles in the story of growth of India is the issues related to land and itsacquisition. The land acquisition issues have led to delay or cancellation of a number of projectswhich have hindered the progress of not only the companies but also the nation as a whole. Theseuncertainties and risks of the projects have mushroomed from the protests and resistance of thepopulation affected by land acquisitions.These protests are result of various factors including cultural issues, improper monetarycompensation, environmental issues, etc.Let’s look at an example: Tehri Dam Project. Source: Google Images; Protests against the construction of Tehri DamThe above picture depicts the protests environmental organizations and local people against theconstruction of a dam in Tehri, Uttarakhand. This issue was more than just the monetarycompensation as the Old Tehri was the capital of the Garhwal Kingdom and hence had an immensehistorical importance for the people of that region. Apart from the resistance based on the historicalimportance, there were also resistances from the religious front as the construction of dam requiredinitially blocking the Bhagirathi River to fill up the dam. This didn’t go down well with the religioussentiments of many people as they were opposed to the idea of blocking one of the tributaries ofholy Ganges. This ultimately resulted in the delay of the project and cost overruns. Land Acquisitionhas made a number of other projects financially infeasible.No two pieces of land is same is a fact which impedes the natural emergence of land market.A private developer or sponsor of the project basically two ways of acquiring land: MarketAcquisition or Acquisition using eminent powers of the state. Owing to issues resulting from LandAcquisition Project Developers prefer using eminent powers of the state over market acquisition ofland.The problem with land acquisition has also arises from poor land administration in India. During theBritish Rule, records were only prepared for the agricultural land but no proper records weremaintained for the residential lands and the spatial records were neglected. Post Independence, lowpriority was given to agricultural land records as land revenue arising from this land declined inimportance. Also, multiple agencies handled land records with no interconnectivity between them.Computerization of land records also focused only on ‘computerization’ per se rather than tomaintain accurate and up to date records. All these factors led to lack of clarity in land titles leadingto disputes and litigations. A buyer would always want to prevent these risks.
Also the transaction cost is pretty high in India as compared to global average. The average stampduty in India is 9-10% of transaction value. This leads to informal agreements and underreporting oftransaction value. The land use control measures like limit on FAR ratio, also affect the value of land.These factors make it difficult to estimate the correct market value of a piece of land.Another important factor is the Non Agricultural Use Clearance needed to use an agricultural pieceof land to non-agricultural uses. NAC is generally not awarded to a farmer as they usually don’t haveability to use the land for non-agricultural issues. This means that, purchasers (builders) are able toextract more value out of the land as compared to farmers and there is a wealth transfer at the costof the agriculturist, who can’t get NAC for his land. The point is, if the market negotiations werepermitted, farmers can bargain for his land.One of the land acquisition issues from recent memory is Noida Land Acquisition issue. The landacquisition were carried out by the state of UP as per Land Acquisition Act for industrial purposes. Atotal of about 2000 hectares of farmland were acquired by the government at Rs 850/sq ft and thensold for more than Rs 10000/sq ft to the developers for residential purposes. This led to unrestamongst the farmers who felt they were ill treated as the land was taken from them at dirt cheaprates in the name of developing industrial area; instead the land was resold at much higher rates tothe developers for residential purpose. Hence, not only the farmers but also the common middleclass people who purchased apartments from the private builders were affected. Source: Google Images; Farmer agitation against land acquisition in NoidaUsually, the land is identified and acquired by the District Collector and he/she has discretion overselecting the right value for the land. They use market price based on the stamp duty which isgenerally underreported. Hence, there is no concept of independent land evaluators in India andalso no legislation exist which approves such profession. The creation of such experts would makethe land acquisition process fair for the losers of the land.Often, there is a long gap between the promise and fulfilment of process of rehabilitation andresettlement (R&R) which is a major reason for distrust against land acquisition. The process shouldbegin along with the issuing of first notification under the Acquisition Act. Only demonstratingsuccessful implementation of R&R will reduce this distrust level.
References: Land Markets in India: By Sebastian Morris and Ajay Pandey Security of Title to Land in Urban Areas: By Swati Ramanathan Mega projects in India: Environmental and Land Acquisition Issues in the Road Sector: G. Raghuram, Samantha Bastian, Satyam Shivam Sundaram; W.P. No. 2009-03-07 March 2009 Land Acquisition Issues in Noida District: Background to ‘Land Wars’ in India; Hajime SATO LAND ACQUISITION ISSUES; M.M.K. Sardana