Land Bill may push up prices 15-45%, say realty players

New Delhi, Jan. 1:   

 

Amid concerns over cost escalation and execution delays, the Land Acquisition Act has come into force from January 1, 2014. 

Real estate players say that for large infrastructure and residential projects, cost escalation due to the Act may range between 15 per cent and 45 per cent. 

The Rural Development Minister, Jairam Ramesh, however, allayed industry apprehensions on Wednesday, saying there was no bar whatsoever on purchase of private land. 

The Land Acquisition Bill or The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 had received the President’s assent on September 27. 

The Bill was brought as the archaic Act of 1894 suffered various shortcomings, including silence on the issue of resettlement and rehabilitation of those displaced by land acquisition. 

Ramesh said the new Act applies only to land acquired by Central and State authorities for any public purpose. He, however, said that there was no bar whatsoever on purchase of private land.

From January 1, the Government will not acquire any land for private investors for their private projects, he added. 

The rehabilitation and resettlement clauses of the Bill are expected to push up land prices, as the expectations of land owners will be higher, real estate players said. 

The largest realty player, DLF, said delay in land acquisition may also lead to cost escalation.

Mohit Arora, Director, Supertech, said existing projects may not see any price hike, but all new projects could see land getting dearer and project costs going up by nearly 50 per cent.

 

Key guidelines

The key guidelines of the Act include a Social Impact Assessment study to be carried out, outlining how the acquiring parties intend to use the land, and how the original inhabitants or owners will be rehabilitated. The Act now also puts definite timelines on project completion and land use..

Vikas Gupta, Joint Managing Director, Earth Group, said, “Implementation of this Bill will hamper prospects for realty developers and builders. Property prices are bound to shoot up even as farmers will benefit.” 

Industry players say the provisions of the Bill will be applicable in cases of land acquisition of 50 acre in urban areas or 100 acre in rural areas. The compensation for acquisition may double in urban areas and will go up by four times in rural areas. They also point that “a willing buyer and willing seller should be excluded from the Act.”

 

Liquidity issues

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, “Some developers may continue to struggle with liquidity issues and be forced to offer some discounts and/or freebies to boost sales. Further, the implementation of various reform measures like the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and the proposed Real Estate (Regulation and Development) Bill 2013 will see increased participation from all stakeholders like Government, developers, real estate service providers, and investors alike.” 

In its realty outlook, Knight Frank said high interest rates, spiralling vacancy levels and lower margins arising from inflationary pressures led to a slowdown of construction activity, leading to a drop in new launches and also delayed project delivery by several months.