Land Acquisition – An advantage

With the proposition of the Land Acquisition Bill, there are growing concerns among realtors about rising costs and increasing acquisition time. However, two financial institutions have countered the real estate sector’s concerns. Their assessment back up the government’s view that the industry’s concerns may be overstated.

ICICI Bank’s Treasury Research Group and Kotak Institutional Equities are two financial institutions that have seen a plus point in the legislation. According to them, the biggest plus point is the clarity of process and time bound activity. Both institutions state that the process of land acquisition will now be time bound and should not take more than 18 months. The process will also involve massive local population.

While the institutions acknowledge the positive development, they also acknowledge that the real estate sector may not readily appreciate this new situation where it will have to fend it for itself. The institutions state that the real estate industry will have to deal with the reality of fragmented negotiations.

Both institutions acknowledge the time-bound process. But the ICICI Bank’s report raises concerns over possible bureaucratic hurdles. According to its report, there are three specific instances where such problem may manifest: composition of an independent expert committee in order to evaluate social impact assessment report; lack or differences between panchayats, industry and the committee in their coordination and; delays at collector’s level.

There is another concern regarding the social impact assessment, which is mandatory. Absence of a threshold area would mean that an acquisition, however small it is, will have to go through this process. This could potentially delay certain government projects.

The ICICI Bank report suggests that the proposed regulation will most likely exclude most of the commercial and retail real estate projects from its provisions. Another major concern for the real estate sector is the retrospective application of the law. Assessments from both financial institutions state that concerns in this regard from the industry too are overblown.

The assessment from ICICI Bank’s maintains that retrospective applicability of the land acquisition bill is limited to selective cases and simply pertains to the compensation to be given to the land owners and not resettlement, rehabilitation or even the procedure. However, the report by Kotak Institutional Equities points out that if the final award for acquiring land has not been made under the 1894 Act, then the new provisions of compensation and resettlement will apply.

Reports from both the financial institutions make it clear that the procedure laid down by the 2013 land acquisition regulation will not apply in these cases. With respect to prices, ICICI Bank opines that the concerns over keeping the compensation rate higher than market price is exaggerated. This is because the market price set out in the Act is the price as per official records, and this price is generally under reported.