Land acquisition bill sends developers, builders on land buying spree!

Pinning their hopes on the Modi government at the centre to relax the proposed norms, real estate developers have been buying more land from farmers over the past year than usual because of apprehension that the new law may raise cost of land acquisition.

“Companies have been buying land in their catchment areas as they fear that the land acquisition bill will make it more expensive and tedious to buy land in the future,” said Amit Goenka, chief executive officer of private equity fund Nisus Finance, which is currently working with developers in Mumbai, Pune and Bangalore to fund large land purchases.

The land acquisition bill that was passed last year but is yet to come into force proposes to double the compensation for acquisition of land in urban areas while land acquired in rural areas will entail four times compensation. The clause mandating consent of 80% of land owners for a private project will delay the process of acquiring land and further increase project costs for developers.

“The new bill could raise prices of land in key areas where we want to operate and build projects. We had been acquiring land in the area for the last few years but we have increased the pace of acquisition in the last eight months,” said RK Arora, managing director of Supertech who has acquired three different land parcels around Gurgaon totalling about 350 acres over the past year.

The rural development ministry is likely to suggest relaxation of norms including scrapping of the mandatory consent provision for public-private partnership or PPP projects and scaling it down in the case of private projects from 80% to 50%. There will be a lot of speculation and there won’t be any price control, which will eventually push up property prices,” said Shyam Sundar Pani, president of industry body Global Initiative for Restructuring Environment and Management.

Real estate developer Chintels, which has large landholdings in and around Gurgaon, has acquired about 150 acres of land in the last one year. “There is certainly a concern around the new land acquisition bill,” said Prashant Solomon, managing director of Chintels. “There is certainly a concern around the new land acquisition bill, “said Prashant Solomon, managing director of Chintels. Anckur Srivasttava, chairman of GenReal Property Advisers said that while the impact of the bill on commercial and residential real estate would be visible across the country it would be considerably higher in states such as Uttar Pradesh where land is acquired and allotted by the government. “The bigger impact, however, will be felt in industrial real estate for companies and for the infrastructure sector,” he said.

Even as optimism has returned in the sector with the installation of the new government at the Centre, an increase in cost of land acquisition could dampen sentiment. Several developers have therefore been raising money from private equity funds as well as non-banking financial companies to buy land in different parts of the country. “Land acquisition will be a huge challenge once the bill is finalized”, say real estate developers who have seen home sales drop drastically over the past two years as property prices rose in a slowing economy. Developers are hoping that the government will dilute some of the provisions of the bill as it is reportedly considering.