LARR Act: NAREDCO suggests amendments
Jan 08, 2014
Source : The Times of India

 

DELHI: The intent of the Act seems to set standard norms for the transfer of land in order to free such deals of any dispute and thereby facilitate land transfers. However, the terms laid out within the Act are impractical and bound to result in avoidable delays and exponential cost increases, which defeat the very purpose of the Act.

Major shortcomings of the LARR Act

Natural fallout of the clauses of the LARR Act are:

It will make land acquisition an extremely lengthy process due to the mandatory SIA approval process for every acquisition, followed by consents from 70 or 80 per cent of the displaced sellers, as the case may be.

Despite the attempts of the Act, there is still no sound, controversy free approach to fixing the land acquisition rate. Due to the various compensation models recommended in the Act, it remains completely arbitrary.

As a Punjab state government panel 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. Once the total package is given, the additional compensation is unwarranted.

The Rehabilitation and Resettlement costs, which are excessive will lead to higher project costs and which 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.

Impact on the Sector

Overall, the LARR Act will have a retarding effect on the real estate sector. It will result in higher development costs, an increase in housing prices and delays in project implementation. Affordable housing will remain a cherished dream and the trend of Joint Development may pick up.

Further, in order to contain real estate prices, the government may have to offer higher FSIs to developers and take many other measures to correct the ill-effects of the Act.

Alternative suggestions

Farmers should be made stakeholders in what comes up on their land, not an alienated, vengeful bunch of newly landless destitutes ready to strike out any which way. A special purpose vehicle (SPV) could own the land, the farmers owning half of the SPV and the project developer owning the other half. 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 locking period, sell their shares to encash the appreciation.

Another suggestion is to apply the principles of Land Pooling, initiated by the Ministry of Urban Development of Delhi division 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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