New land acquisition bill likely to increase land cost by 25-350%

NEW DELHI: The new land acquisition bill, which was tabled in the Parliament earlier this week, will make it more expensive for developers to acquire land in the country. According to a report by Nomura, “Under the proposed set of rehabilitation and resettlement guidelines, the developers’ cost of acquiring land greater than 100 acres is likely to increase by 25-350% depending on current costs.”

The bill does not prevent private developers to acquire land from farmers directly after negotiations, but if the size of the land being acquired is over 100 acres, then the developer will have to provide for rehabilitation and resettlement benefits.

The report points out that a number of developers, like Unitech, DLF and HDIL that own large land banks in the country will benefit, as they are now in the process of selling land. “The higher cost of land acquisition for other developers should now ideally benefit them,” says the report, which was prepared by research analysts Aatash Shah and Vineet Verma.

Developers feel this new land acquisition bill will surely increase the threat of litigation as well as increase the cost of land for future development. “Our basic concern is that nowhere in the bill should there be a chance for landowners to hold the entire acquisition process to ransom,” says Getamber Anand, managing director, ATS Group and vice president of the Confederation of Real Estate Developers' Associations of India.

Nomura’s report also points out that large affordable home projects could get impacted in the future as the cost of land goes up. “However, developers still interested in purchasing large sized land parcels for township development or SEZs could also possibly divide their land acquisition amongst various subsidiaries to avoid breaching the 100 acre mark,” adds the report.