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The land acquisition bill, once effective, would increase cost of acquisition for developers.
Therefore developers with significant land bank (DLF) are relatively better placed. That said, we
believe that there could be several iterations of the bill due to consultations with various state
bodies before it becomes effective.
Key highlights - Land Acquisition, Rehabilitation and Resettlement Bill, 2011
The long-awaited Land Acquisition and Rehabilitation Bill, was cleared by Cabinet on 5
September 2011 and was tabled in Parliament yesterday (7 September 2011). This bill will
replace the archaic and much-abused Land Acquisition Act of 1894.
Bill is applicable to private acquisitions for more than 50 acres in urban areas and 100 acres
in rural areas. No consent required for building railways, ports, highways and canals. In the
bill the public purpose has been comprehensively defined, so that government's intervention
in acquisition is limited to defense, and certain development projects only.
The bill has even ensured that consent of at least 80% of the project affected families (PAF) is
to be obtained through a prior informed process. The government will step in only to acquire
the last 20% of land required for a project. This implies companies needing land will have to
first acquire at least 80% of the land their projects require.
While the earlier draft excluded all irrigated multi-crop land from acquisitions, the proposed bill
now allow acquisition of such land upto 5% provided an equal area of wasteland in the district
is developed.
The bill highlights that after acquisition, the purpose of land use cannot be changed.
The bill also sets a 10-year limit for acquired land to remain unused. The land would then
revert to the state, which can either return it to the person from whom it was acquired or use
the land for other public purposes.
Provisions of resettlement and rehabilitation (R&R) will be uniform in all states and made
mandatory through a central legislation
Its effective from retrospective basis (ie. includes ongoing land acquisition deals)
Compensation for the acquired land
Compensation set at four times the market value of land in rural areas, and two times the
market value in urban areas.
PAF can opt for 20% of the developed land to be given to owners, where land is acquired for
urbanization, in place of full monetary compensation.
PAF can opt for taking shares upto 25% of compensation amount in place of full cash
compensation
20% profit on each transfer of land within 10 years to be shared with owners
Compensation to be given within a period of three months from the date of award. Monetary
rehabilitation and resettlement will be provided within a period of six months from the date of
award
Provisions of resettlement and rehabilitation (R&R)
The bill provides for a monthly subsistence allowance of Rs 3,000 a month for each family in
the first year after losing their land, and a monthly annuity of Rs 2,000 for the next 20 years
with index of inflation or Rs 0.5m compensation to the displaced person or job per family
thereafter
House lost to be replaced by the Indira Awas Yojana house in rural areas
One acre of land lost in irrigation of projects
Rs 50,000 per family for transportation and Rs 50,000 per PAF as resettlement allowance
Impact of the bill
We believe that developers with significant land bank are relatively better placed as the
proposed bill would make the land acquisition more costly for any development. Thus most
real estate companies which already have significant land bank (sufficient for next 10-20
years of development) are likely to gain as compared to developers with smaller land bank
(as they would have to acquire land bank at higher cost which could affect their profitability).
We note that even developers with significant land bank would need to buy few land patches
to make their land parcel contiguous for which they might have to pay a higher price.
Realty players have commented that project costs could rise by 40-60% because of the
resettlement and rehabilitation package proposed in the new bill.
Considering the current market conditions where sales have slowed down, we believe the
developers would not be able to completely pass on the impact of higher land cost to the
customers.
However, we would like to state that there could be several iterations of the bill before it
becomes effective due to consultations with various state bodies with possibilities of some
minor changes. Once the bill is effective, it would be followed by all state governments.
DLF, with a good proportion of its land bank in Metros/Tier I cities acquired at historic low
costs, is the top pick in our coverage universe.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The land acquisition bill, once effective, would increase cost of acquisition for developers.
Therefore developers with significant land bank (DLF) are relatively better placed. That said, we
believe that there could be several iterations of the bill due to consultations with various state
bodies before it becomes effective.
Key highlights - Land Acquisition, Rehabilitation and Resettlement Bill, 2011
The long-awaited Land Acquisition and Rehabilitation Bill, was cleared by Cabinet on 5
September 2011 and was tabled in Parliament yesterday (7 September 2011). This bill will
replace the archaic and much-abused Land Acquisition Act of 1894.
Bill is applicable to private acquisitions for more than 50 acres in urban areas and 100 acres
in rural areas. No consent required for building railways, ports, highways and canals. In the
bill the public purpose has been comprehensively defined, so that government's intervention
in acquisition is limited to defense, and certain development projects only.
The bill has even ensured that consent of at least 80% of the project affected families (PAF) is
to be obtained through a prior informed process. The government will step in only to acquire
the last 20% of land required for a project. This implies companies needing land will have to
first acquire at least 80% of the land their projects require.
While the earlier draft excluded all irrigated multi-crop land from acquisitions, the proposed bill
now allow acquisition of such land upto 5% provided an equal area of wasteland in the district
is developed.
The bill highlights that after acquisition, the purpose of land use cannot be changed.
The bill also sets a 10-year limit for acquired land to remain unused. The land would then
revert to the state, which can either return it to the person from whom it was acquired or use
the land for other public purposes.
Provisions of resettlement and rehabilitation (R&R) will be uniform in all states and made
mandatory through a central legislation
Its effective from retrospective basis (ie. includes ongoing land acquisition deals)
Compensation for the acquired land
Compensation set at four times the market value of land in rural areas, and two times the
market value in urban areas.
PAF can opt for 20% of the developed land to be given to owners, where land is acquired for
urbanization, in place of full monetary compensation.
PAF can opt for taking shares upto 25% of compensation amount in place of full cash
compensation
20% profit on each transfer of land within 10 years to be shared with owners
Compensation to be given within a period of three months from the date of award. Monetary
rehabilitation and resettlement will be provided within a period of six months from the date of
award
Provisions of resettlement and rehabilitation (R&R)
The bill provides for a monthly subsistence allowance of Rs 3,000 a month for each family in
the first year after losing their land, and a monthly annuity of Rs 2,000 for the next 20 years
with index of inflation or Rs 0.5m compensation to the displaced person or job per family
thereafter
House lost to be replaced by the Indira Awas Yojana house in rural areas
One acre of land lost in irrigation of projects
Rs 50,000 per family for transportation and Rs 50,000 per PAF as resettlement allowance
Impact of the bill
We believe that developers with significant land bank are relatively better placed as the
proposed bill would make the land acquisition more costly for any development. Thus most
real estate companies which already have significant land bank (sufficient for next 10-20
years of development) are likely to gain as compared to developers with smaller land bank
(as they would have to acquire land bank at higher cost which could affect their profitability).
We note that even developers with significant land bank would need to buy few land patches
to make their land parcel contiguous for which they might have to pay a higher price.
Realty players have commented that project costs could rise by 40-60% because of the
resettlement and rehabilitation package proposed in the new bill.
Considering the current market conditions where sales have slowed down, we believe the
developers would not be able to completely pass on the impact of higher land cost to the
customers.
However, we would like to state that there could be several iterations of the bill before it
becomes effective due to consultations with various state bodies with possibilities of some
minor changes. Once the bill is effective, it would be followed by all state governments.
DLF, with a good proportion of its land bank in Metros/Tier I cities acquired at historic low
costs, is the top pick in our coverage universe.
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