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Impact of the new Land Acquisition Bill on a home buyer

Impact of the new Land Acquisition Bill on a home buyer

Impact of the new Land Acquisition Bill on a home buyer

After the passage of the Food Security Bill, the Lok Sabha on Thursday gave its nod to adopt the Land Acquisition, Rehabilitation and Resettlement Bill. While the welcoming of the bill in the Lok Sabha is seen as a populist measure at a time when the country is heading into an election year, the real estate industry is unsettled and is concerned about the outcome. The bill is expected to push up the property prices and will prove to be an adverse crash on affordable housing projects. On the other hand, from the point of view of the government, it is believed that the Bill will ensure smooth procedure and lesser delays in getting land for development. Let us look at the impact the bill will have on the home buyers, land owners and the developers:


New rules and impact on Home buyers:

  • Most property developers have land parcels for next few years of construction and development; however, with the land bill on the table the housing segment will be affected as the increased cost will play a negative impact on the new projects, their viability and later possessions.
  • The cost to be paid for acquiring a land will ultimately be reflected and will put the burden on the homebuyers’ pockets. Eventually, there will be increase in the sale price of the properties thus becoming an affordability issue for the Indian home buyers.
  • Some provisions of the bill are applicable from retrospective effect, this will create chaos in the market as the developers will re-calibrate the project cost and some of it will be recovered from existing home buyers. This can lead to increase in litigations.
  • The provision to take agreement of 80% land owners will be a time taking process leading to delay and further litigation.


New rules and impact on land owners:

  • The Bill sets new rules for compensation for land acquired for infrastructure projects and industry. As compensation, the new bill provides for up to four times the market value of land acquired in rural areas and twice the market value in urban areas. This is good news for land owners.
  • The Bill also provides compensation to those dependent on the land for livelihood; where acquired land is sold to a third party for a higher price, 40% of the appreciated land value (or profit) will be shared with the original owners. This would be exempt from tax and stamp duty.
  • There is a provision to keep 20% of the developed land for the use of land owners which is likely to become a bone of contention.



New rules and impact on real estate industry:

  • Developers will now have to get the consent of up to 80% of people whose land is acquired for private projects. For public-private partnerships, the approval limit has been set at 70%.
  • The industry insiders feel that the cost of land acquisition will most likely increase by about 3.5 times as the buyer has to pay two or four times the market value of a property; the same is said to make the industrial projects unviable and it will raise the costs of the overall Indian economy.
  • The value of the land is already high and with the passage of the bill the cost of land is going to increase significantly; it will therefore, make land acquisition more difficult. It is also of the view that as so many approvals are needed before acquiring a land, the entire process will be stretched again making the manufacturing time frame more expensive.
  • The passage of the Bill has brought some joyfulness to certain real estate companies that have huge parcels of land in their kitty. However, most of the developers are complaining of the government’s demand of coming out with affordable housing when there is no affordable land.
Last Updated: Mon Sep 02 2013

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@@Fri Jul 05 2019 13:15:19