HARYANA LAND AQUISITION
With land acquisition now becoming a time-consuming and an expensive affair (compensation that is almost four times the market price of land has to be paid for rural areas and two times for urban land), the Haryana government has now found an innovative way to address the challenge. Last week, it launched the new integrated licensing policy (NILP) 2015, which seeks to balance the aspirations of farmers, property buyers, real estate developers and the government.
Under the policy, the minimum size of a township has been reduced from the earlier 100 acres to 25 acres and the international model of transferable development rights (TDR), already in place in Maharastra, Tamil Nadu and Karnataka, has been introduced.
Under this policy the government might not have to compulsorily acquire land. Through the TDR mechanism it seeks to enable small landowners to voluntarily monetise their land by participating in the process of licensing, real estate development and marketing and sale of their TDR. Instead of a fixed compensation for land acquisition, farmers will get TDR certificates which they can sell like stocks in the share market.
Farmers with land holdings of less than 25 acres will be able to obtain a TDR certificate from the government and monetise their land holdings at current market prices in residential areas and for sites designated for external development works such as sector roads, colleges, hospitals, fire stations, open spaces and green belts etc.
Each farmer will be allowed to sell the TDR certificate equivalent to 1 floor area ratio (FAR) of his land at market rates and not end up filing cases in courts claiming more compensation as per market rates.
Relaxing norms for builders, the policy now allows real estate developers to construct projects on land measuring less than 100 acres. Also, builders can acquire land directly from the farmers and give it back to the government in exchange of a TDR certificate which will get them additional FAR that can be loaded on to their existing project in the same zone. They can also sell the certificate to another developer in the same zone. This will ensure that work on basic infrastructure such as roads, pipelines etc continues without getting mired in land acquisition issues, say experts.
This concept has recently been introduced for procuring land falling within the alignment of internal 18-24 metre wide roads to enable connectivity with the wide sector roads and to make infrastructure provision for specific colonies located within the sectors.
While realty experts have said that this policy is a “game changer” and much better thought out than Delhi’s land pooling policy, they add that its success will ultimately depend on how well it is executed. “Ultimately, all depends on execution, how the policy finally gets rolled out – that will define its success in the future. How much TDR can you buy? What is the process of approval? How much time will it take to get approvals? All of it has to be thought out. This is only a statement of intent, a policy document. The modalities will take some time to come through. This will pave the way for long-term maturity of the market. So far there is artificial scarcity and pricing in the market, arbitrage in land values will go away or at least come down,” says Anckur Srivasttava of Gen Real Advisers.
The intent of this policy is to overcome the challenges of land acquisition with the onus to acquire land now resting on the developer. “Naredco welcomes this well thought out move. It will open up infrastructure development without the gover nment having to put in huge investments. Under the scheme, it will get about 22% (12% land for affordable housing and 10% land for community services) of land free of cost both for affordable housing, infrastructure and community services. It is a commercial method of solving the challenges associated with the stringent land acquisition Act,” says Navin Raheja, chairman, FICCI real estate and chairman, advisory council of Naredco.
Some changes have been made to density norms too. Earlier the requirement was 850 to 900 persons per acre, considering the f act that each family on an average had about five family members. Assuming then that the density was 850, the minimum number of flats that could come up in a project was 190, mostly 1BHK unit types. Now with the minimum density being reduced to 750, at least 150 units can be constructed in a project, allowing a developer to build a mix of both 1BHK and 2BHK units depending on the demand pattern in that area, say experts. Also, under the new policy, if a developer owns 40 acres, the share he would have to surrender to the government would work out to about 8.8 acres.
This is a practical policy that is aimed at incentivising landowners, to make them participants in the development process. TDR is also linked to the market performance of real estate. It may command a favourable value in urban areas, but not in rural or semi urban areas, say experts.
A TDR is akin to virtual real estate being offered to farmers. The landowner in possession of a TDR certificate can sell the development rights to a builder. It can be traded in the open market pretty much like any other transferable negotiable instrument.
By reducing the size of the land parcel to 25 acres under this policy, the government is hoping that even unproductive land can be utilised in the best possible manner. Also, by ensuring that developers surrender 12% of the land to the government for affordable housing, the government probably wants to control the affordable housing stock in the state and oversee its development, add experts.