Land ordinance likely to spur development
Amendments to remove land acquisition bottlenecks in five key sectors such as power, highways, housing, defence and infrastructure projects; to facilitate land pooling in Delhi
The year of end-users The year 2015 will experience a very positive shift from the earlier years and will bring in the much required stability in the property market. Speculators and investors who have been riding the property market since a long time will make way for end-users this year. According to a survey by Makaan.com, as many as 39% want to purchase a property for self-use as they are currently lving in rented accommodation. Another one-third want to buy property to meet growing family requirements. Only 14% buyers want to buy a property for long-term investment whereas 5% are looking to buy a property as a short-term investment. Property prices to remain stable in 2015 Proper t y prices have remained stable over the past few months and the mood of the market suggests a continuation of this trend. Around 33% homebuyers feel that the residential property prices would remain stable over the course of 2015, whereas 27% of buyers expect prices to go up from the current level with majority expecting an appreciation of not more than 10%. For buyers, location is more important than price Location will be the most important purchase consideration for homebuyers in 2015. The preference for location will be even higher than price. This will be an important shift in the purchasing pattern of homebuyers this year. Other factors that will influence purchase decision will be price, connectivity and proximity of the property to hospitals, schools and offices. It is interesting to note that only 8% of homebuyers rate size as the top purchase consideration. Affordable and midsegment housing to be hot favourites Affordable housing i.e., housing in the range of ₹ 40 lakh will continue to be preferred by a majority of homebuyers with aas many as 46% buyers opting for it. Mid-segment housing (₹40 lakh to a crore) will be the preferred budget category for 31% of homebuyers. Highend housing (₹1 crore and ₹ 2 crore) will be a preferred choice for 15% of buyers whereas only 8% of buyers will be looking for luxury housing (over ₹ 2 crore). Among types of properties, apartments will continue to be preferred over plotted homes or villas. Service/studio apartments have gained popularity but will account for a small portion of the overall demand. Factors that will keep b u y e r s awa y f r o m buying property High property prices will be the single biggest hindrance in buying property in 2015. As many as 43% homebuyers consider the high property prices as a major challenge and 21% home buyers are unable to find a property close to their preferred location and appropriate connectivity. They are either forced to compromise with the area or postpone the purchase.
Around the same time last year, the Right to Fair Compensation and Transparency in Rehabilitation and Resettlement Act, 2013, replaced an earlier law dating back to 1894. The new law proposed that farmers and landowners be paid up to four times the market value for land acquired in rural areas and two times the market value in urban areas. Another key feature of the act was that the consent of 80% of land owners was needed for acquiring land for private projects and of 70% landowners for public-private projects.
A few days ago, the new government promulgated an ordinance amending key portions of the “consent clause” seen as a roadblock to acquire land for five key sectors such as power, highways, housing, defence and infrastructure projects. While this restriction has been waived, the government has decided that the compensation, rehabilitation and the resettlement packages would remain the same. The amendment also removes the requirement for mandatory social impact assessment (SIA) study for these key sectors involving public hearings - procedures that industry executives say would have dragged on the acquisition process for years.
Experts say that this move was necessitated by the fact that the stringent land act was holding up projects worth US$300 billion. While this underlines the importance the new government attaches to infrastructure development, it’s still not clear which projects in Delhi NCR will be impacted by this move. The most likely will be the developments along the Delhi Mumbai Industrial Corridor (DMIC).
The amendments will definitely have a direct impact on development, especially land parcels that are still in the process of being acquired. It will help a lot in land pooling, especially land pockets that are difficult to acquire, says Balvinder Kumar, vice chairman, Delhi Development Authority.
Most stakeholders in the real estate sector have reacted positively to the amendments, saying these will have a positive impact on the infrastructure and the sector as a whole and that the new norms will ease the inordinate delays in the land acquisition process for large scale infrastructure and affordable housing projects. Others, however, are not too happy about the compensation amount remaining the same.
Po s i t i v e impact on infrastructure
Anshuman Magazine, chairman and MD, CBRE South Asia Pvt Ltd, says that the amendments will have a positive impact on the infrastructure and real estate sector. ‘’I’m hopeful of the new norms easing the inordinate delays seen so far in the land acquisition process for large-scale infrastructure and affordable housing projects. The infra industry, in particular, is expected to gain much from these new changes, as will housing for the poor. However, I hope this is just the first step in amending the Land Acquisition Act, as many more amendments are required to ease land acquisition procedures in India. It could perhaps bring in more segments of organised real estate within the ambit of such faster processing norms, which would be beneficial for construction activity across the country.”
“The step will remove roadblocks and will help developers get faster approvals for projects and acquisitions. With the amendments farmers will get better deals for their land as the new rules will apply even to land acquired under 13 other acts like the Railway Act, National Highway Act, Housing or Commercial Act, etc, the provisions will now be uniform on the compensation aspect,” says Prashant Solomon, MD, Chintels India and membergoverning council, Credai NCR.
Remove roadblocks to development
According to Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, the decision of the government to address the negatives of the Act is a welcome and much-needed confidence-inspiring step for the country. These measures will ensure that the necessary investments in boosting the economy through industrialisation, urbanisation and development of physical and social infrastructure will become viable and help achieve the targets set out in the Make in India and Housing for All by 2022 campaigns. Besides t h e f a r mers who are obviously upset about the consent clause being lifted, some legal experts are of the view that despite the compensation clause remaining the same, the crucial issue of the land being undervalued will continue to persist. The value of much of the land sold as agricultural land is generally low.
But when the announcement is made to use it for infrastructure or industrial purpose, its value goes up. Experts suggest that these land parcels should be sold only after it is determined that to what use would the land be put to - industrial or residential. This will ensure that all stakeholders get a good price of their land.
Crystal ball gazers said location and affordability will help people make that critical homebuying choice this year.