For real estate developers and builders, the core issues that surround the acquisition of land in India are more complex than those related to built-up property. Mayank Saksena, Managing Director – Land Services, Jones Lang LaSalle India, discusses ways to circumvent the complexities involved in acquisition and development of land.
As things stand now, land acquisition has become a means for a multitude of middlemen to make a lot of money. This is because the tough regulations and complexities related to acquiring land today provide huge arbitrage to such people. If the government starts simplifying the process, middlemen can be eliminated, reducing the cost arbitrage and passing the benefit to the actual landowners. Until that happens, the availability of foolproof deals in land will remain scarce on the ground. For the record, a good deal is one wherein one can buy, in one go, a clean title property that complies with all government plans and stipulated usages.
The core issues that surround the acquisition of land in India are more complex than those related to built-up property. Some of these are:
* Litigations due to inheritance
* Multiple sales which have not been properly recorded
* Pledging of land to local money lenders
* Fragmented holdings
* Requirement of cash while dealing with sellers
* Difficulty in obtaining contiguous land
* Lands which have been granted to SC/ST by the government
* Land ceiling laws
* Tough resettlement and rehabilitation laws.
How to avoid bad land deals
One can avoid bad land deals by using experienced lawyers for the transaction. One has to go for a detailed due diligence. Employing the services of a reputed real estate consultant with in-depth market knowledge is also a solution which would help avoiding bad land deals. When it comes to land acquisition, there is no question of a free lunch or shortcuts. If something about a land deal seems out of whack, then it can be taken for granted that there is an issue with the land. As things stand today, fraud happens as because people buy land without complete due diligence, which leads to faulty acquisition of land with title issues.
The objective of buying land for development should be getting a clean, secure title and being able to develop on the plot without facing any future complications at the development stage, and within a stipulated time.
In the whole morass of problems related to land acquisition, developers face the greatest challenges in obtaining a clean, bankable title to a contiguous land parcel of sufficient dimensions to develop projects. Another issue they face is the loss of control on cost during acquisition, since the cost of acquisition after completion of the entire process is often so high that any development becomes prohibitively expensive.
Often, the only way in which developers have been able to circumvent the complexities involved in the acquisition and development of land is via land pooling. This is a process wherein a number of landowners agree to pool their land holdings and then develop them together. Successful cases include Amanora in Pune and Magarpatta, also in Pune, where various land owners pooled their land and developed townships to service the growing residential and office real estate needs of Pune’s IT industry. All the original owners have a stake in the developing company.
Role of the government
The present laws are such that it is next to impossible to get 100 per cent clean title for a land parcel of any significant size. The problem is that the law does not have provisions to stop a claimant from approaching the courts at any stage and at any time. The only secure way to get land with a 100 per cent secure title in India was through the government. However, with the issues that have been raised as farmers went to court at Noida West and Greater Noida, even that route has now come into question.
In order to make acquiring land India easier and more beneficial, the Government needs to make more proactive laws for the process of acquisition, as well as for resettlement and rehabilitation. Two of the most critical needs of the hour are the abolishing of the Urban Land Ceiling Act across country, and the formulation of laws that encourage participation of the owner in development of land.
The government cannot wash its hands off the responsibility of providing land for development, especially on rehabilitation and resettlement. The government should devise a mode to provide title security, and laws need to be made in a manner that ensures that old laws like ULC do not have an overhang on the land.
If we want our country to be truly global, and to grow more rapidly, land for development needs to be made available more easily. Cases like Singur, Greater Noida and Noida West must be avoided at all costs, as they shake global confidence in investing in India.