Will land reforms help property buyers?


With a number of land reforms in the offing, the real estate market is likely to become more structured. However, the benefit for property owners, will depend on the government’s ability to address challenges and successful implementation

Land acquisition in the country, has been a hotly debated issue. The controversies around faulty land acquisition and the problems of resettlement and compensation, continue to threaten a number of projects across the residential and commercial segments. Even industrial and infrastructure-related developments, continue to face problems on account of archaic laws in the country. Land disputes arising out of unclear land titles, have been one of the biggest problems. Thankfully, a number of reforms, such as the digitisation of land records, the proposed Geospatial Bill and land demarcation in the country, could lead to fewer land-related disputes in future.

According to Anuj Puri, chairman and country head, JLL India, the high level of opacity with respect to land titles in India, has been a consistent stumbling-block to progress and faster development. “The absence of a central database of records for privately-held land, has resulted in protracted legal and due diligence processes. In a majority of cases, land parcels had not been surveyed, resulting in disputes about boundaries. Land records in most districts were maintained manually, on the basis of date of registration, and only new registrations were computerised. This made it extremely difficult to trace the historic chain of ownership,” he explains.

Puri maintains that the lack of clarity on land titles, shakes the confidence of investors and is a serious hindrance to overall growth. “Across the country, land needs the benefit of legally documented ownership, assigned to the right persons or entities. Hence, the government’s announced intention to digitise all land records, is a welcome and timely move,” he adds.

 

What has happened so far?

Reforms – enacted or proposedDirect impactChallenges in implementation
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 (LAAR)·  Impacts and governs the land acquisition by government/private bodies, acquiring private land for public purpose.

·  Projects for five special categories – defence, rural infrastructure, affordable housing, industrial corridor and infrastructure projects, are exempted.

·  Raises the cost of private housing projects.

·  Consent clause for projects by private entities, makes the land acquisition difficult and tedious.

·  Land being a state subject, is often governed by local laws.

A number of states are implementing e-filing facility, under the Urban Land Ceiling ActTaken up in respective states, the act caps the maximum land to be acquired by an individual. E-filing will improve the ease of doing business and will smoothen the process of obtaining no-objection certificates.Infrastructure and funding constraints within the implementing agencies.
Some state authorities are bringing in rules to enable smooth exit for the builders and to help them to surrender extra land of a project, if they are unable to develop it further·  Directly impacts the development of projects under the private builders.

·  Generates revenue for the development authority, which will get the excess land back, when the developer is no longer in a position to continue construction.

Benefits consumers of a number of projects, who are stuck with delayed construction.
National Land Records Modernisation Programme (Digitisation of land records)Directly impacts the management of land records, minimises the scope for disputes arising out of land titles and enhances transparency in land records. Guarantees ownership of immovable properties in the country.Slow implementation of the programme.
Land pooling schemes for urban areas (A number of states are already implementing such schemes)Directly impacts the development of housing in urban areas.·  Collaboration of land owners.

·  The rate of compensation needs to justify the market rates.

·  Consent required from all owners to successfully implement the reform.

Geospatial Information Regulation Bill. 2016 (Proposed): The Ministry of Home Affairs, on May 4, 2016, released a draft of the bill. Under this draft, acquiring or disseminating any geospatial information of India, will require prior permission from a government authority.·  Directly impacts every person and business, which uses location as a major feature to function.

·  If implemented, this will impact land demarcation and land titles too, as in the future, government agencies such as the Ministry of Urban Development, Ministry of Highways and Roads and Ministry of Housing and Poverty Alleviation, will use such location-based services to demarcate land parcels.

·  If implemented, it could create another level of regulation, in addition to the National Mapping Policy, 2005 and Official Secrets Act, 1923.

·  Faces strong opposition from corporates and various government agencies.

The above box gives a snapshot of land-related reforms

Interestingly, most of these reforms are being framed on technology-based platforms. A New Delhi-based developer, on condition of anonymity, explains that “These reforms will eventually lead to a more investment-friendly market and transactions that will be based on market values. Adoption of technology, will lead to clarity in ownership.”

See also: Investing in land: The pros and cons

 

The benefit and the way forward

These reforms will ultimately benefit the people, in the long term, feels Abhishek Dhawan, a financial planner and chartered accountant, who works with several real estate firms. “The government will also benefit, as these reforms will eventually lead to the generation of more property taxes and revenue collection on the transacted properties,” he asserts.

Nevertheless, challenges remain. There is a need to expand the scope of these reforms. The willingness to implement these proposed changes within the government framework remains questionable. Technology-enabled reforms, should also be extended to rural areas. Only then, can we see a real change in the market.

 

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