Thursday, 14 May 2015

Land Acquisition bill: Impact on real estate market

The Land Acquisition Bill introduced by the current government is facing protests and opposition causing delay. The issue has not only affected the affordable housing projects. The Bill has been consistently opposed by the opposition party; however, little attempts have been made to understand its impact on the stock market and the infrastructure projects.

The delay in the passing of the Bill has affected the realty market. Rohan Sharma, associate director, research & real estate intelligence service, JLL India explains, “The possibility of delays in reforms in the economy, especially those directly impacting industry are likely to impact the stock market behaviour of listed firms in the sphere. It also impacts the real estate sector in the future in matters related to creation of infrastructure such as road, airports, townships, etc.”

Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, says, “Currently, the biggest challenge being faced by most infrastructure projects is acquisition of land. The passing of further amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which itself replaced the antiquated Land Acquisition Act of 1894, has been delayed far too long and does continue to have a negative impact on the overall stock market, especially stocks of infrastructure and power companies. If the necessary amendments are passed in Parliament quickly, real estate sector companies could also see an upside as it would mean easier and faster access to land for future projects.”

Delay in the Bill. The government does not have the requisite numbers in the Rajya Sabha to get the bill passed. Key changes made to the clauses by the current government have made it come under a lot of controversy as the opposition has been against the bill in the Rajya Sabha.

“While the older LARR (Land Acquisition and Rehabilitation and Resettlement Bill) Bill is still in use and has not been repealed, issues of higher compensation notwithstanding the need for social impact assessment and consent causes were mentioned as hindrances to large infrastructure projects,” says Sharma.

“The previous government passed the Land Acquisition Rehabilitation and Resettlement (LARR) Act, 2013 unanimously in the parliament during its tenure. However, the current government is finding it difficult to provide access of land to infrastructure and manufacturing sectors with the provisions of the 2013 Act. Several amendments proposed seems to be anti-farmer and thus the opposition in the parliament leading to the delay,” adds Dutt.

Infrastructure projects affected due to the delay

A gamut of infrastructure projects has not met their completion timeline due to the difficulty in land acquisition. “Recently, it is been reported that the Yettinahole project in Karnataka is stuck because of the confusion whether to follow the 2013 Act or the current ordinance. Industrial corridors and freight corridors such as the DMIC (Delhi-Mumbai Industrial Corridor), CBIC (Chennai-Bengaluru) and AKFC (Amritsar-Kolkata Freight Corridor) are some of the major projects that are getting affected by the delay in amendments to the Act. Also, projects in the power sector from companies such as National Thermal Power Corporation (NTPC) and Powergrid Corporation of India Limited (PGCIL) such as setting up of power grids and transmission lines are being deferred due to difficulty in acquiring land,” says Dutt.

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