Land Acquisition Bill Drives Up Residential Prices
The Union Cabinet recently approved the Land Acquisition Bill, granting increased rights to farmers and potentially impacting residential real estate prices. Experts across the industry believe this new legislation will contribute to a surge in housing costs.
Bill's Impact on Housing Costs
The bill mandates landowner consent for private projects, a significant shift from previous practices. This change is projected to escalate housing prices, echoing concerns about decreasing price appreciation observed in the residential sector during 2012. Experts emphasize the connection between the bill and the anticipated price increase, foreseeing improved value appreciation for landowners.
Landowner Empowerment and Market Implications
The Land Acquisition Bill strengthens landowners' control over their property and related projects. This empowered position will likely influence market dynamics. The most significant consequence of this bill is the projected increase in housing prices, potentially impacting affordability and market demand.
Industry Reactions and Concerns
The Confederation of Real Estate Developers’ Associations of India (CREDAI) expressed disapproval of the bill, highlighting its potential adverse effects on the real estate sector. Mr. Lalit Kumar Jain, CREDAI's National President, articulated the organization's concerns:
"[The bill] was entirely against the real estate industry...the prices of [the] housing sector would go up."
Mr. Jain also anticipates the bill will create obstacles for large-scale real estate projects, possibly deterring developers from undertaking such ventures.
The new legislation requires developers to secure 80% landowner consent for private projects and 70% for public-private partnerships. It also mandates higher compensation packages for landowners, further contributing to development costs.
Further Industry Perspectives
Similar sentiments were shared by the National Real Estate Development Council (NAREDCO). Navin M Raheja, NAREDCO's president, characterized the bill as "real estate unfriendly," criticizing the government's sole focus on farmer compensation without considering the broader implications for real estate growth.
Niranjan Hiranandani, MD of Hiranandani Constructions, offered a more nuanced perspective, suggesting the bill might reduce future farmer resistance due to increased compensation. Mr. Hiranandani also acknowledged the likelihood of price increases.
A DLF official stated that the real impact will be more evident over time. Rajeev Talwar, Executive Director of DLF, emphasized the need for a comprehensive analysis before determining specific actions about company plans.
Current Land Acquisition Practices
Both Hiranandani Constructions and DLF confirmed their current land acquisition practices involve obtaining full landowner consent, anticipating minimal disruption despite these changes.
Mr. Anuj Puri, Chairman and Country Chief of Jones Lang LaSalle India, foresees the bill negatively influencing housing demand because of escalating prices potentially impacting affordability.