The amendment to the land acquisition law that removes consent from landowners and social impact assessment (SIA) for five categories is a step in right direction, but not enough to bring down project costs, say infrastructure and housing companies.
These categories include infrastructure projects in public-private partnership (PPP), industrial corridors, affordable housing, rural infrastructure and defence requirements.
Last year the United Progressive Alliance government passed the Land Acquisition, Rehabilitation and Resettlement Act, 2013, which was seen as a roadblock for infrastructure projects. According to estimates, there are Rs 18 lakh crore of projects stalled for various reasons. Of these about 60 per cent are PPP projects.
"There was no land acquisition this year because the new law posed a major hindrance for road and highway projects," says Neeraj Sharma, partner at consultancy firm Walker Chandiok, highlighting need for such the amendment.
While the move is in the right direction it is not enough as other industries, including steel and power, will continue to face challenges. "We consider this as partial relief," says Pulkit Patna, analyst at Goldman Sachs. "The administrative burden related to rehabilitation and resettlement will continue to impact infrastructure and industrial projects," he adds.
Also the amendment has not made any change to the pricing of land for acquisition. Industry needs to pay four times the market value in rural areas for acquiring land. "Pricing for such land remains a hindrance," says A Issac George, chief financial officer at infrastructure group GVK.
But industry has received some relief. "The social impact study was going nowhere and consent was delaying projects unnecessarily," says Madhu Terdal, chief financial officer at the GMR Group. The social impact study that companies were expected to conduct was found to be vague and subjective. Also consent from 70-80 per cent of landowners became an issue as sellers stalled to hike prices.
"Even though it will not solve all the problems, delay has been now eliminated," says R Shankar Raman, chief financial officer at Larsen & Toubro. He, however, remains cautious about implementation.
The move is also beneficial for real estate companies that offer affordable housing. "Affordable housing projects can be executed faster and cost escalation can be controlled," says Brotin Banerjee, managing director and chief executive at Tata Housing.
JC Sharma, vice-chairman at Bengaluru-based Sobha Developers says, "The ordinance makes the law very practical for stakeholders in terms of operating at the ground level."
As the benefits have also been extended to industrial corridors, it is expected to de-congest cities and spur development in rural areas. Industry will also need to look at places where land prices are moderate to take care of project costs.
