Uttar Pradesh’s new land acquisition policy will make homes dearer by 10 per cent in towns like Noida Extension or Greater Noida as it will push up the land costs for town development authorities and developers buying land from them.
“According to the new policy, the authority will have to return 16 per cent of developed land or cash in lieu of it to farmers, plus resettlement and rehabilitation benefits. The cost of this will get loaded on the remaining land,” said Supertech Chairman R K Arora.
He expects land costs to go up by 10 per cent for the authority, which will pass it on to the developers, who in turn would want to pass it onto consumers. Given the demand-supply scenario, excess supply in Noida Extension is estimated to be around 25 per cent or more, developers will find it difficult to pass on the increase in land costs.
A good indicator of the excess supply is that in many areas (Crossings Republic on NH-24, for instance), finished units are available at almost the same price (Rs 2,000 a sq ft) as the price at which these units were sold two years back (Rs 1,800-2,000 a sq ft).
Luckily for developers, they have sold only 15-20 per cent of the stock that they plan to build in Noida Extension, and hence, the losses will be restricted. Developers launch their project in phases, hoping to sell units at a higher price at a later stage.
UP’s new land acquisition policy could also be the basis for settlement with farmers in several villages of Noida Extension, where the Allahabad High Court cancelled the land acquisitions. After a settlement with farmers, the Greater Noida Authority is likely to file a special leave petition in the Supreme Court to stay the High Court judgement. The High Court had cancelled land acquisition in five villages in Greater Noida, as land was acquired in many villages without a public hearing of villagers.
Wherever there’s a town-planning authority, it will acquire land according to the master plan, and farmers will get back 16 per cent of the developed land. Outside authority areas, developers will buy land directly from farmers. ‘‘Since we will buy at market rates, we won’t have to give 16 per cent of developed land,’’ said Arora.
Based on the demand, developers have started buying land outside the authority area. Supretech, for instance, has bought land in Meerut outside the authority area. A few developers say that the new policy won’t make a big difference and only formalises an existing method. In Noida, for instance, land was being acquired in two ways.
In one process, the Noida authority acquires entire land, and auctions the land to developers, who pays the price and develops the project. In the second process, the developer does the acquisition, acquires 60-70 per cent of land, and the government helps it acquire the balance under Section 4 of the Land Acquisition Act.
Under this clause, the government can acquire land by invoking an emergency clause for infrastructure or a regular clause. “The land owners can lodge a complaint within a year and people are heard through a public hearing,” said a developer. “Technically, there’s no change. Earlier also, developers acquired 60-70 per cent of land; and the government facilitated the rest,” said Shravan Goel, Additionalj vice president, Omaxe Ltd.
Omaxe has projects in towns like Allahabad, Lucknow and Meerut, where 75 per cent of the land was acquired by the company from the open market based on market rates. “In places like Noida, the price of raw land is so high, 16 per cent norm (the authority is required to return to farmers) won’t make a difference,” said Goel.
The Land Equation
A big criticism against the land acquisition process by state or its authorities, especially in Noida or Greater Noida, is that they acquired the land cheap from farmers and sold them to developers, who are now making a killing on the same. In this criticism, what is often forgotten is the kind of land that is being sold at each stage, and when.
Assume the authorities bought land at Rs 700 per metre and sold the same to builders at Rs 5,000 per metre, who in turn sell it for Rs 11,000 per metre. “Authorities buy farmland, and what they sell to builders is bulk land, and what the developer sells is developed net land,” Pankaj Bajaj, MD, Eldeco Housing, a Noida-based builder.
When the authorities buy and develop land, 50 per cent of the land is lost in building roads, parks, and community areas. At the authority level, the wastage could be more than 50 per cent. So, if an authority buys 1,000 acres, it sells only 400-500 acres, but it is a value-added land. Similarly, if a builder is doing row housing, 50 per cent of land is wasted in building roads, schools, sub-stations and other common areas or greens.
“The total area that is saleable is only 20 per cent. If one loads this on the basic cost of Rs 700 per sq metre, the cost itself becomes five times to Rs 3,500 per sq metre. This is the cost of raw land. If one adds the cost of developing by the authorities as well as by the developer (Rs 1,000 each), it adds up to Rs 5,500 per sq metre. Add to this, interest costs. From farmland to selling built-up units, it can take seven-eight years,” said Bajaj.
“In Noida and Greater Noida, most farmers willingly participated in the land acquisition process. The ones who sold unwillingly went to Court. There’s a genuine problem on both the sides. Both are being greedy and both are wrong. In some cases, the farmers have taken the money, enjoyed and are now seeking more money,” said a developer.
Developers say that if they have to return 16 per cent of developed land to farmers, it will make land values expensive, especially in Tier-II towns like Moradabad or Bareilly. “Organised housing development will take a backseat. It has to be viable. You cannot overcorrect the situation,” said Bajaj. The policy will have to balance the interests.
