Experts in the infrastructure space are hailing the government's move to approve the ordinance route for Land Acquisition Bill. The benefits of the amended Land Acquisition Bill, experts say will range from improved infrastructural connectivity and a fall in realty prices.
In an interview to CNBC-TV18, Rajeev Talwar , Group ED, DLF; Niranjan Hiranandani, Managing Director, Hiranandani Group; Madan Sabnavis, Chief Economist, CARE Ratings and K Venkatesh, CMD, L&T Infrastructure Development share their views over the development.
Below is the verbatim transcript of the interview with CNBC-TV18's Nayantara Rai and Surabhi Upadhyay.
Surabhi: The niggling sticky point and one of the biggest criticisms of the Land Act was the amount of money that has to be paid to acquire land and the government is very clear there is absolutely no touching the compensation clause. It is going to be four times market value for rural areas and twice in urban areas including in affordable housing, including in some of these exempted areas that we just spoke of. How would you react to that? Will it be conducive to really then kick-start affordable housing in a real way?
Hiranandani: It is very clear that the compensation which is going to go to the farmer is going to be high. In certain areas it is not going to be possible to make affordable housing because the land prices and acquisition prices would be higher but then obviously what the government intends is to acquire those areas where the land prices are not higher and they will create new infrastructure to develop new extensive areas. So what they will look at is probably faraway places, locations elsewhere, build new infrastructure, build the metro, build the connectivity, get land and do it but they don't want to deprive the farmers of this compensation.
Surabhi: I understand that but then my corollary to that would be then would developers like yourselves or Mr Talwar in DLF etc large real estate companies in the country that have so far not really seen affordable housing as a big chunk of the business, not as a mainstay of the business. Will that mindset at all change if this land is going to be in far flung areas in order to keep costs in check?
Hiranandani: No, I don't see that as a problem at all. We have always gone to faraway places and once you create it infrastructure becomes nearby. So, development is going to be more spread out than has been done in the past and this is essential which we think that they are going to only develop in the congested areas, it is not going to be possible and if you see the corollary look at it, they are talking about smart cities, they are talking about new areas.
You may not have development in the cities or in the immediate peripheral but, if you take Mumbai you have the entire MMR region right up to Pune, you have the Alibaug area, Panvel area, the Vasai-Virar area and similarly you have Noida and other areas which you have around Delhi.
So, I don't see that as a real problem but the issue is this government is clear. You don't want to deprive compensation. So I don't see that as a problem. It is a political necessity for the government to do. We have to build it around it, we can criticize it but I don't see anything wrong.
Surabhi: What is it that is required to really get this housing PPP model really kick off on the ground in a big way?
Talwar: The provisions would be more applicable to areas like industrial corridors and to new cities being developed, but you would be surprised. Mr Hiranandani is absolutely correct that it was really the time taken which was of critical concern to all of us. You cannot have a project wait for five years for land acquisition alone. It was never the compensation, you would be surprised that way back in 2006, 2007 and 2008 the kind of compensation which was offered for new subsidies to be developed either in Karnataka or even in West Bengal or for that matter in Maharashtra was more than 50 lakh per acre. So that is something in rural areas which was being done even earlier. It is not the price which is really going to make a huge impact but it is the time saved which will make a bigger impact.
Surabhi: What is it that is required to really get this housing PPP model really kick off on the ground in a big way?
Talwar: The provisions would be more applicable to areas like industrial corridors and to new cities being developed, but you would be surprised. Mr Hiranandani is absolutely correct that it was really the time taken which was of critical concern to all of us. You cannot have a project wait for five years for land acquisition alone. It was never the compensation, you would be surprised that way back in 2006, 2007 and 2008 the kind of compensation which was offered for new subsidies to be developed either in Karnataka or even in West Bengal or for that matter in Maharashtra was more than 50 lakh per acre. So that is something in rural areas which was being done even earlier. It is not the price which is really going to make a huge impact but it is the time saved which will make a bigger impact.
Nayantara: But once the land acquisition had been approved by the parliament in 2013 we had you, Mr Hiranandani, various real estate companies and expert coming out and saying that the days of the large integrated townships are over, that this land acquisition act will make it impossible. So whatever, land you have now is literally gold, it is worth platinum. Do you think the new ordinance that has been proposed will change that, can companies like you again think of having new integrated townships going out there to acquire land not just for affordable housing?
Talwar: That is going to be taken care of with the Floor Space Index (FSI) declaration and with cities going vertical we will have to do with much larger amount of housing in much smaller land parcels and perhaps the new cities which come along will use land much more efficiently. We will have much better systems and hopefully as has been announced by the government these will be smarter cities.
Nayantara: What every consumer wants to know, will we see property prices come down?
Talwar: They have already come down. Last six years have seen a appreciable moderation of prices. If supply increases I am sure prices of housing can be kept very well affordable depending on the ultimate price also of what is described as affordable housing. I do not think housing for middle class and for even others should be either very small or should be kept restricted to only about 500 square feet.
Nayantara: The finance minister has also spoken about reviving exemptions for projects under national security and defence. Your reaction to that and also let us not forget very recently we have also seen the FDI regime being changed for defence. How is all of this going to play out and the fact that it all has to be PPP?
Sabnavis: The way I look at it is that there are two parts to this particular thing on land acquisition. What the finance minister seems to have addressed today is more on the infrastructure side where there is no ambiguity in terms of which are the sectors which are going to be exempted. As far as industry is concerned the same provision is there (Not Sure) in terms of compensation and I think that was a big deterrent earlier in terms of what the compensation should be paid to the farmers.
While moralistically speaking that was the right thing but from the commercial point of view it would still be a challenge. I don't think it is going to change anything for companies who are going to try and acquire land for the sake of putting up their own plant. Definitely from the point of view of infrastructure if you combine this with also what has been done on the FDI side, I think there will be a boost.
Surabhi: It probably sounds quite for affordable housing. We have been getting a view the real estate sector. However if you move beyond that they have taken as part of the 5 exempted areas apart from national security there is industrial corridors and there is rural infrastructure. However it doesn't seem to be very clear about other large scale private sector projects that would be coming in, they will still have to go through the compensation which has been earmarked earlier, they will have to go through the social impact report, they will have to go through the 80 percent consent clause. So, do you really see this in a decisive way shifting sentiment in terms of manufacturing?
Sabnavis: No, I think it is only doing it partly. As far as manufacturing as you were mentioning about the large companies, debt levels are going to remain the same. So, I don't think anything changes out there. The only way in which the overall sentiment improves is we are saying that something else is going to happen where the government is involved, where there is infrastructure involved. Talking of rural infrastructure, industrial corridors, I think all that is very good.
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