Hit by concerns of cost increase due to the new Land Acquisition Bill, DLF tumbled more than 7% yesterday. The company is just reviving from the blow it took from the CCI penalty, when the land bill has hit it. Rajeev Talwar, group executive director of DLF joins CNBC-TV18 to discuss the bill.
The realty space is caught in quite a catch-22 situation. The new Land Acquisition and Rehabilitation Bill coming into force is expected to increase cost for real estate developers by an estimated 80%. The players will now have to either pass on the cost to customers or take a hit in margins. Now, of they do hike land price, they might end up wrecking the already measly sales the industry is seeing.
Run over by all these concerns, DLF was beheaded at the stock market yesterday, the price tumbling more than 7%. The company is just reviving from the blow it took from the CCI penalty, when the land bill has hit it.
Rajeev Talwar, group executive director of DLF joins CNBC-TV18 to discuss the impact of the bill on the company.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Just take us through what you are expecting from the bill to be tabled as opposed to draft?
A: I think the bill which is being tabled would probably be the same as the draft. What has been cleared by the cabinet would be definitely tabled. But yes, we expect that during the discussions, either in the parliament or in the standing committee, they would like to distinguish between the pure private sector willing-seller, willing-buyer transactions and those transactions in which the government has any role to play in any partial or complete manner in land acquisition.
Basically, all these transactions which do take place are only as a help to the government substituting the very role which the government plays normally in land acquisition. So we are quite hopeful that there will be some changes to make to lesser the burden on the government machinery and also to see that no malpractices are set in.
Q: What are you expecting to hear and what will make you happy in terms of the coverage for private players in the bill?
A: Private companies transacting direct land transactions with owners on a willing voluntary basis, because market determine rate, those should be kept out of the purview of the bill. There should be no conditions imposed on them. That’s what we are expecting and that’s what the industry is asking for.
It will become extremely difficult on how do you monitor these and how you regulate these private sector transactions. And once the market price has been paid, then what else remains to be paid? That was the only problem in government acquisitions that determination of market price became a big problem for the government. That’s why, if you recall, the provisions that either two times the amount the government will pay in urban areas or four times the amount in rural areas, then there will be a relief and rehabilitation package wherever the government sets in.
So in a private sector, willing seller-willing buyer transaction, the market-determined price is already well settled. Now what more needs to be done on that? I think those are the kind of discussions which should take place before any final decision is taken.
Q: If it goes ahead with respect to the way the draft was tabled and what was declared over there, do you think it is very anti-industrialization and that would in any way hamper growth for something like DLF?
A: Let’s not say anti-industrialization, but it will be extremely difficult to monitor, it will be extremely difficult to regulate, and it would lead to a huge futuristic problem. So maybe it’s not a solution which will be very easy to implement in the future. To that extent there definitely needs to be rethinking on it.
Q: There is a converse view as well from brokerage reports with regards to DLF that you all own large land parcels etc hence you all might actually benefit from the land acquisition bill in terms of appreciation of cost of land further on?
A: Yes that has been also been said, but one should really look in it from the point of view that what will be eventually the most practical and workable legislation in the country. This law is being changed after 1894, so the solution should not be worse than the problem. That’s about all that we can say.
Q: So you wouldn’t look at taking advantage of this situation in terms of possibly strategic sales, in terms of land parcels that you are wanting etc?
A: One should not take an advantage of something which will make a resource scarcer and therefore your holdings much more valuable. The real solution in the country lies on how do we effect more urbanization and how do we provide more homes? How do we provide a greater solution to what development requires and what the country needs?
READ MORE ON DLF, Land Acquisition and Rehabilitation Bill, real estate developers, land price, CCI penalty, sector, standing committee, anti-industrialization
ADS BY GOOGLE
video of the day
Budget 2015-16: Revive capex through savings on cheap crude says Kotak Sec