Though a broad consensus was reached on Land Acquisition Bill last week, Ajit Mittal, Director of Indiabulls believes implementation of the act may face hurdles.
Though a broad consensus was reached on Land Acquisition Bill last week, Ajit Mittal, Director of Indiabulls believes implementation of the Act may face hurdles.
The much-awaited Land Acquisition Bill was okayed by all parties after the government gave in to a key demand of BJP for 50 percent compensation to farmers and sorted out certain other sticky issues.
The consensus paves way for consideration and passage of the significant but contentious bill in the second part of the budget session of Parliament beginning Monday. The Bill proposes the payment of compensation that is up to four times the market value in rural areas and two times the market value in urban areas.
Mittal, who sees serious flaws in the processes and regulation of the Land Bill, says the act could stifle base of economic development. “The cost of land will inflate significantly for developers and the land acquisition process will be mired in litigation and controversy,” he told CNBC-TV18 in an interview.
He says it will be tough for affordable housing projects to take off going forward.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What you have read into the kind of all party consensus that has been reached with regards to the land acquisition bill and what to your mind are the highlights over there?
A: Let me first say that this is a welcome step after very long delay. Finally we are going to have land acquisition bill which seeks to address the popular aspirations of very large segment of our population. As 50 percent of India’s population is depended on agriculture and in some way or other is involved in agriculture.
The problem is with regards to its implementation. What it means that instead of achieving very noble objective of equitable distribution and human rights, which I am afraid it may not do so. Instead what it may end up doing is stifle the pace of economic development.
Q: The immediate concern is with regards to the cost of land and how much that goes up for developers. What is your own understanding of what the impact might be in terms of how much the cost of land acquisition could go up by because of these changes or recommendations?
A: It would significantly inflate the cost of land no doubt about it. Not just for the developers that is a small piece. My concern is with regard to the overall industrialisation and the infrastructure growth, which the country needs. That is bound to be delayed considerably because lot of land acquisition, the process is going to be mired in long delays, the court cases and litigation.
The way it has been drafted, nobody denies that farmers. People who develop land for their livelihood they should get their fair and just dues. However, the way it has been designed, the way the fair market price is going to be determined, the way there are host of concomitant entitlements to potentially unlimited claimants this is where my worry is. This whole process is really going to be mired in a lot of controversy and litigations.
Q: Is it a fair benchmark that has been set in terms of compensation sizes as well 4 times market rate in terms of rural, 2 times for urban, does that work, is it a size that fits all kind of system?
A: That is least to my worry, whether it is 4 times or 2 times. The point is how do you determine what is the fair market price. Secondly, whom are you trying to really benefit. I am sure the intended beneficiaries are the farmers in the villages and marginal and the landless labour.
Most of the land, which is likely to come under the ambit of acquisition in the states, has already been grabbed by people with vested interest in cognize with the local politicians. So, who are going to be the end beneficiaries?
As I gather from the media probably there is going to be some safe guard at the insists of opposition party that 50 percent of the compensation should be given to the current land owner. A 50 percent should be given to the earlier land owners, but that again seems to be legally untenable measure although very well intention. I must laud the people who propagated this measure, but whether it will see the light of the day I am not sure.
Q: There is also the suggestion in terms of leasing that an acquisition in terms of acquiring land for developers is that a viable option really for developers going into large scale projects to get into some kind of leasing plan?
A: No, easier said than done. All those things we need to study the details yet. These are only suggestions. There was no such proposal in the draft bill, but as we read in the media there is some suggestion. Government is amenable to this suggestion, but how it will be implemented really I am not able to comment at the moment.
A: As of now, the bill does not discriminate between the acquisition done by the government and done by the private people through bilateral arrangement and voluntary land owners. So, except for the compensation part the other entitlements both from scheduled 4 to schedule 6 will apply in equal measure to land acquisition done either by government or by the private players.
It is not just the question of developers. The land acquisition, the biggest need is going to be by the industry, by the manufacturing and the infrastructure sector. You need affordable housing, so many people not just the developers who are the stake holders in this. It is the industry, the government itself. The large social overhead need to build, it is not just the farmers or the land owners interest.
There are poor people living in the urban areas who need affordable housing, healthcare and education. For that the land acquisition is the way forward. It is inevitable part of economic development and industrialization process. Urbanisation also has to happen along with that. So, all these objectives need to be reconciled. I am afraid there is going to be some problem in achieving these objectives.
Q: What is your sense of how the real estate is shaping up this year as an asset class especially some of the high profile pockets?
A: I don’t see any reason for the prices to come down drastically. The prices seem to be holding out. There may not be run away appreciation in the prices, but I am pretty optimistic that at least in the NCR, Mumbai markets and some of the other prime macro centric markets will continue to perform well in the foreseeable future.
Indiabulls Real stock price
On December 19, 2014, Indiabulls Real Estate closed at Rs 68.40, down Rs 1.5, or 2.15 percent. The 52-week high of the share was Rs 109.45 and the 52-week low was Rs 45.10.
The company's trailing 12-month (TTM) EPS was at Rs 0.34 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 201.18. The latest book value of the company is Rs 134.86 per share. At current value, the price-to-book value of the company is 0.51.
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