Collaboration Sutra

From Modern Mughal miniatures by the Singh  Twins

Collaboration Sutra

Renowned columnist Maureen Dowd who writes for the New York Times compared the poor academic credentials of the Republican Party front-runner Rick Perry with that of the Harvard educated and almost professorial President Obama, with not, let it be understood, anything approximating approval for Perry. She ends her piece with: “The occupational hazard of democracy is know-nothing voters. It shouldn’t be know-nothing candidates.”

In India, confronted by a host of portentous issues including terrorism, national security, corruption, inflation, economic slow-down and drift in governance, all of which have become onerous, the truth and applicability of Ms. Dowd’s comment, though made in the American context, is indeed perplexing.

It is probably true that neither the people of India, nor our rulers and administrators, quite know how to tackle our problems.  But even though the urban or rural public may not understand the issues or possible solutions very well themselves, they are not willing to passively endure the non-doings of an incompetent sarkar any more.  

One such portentous issue, on which the Government has actually taken some action, is the matter of land acquisition. The snatching of land from its original owners for a pittance without recourse has been carried out with Stalinist insouciance ever since the flag of independent India fluttered first in 1947. Then and throughout since, land acquisition has been carried out with spectacular brutality, instead of being conducted in a manner befitting  a republic aspiring to ostensible equality for its citizens and one boasting universal franchise.

So now, even as the Union Cabinet has already passed a forward looking Land Acquisition Bill for further consideration and enactment by Parliament, the various interested parties and their lobbies are hard at work.

The agricultural land-owners are pleased with the provisions that henceforth acquisition of land by developers and industry will require the promoters to pay four times the highest registered sale price in the preceding three years for land sold and bought in the contiguous rural area. For land bordering urban municipalities, where rates are higher, the applicable formula is double the highest registered price of the last three years for a given area.  In addition, 70% of the targeted land-owners have to agree to the proposal in order for it to go through, leaving the door open for further negotiation and upward mobility of the buying/selling price per acre. 

The Government, in the interests of equity, fair return to its largest voting constituency, and natural justice to boot, will not interfere in this process. It will henceforth confine itself to land acquisitions strictly for the common weal, as in roads and freight corridors with widespread benefits for the general public.  

Consequently, the builders and industry looking at green-field projects are a worried lot, because they think this Bill, when enacted into law, will sharply increase the costs of their projects. In fact, land prices have begun to rise already in anticipation, now that the threat of compulsory acquisition by the Government has been set aside.

These constituents also have a point, though urban builders can, of course, pass on the increases in land cost to the ultimate customers of their flats and villas, and they, in turn, can look forward to sharper appreciation in their real-estate values in short order. The so called low-cost or budget housing is a misnomer and non-starter in the NCR or around any of the metro cities anyway, because even a modestly priced and small flat is priced at over Rs. 30 lakhs. To get these at affordable prices, one has to move to Panwel near Mumbai or Bhiwadi or Kundli near the NCR for example. And given good connectivity, this need not be impractical either, as has been demonstrated in many places abroad.

Industry has also been directed in the Bill to share their potential profits by allocating some 15 to 17 % of the developed land to the original land-owners free of charge so that they can participate and partner in the development of their area.

Most of the complaints of the developers and industrialists are essentially retrograde because they are comparing what is fair to all with what was to their exclusive benefit till lately. So, it won’t surprise anybody when they do all they can to argue for a dilution of various provisions of the Bill before it becomes law.

The land-owners, including illiterate tribals from some of our mineral and resource rich states, are naturally strongly in favour of the new Bill, which seeks, after all, to redress the inequities of the colonial 1894 land acquisition law in force at present.

But even as the discussion gathers traction and momentum, there is another, perfectly workable methodology that has been in use for many years now- that of an equitable collaboration. In this formula, the land owners retain title to their land themselves and the developer or industrialist puts in all the money and expertise to develop it.

Collaboration agreements typically run on a 40% to one third share in favour of the landlord, inclusive of a negotiated advance of monies to seal the deal. This is a fair basis for a mutual sharing of the future appreciation in property values, or handsome profits on sale at any point in the development phase as well.

Similarly, in the case of industry developed in collaboration, the land owners get to participate as shareholders on an ongoing basis, with options to sell part or whole of their holdings as the time goes on, at freely negotiated or market rates.

This form of shared enterprise has the most important virtue of rendering most of the increase in land prices redundant, and normally draws voluntary and enthusiastic cooperation from land-owners. But of course, this kind of transaction may not suit the developers and industrialists who have long been used to a less equitable outright purchase of land at low prices, and the unfettered freedom to work on the development at their own pace and in the manner they see fit.   

In terms of redevelopment of residential and commercial premises and plots in our metros, as well as a number of projects in the surrounding areas, collaboration is a tried and tested method which has proved most successful. There is no reason, given a shift in attitude on the part of business and industry, that it won’t work equally well in rural areas too. 

But to underpin and ensure the good intent of the developer or industrialist, the Land Acquisition Bill, with a minimum of modification, needs to be passed into law as soon as possible.

(1,100 words)

19^th September 2011
Gautam Mukherjee


Published by The Pioneer as Leader Edit on the Edit Page on 22nd September 2011 as "Look beyond new land Bill". Also published online at www.dailypioneer and in The Pioneer ePaper simultaneously.