Ashutosh Limaye, Head of Research at Jones Lang LaSalle India, discussed the proposed Land Acquisition and Rehabilitation & Resettlement Bill (LARR) 2011.
Residential Real Estate Development:Mr. Limaye said that Land acquisition cost may not go up, since most transactions are done at market price, which is higher than the prescribed formula (using guidance rate, which could be a lot lower than market price).
According to JLL, there appears to be ambiguity regarding developers' ability to buy land parcels >50/100 acres in urban/rural areas without invoking difficult RR [Rehabilitation & Resettlement] provisions.
This appears contrary to general belief that larger land parcels will invoke RR provisions, making longer-term value creation difficult. If RR provisions are invoked, the Bill will be non-conforming to the township policies of the state government, which provides incentives for 100+ acre land developments.
Infrastructure / Industrial Development:The land required for these projects will most likely become expensive. Most of these projects will require large tracts of land and government help in land acquisition, invoking both LA and RR provisions.
Delhi Gate Kashmere Gate Darya Ganj Model Town Pitampura Civil Lines
Mumbai - Mahim, Prabhadevi Worli Lower Mahalaxmi Mumbai Mazgaon Byculla Colaba Peddar Altamont Road Walkeshwar Malabar Napean SEa Road Wadala Sewri Sion
In 2001, the shift from time-linked payment to construction-linked payments and buyers becoming selective is having a far-reaching impact on developer’s cash flows. Land acquisition has become troublesome with land owners demanding a share in conversion gains while construction costs have seen continuous upward pressures and shortages on emerging bottlenecks. Regulators have increased surveillance on the sector with multiple monitoring tools. Equity capital is scarce with foreign investors disappointed with poor corporate governance and lack of cash flows. Debt and Private Equity funding has become expensive and scarce. We believe 2011 has provided enough empirical data confirming that it is a structural shift rather than mere cyclicality at play.
