G U EST CO LU M N
Who benefits from land?……….KALA SEETHARAM SRIDHAR
LAND in urban areas is a scarce resource which needs to be optimally utilised if the objectives of affordable housing, and improvement in the lives of slum dwellers by the year 2020, as set out in the Millennium Development Goals, are to be attained.
In India, certain laws were enacted to regulate the use of land in urban areas. The Land Acquisition Act of 1894 was enacted for building an adequate stock of urban land for public interest purposes such as low-income housing, road widening, development of parks and other amenities. Such land is typically acquired by the government through payment of compensation to landowners as per market value. Given that large tracts of land are frequently acquired by the government at low prices for industrial development, it is not clear if the urban poor have benefited from this Act.
The Urban Land Ceiling and Regulation Act (ULCRA) of 1976 was enacted to exercise social control over urban land, so it is equitably distributed. This Act specifies that no individual or enterprise can hold beyond a certain limit of vacant land above which they need to ‘declare’ to the government and sell at a predetermined price. While many social groups demand better implementation of the Act, most of the states repealed it due to its adverse impacts on restricting the supply of urban land by reserving too much for “public purposes”. ULCRA also became a charter for corruption since it enabled large-scale land holding by the government, which directed it to whatever purpose it considered fit. There was also no evidence that the land so acquired was used for the urban poor, hence the law has long outlived its utility. In any case, the above laws enabled the government to possess large amounts of land at its disposal.
Another of ULCRA’s objectives was to curb speculation in urban land transactions. Following the repeal of ULCRA in most states, speculation continues to plague urban land markets. Investors buy a piece of land in peripheral areas of cities for a low price, hold it until it appreciates in value, then sell it off at a higher price. Such speculation results in a general rise in the price of land. Given that the cost of the land is the big chunk in the cost of housing, when compared with the cost of construction, speculation in land causes huge increases in the price of housing as well.
Considering the large amount of land that the government owns, and the expected speculation and capitalisation that have been taking place, it must be the case that state and local governments use land as an effective financing tool. Many cities and municipal governments have access to substantial land assets such as public buildings and municipally-owned enterprises.
In the absence of an effective taxation system, one of the means by which local governments increase revenues is through public land leasing. There is evidence that land leasing has been happening on a large scale. For instance, the revenues gained through land auctions by the Mumbai Metropolitan Regional Development Authority in just one complex (Bandra-Kurla complex) in January 2006 was a staggering Rs 2,300 crore, two times more than the total infrastructure investment made by the Mumbai Municipal Corporation during 2004-05 (which was only Rs 1,040 crore).
Land leasing has also been time-tested in other countries. There is evidence that many cities in China financed more than half of their urban infrastructure investment from land leasing, while borrowing against the value of land to finance much of the remainder. Ethiopia recently introduced land leasing as a financing device for cities.
The implication is that governments in India and other developing countries have been capitalising on increases in land values through leasing, to finance their infrastructure needs.
This has resulted in governments utilising their land more for revenue generation than for affordable housing, or for the urban poor. While municipal governments have every right to capture their own investment in land, which manifests itself in increased land prices, through leasing, they should reserve land for housing the lower income groups. Urban development authorities do reserve a small portion of the land they acquire for housing the economically weaker sections, which is not adequate, given that more than half of the population of metropolitan areas such as Mumbai live in slums. Hence urban development authorities need to allocate greater portion of their revenues from land leasing and auctions for infrastructure and housing the economically weaker sections.
The evidence shows that legislation has not helped in building an adequate stock of housing for the urban poor. With economic growth, capitalisation and speculation, land values have increased significantly and governments have been capitalising on them through leasing and auctions, but have to do much more in the way of affordable housing for the urban poor.
(Views are personal)
• Various land laws have not helped in building an adequate stock of housing for the urban poor
• In the absence of an effective taxation system, local governments tend to raise revenues through public land leasing • Authorities must allocate greater share of revenues from land leasing and auctions for infrastructure and affordable housing |