The Nandagudi Special Economic Zone (SEZ) in Hoskote taluk near Bangalore's upcoming new international airport will occupy about 12,000 acres in 36 villages. Power, politics and patronage have once more preyed on land. This proposed acquisition has been described as one of the most draconian of government powers. It allows cities and states to take people's private property without their consent - for projects proposed in the “interest of the larger good.”
Around the world, "eminent domain" - the legal term for this process - is a topic of concern and debate. In India, the justification is threefold: Urban housing requirements, critical infrastructure, and new jobs creation. The first two offer visible benefits to the public, and acceptable to most when combined with transparent and fair processes. The last has dramatically raised the decibels of dissent.
Cities and towns undoubtedly need to develop clear economic identities and provide intelligent planning to strengthen their competitive advantages. The question is how should this planning take place? What is the process by which we allocate land to encourage economic growth? How do we mitigate the social and financial cost to farmers who are held hostage to government powers of eminent domain?
Attracting industries - smokestack in the past and IT companies in recent times - has always been vital for state and local governments. Land has all along been considered a legitimate carrot. So what's the big deal now?
There are two significant reasons. First, land with access to urban infrastructure and resources are becoming a scarce and precious commodity. This trend is unmistakable now: such land will only get dearer.
Second, acquisition is a coercive procedure. There must be a balance between individual and collective rights. The government and the beneficiary of acquisition must be required to prove long-term development value for the larger public good. What happens when industries lose their employment rationale? Unfettered allocation can act as an arbitrage on land, given the powerful land economics at play.
So what is the solution? One approach could be that government land and acquired land is leased to industry rather than sold. This is called "leasehold" as versus outright sale which is called "freehold". Only residential land and land that is bought independently in the market could be under freehold.
Leasehold could be for 25 to 50 years and extendable through a public and transparent process based on proving continuing relevance. This allows land to be retained as public stock, enabling intelligent recycling over time. This is precisely what China does. Every piece of land given to industry is on lease. Companies still have an incentive to make their investments in buildings and related assets, since these investments are depreciated in their books over a maximum period of 30 years.
Another market-based approach could be to create Land Bank Trusts (LBT). LTBs could be used to pool in all the land for development and owned proportionately by both the original landowners (rural farmers, for example) as well as government (or private infrastructure companies) for financing the development. The LTB would lease land to interested industries at market value.
This LBT option could have multiple advantages: the original owners continue to retain a proportional stake in the land; the up-side valuation of land over time is not lost to the original owners; such ownership instruments act as liquid investments even for farmers; market forces will dictate pricing and no preferential treatment will come into play; and the government can ensure that future re-allocation decisions can be controlled.
The rise of land prices in urban areas has many owners sitting on a tidy fortune. With growth tentacles reaching ravenously into suburbia, rural residents must have an equitable opportunity to participate in the benefits. Without equity, acquisition will continue to be a flash point waiting to flare up at the slightest provocation. Land Bank Trusts could be a solution worth considering in bridging the equity gap on land.
(The writer is Chairperson, India Urban Space; Co-founder, Janaagraha)