Government as a Land Shark

Recently Supreme Court in a far-reaching judgment, delivered on 12/03/18, adjudicated a land dispute, the “Manesar Land Release issue”.

The political establishment is terming it as a scam and trading charges. That whether corruption happened or not is subject to inquiry but that the landowners were given a raw deal is undoubted.

The issue in very broad terms is something like this.

The Haryana governments from the year 2004-2007 issued a notification, vide HSIIDC, to acquire some close to 668 acres of land in the Manesar general area for development of Industrial areas.
This notification created a lot of panic in the minds of “landowners” as the government price was considerably lower than the market price. More so, because of the general perception of the market was of constant ascendancy.

HOW LANDOWNERS WERE BETRAYED

Rera

Now with these losses getting established in the landowner’s mind, they were duly approached by some “Agents” who offered prices slightly more than the government prices. The transactions were concluded.

One day subsequently the government of the day realized that they do not need this land and the “acquisition notification” was proclaimed to be ineffective. Therefore the land became available to the builders who were till now playing the entire game from the background with their “Stooges” being the “Agents”.

The lands were then officially transferred to the “Builders” who made a killing by selling projects at market prices.

THE FEELING OF GETTING CHEATED SET IN

Now naturally the landowners felt betrayed as they sensed that some kind of a scheme was conspired and orchestrated much to their dismay. Hence suitable representations were made to the Judiciary, cases taken up, investigations constituted, charges framed and decisions arrived at.

The Supreme Court has adjudicated that the “cancellation” of “Acquisition Notification” was not in order hence the lands to be deemed acquired and restored to HSIIDC and/or HUDA. Of course, the enhanced money which was paid to the landowners by the builders is not to be returned.

Any balance or additional compensation is to be paid by either/or HSIIDC/HUDA to the landowners. Also, the completed or near completed projects are to be treated on “status quo” basis and to be handed over to the Buyers i.e. the retail buyers. The builders can claim prices equivalent to the acquisition price from the government department. It would be incumbent upon HSIIDC to develop and hand over the balance of the projects as per the approved master plans.

NO, THIS DOESN’T STOP ONLY AT HARYANA

best houses in india

When one looks at it from the point of view of the buyers who have yet to be handed over the booked projects, they are still at a loss.

Now let us look at similar issues which have happened in the past with intermittent regularity.

DDA and its buyers in Delhi have been known to be paying enhanced compensation to the landowners when they lose litigation.

Similarly, HUDA and its plot buyers meet a similar fate at least once in every project they undertake.

Last known sector 57 plot owners in Gurugram have been served enhancement notices a good decade after having purchased the plots from HUDA. Memory is still fresh from the dispute which kept work on standstill in the erstwhile Noida Extension (now Greater Noida West) over land compensation issues which started with the “Shahberi” village.

A similar example is the completed projects not receiving “Occupation Certificates” from the authorities in Noida and Greater Noida due to nonpayment of land dues. So the authorities in their exuberance to collect revenues acquired land in Noida and Greater Noida and then sold it to private builders.

The catch was that they sold it to private builders on installments and now the private builders are failing to make due payments to the authority, the situation for “home/commercial asset buyers” is perilous, to say the least. In the event of builder defaulting payments, the onus would be on them to clear land dues, resulting in a possible wiping of the entire profits made in these purchases.

WHAT IS LAND SHARKING

best houses in india

A pattern is clearly visible that whenever land is acquired using government diktat and then put to commercial usage there are disputes and cost enhancements. This has to happen for the obvious reason of “unfairness”.

When the land acquired is used for commercial reasons then the landowners feel, and justifiably so, having been given a raw deal. What public good is been serviced by land getting acquired and then being handed over to builders for development, notwithstanding the development being residential or the builder being DDA?

Such a move is “Land Sharking” as the land-owner did not have a choice. Hence the government has routinely lost in such cases.

That land is an extremely scare and hence valuable resource is established. What needs to be understood is that since it is a valuable resource hence attempts to steal it will always be made.

That it is only the government which has the most visibly legitimate means to commit this theft is equally established.

Hence it is to be kept in mind that people who are close to the governments will try to use this route for usurping prime lands. It has happened in the past and would continue to happen in the future. What may possibly change are the methods and means but never the intentions.

DEMOCRACY IS NOT A FALLACY

Real Estate Consultant

Now, this is where one of the best things about living in a democracy occurs. We can sue and litigate against our own governments and even better is that governments are not permanent hence their powers are transient.

Therefore such thefts most of the times would continue to be challenged and parities restored.

That such challenges would then result in delays and cost enhancements is also a given. In an ideal world all land purchases, including for so-called common goods, such as the building of roads, power plants and other infrastructure should be done from the open market.

To reduce upfront costs the landowners should be made partners in development with adequate equity arrangements. Only then fair and lasting negotiations can be reached, although this is no doubt a “utopia”.

In addition to the present case of “Manesar land release” issue, there is no justification with builders like ABW and other for the delays there have been in the construction. The dispute started only 3 years ago whereas the sales were made about 8-9 years ago. They have clearly diverted the funds for wrongful gains to themselves.

They should be separately brought to justice for criminal actions done against the buyers.

WHAT LESSON DO WE LEARN

Real Estate Consultant

1.    Whenever making the purchase it is imperative to understand the source of land being used for the development. If it is anyhow connected to or being sourced from government force, coercion, inducement, deception; which are euphemistically masqueraded as acquisition” then be very, very cautious. The word government land by acquisition or otherwise should instead of comforting a buyer be a reason to stay away from a project. Even remote connections like “Manesar Land release” issue should be avoided.

2.    Approvals of the project in such cases should not be a yardstick for making an investment. The approvals for construction in such cases rest on weak foundations, a small tremor being enough to bring down the building.

3.    In case one is buying such properties then try and ascertain what land prices have been paid to the landowners. The first landowners and not the temporary middle agents specially planted for such machinations. If there is too much of disparity between the landowner prices and the fair market price, please stay away from such purchases.

These are minimum due diligence which should be employed in making big purchases. One assumes that Real Estate is a “big purchase” and hence this much of respect is accorded.