Building Economics

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SECTION A: BUILDING ECONOMICS

2. LAND ECONOMICS

2.1 Land economics: Land as limited resource

2.2 Land development and conservation

2.3 Public policies on land utilization and development

2.4 Theories of land values

2.5 Acts

2.1 LAND ECONOMICS: LAND AS LIMITED RESOURCE:

Land is a natural resource which yields some income and has some exchange value .Land economics is a branch of the economics which focuses on the use of land and the role of land in economics. It often intersects with environmental economics, since land use policies

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have an impact on the health of the environment, and many land economics trade journals focus on the environmental ramifications of land-use around the world. Specialists in this branch of economics work in a number of places, from university campuses to public utilities.

Characteristics of Land:

1. It is nature’s free gift.2. It is fixed in quantity.3. It doesn’t have any supply value.4. It is permanent.5. Land lacks mobility in geographical sense.6. Land provides infinite variation of degree, fertility and situation so that no two

pieces of land are exactly alike.

The pressure of growing population in developing countries has laid a heavy burden on the physical resources of the countries. The scarcity of land and infrastructure facilities has come in the way of housing development, especially in the urban areas.

High Cost of Urban Land:

The cost of land and its development to provide essential housing services and other infrastructure facilities has steeply risen and now accounts for substantial cost of housing construction.

It has become therefore to devise ways and means of effecting saving in the use of land cost of its development.

At the same time, the quantity of housing and human settlement that emerges should not be adversely affected. It is therefore, incumbent on planners to achieve economic physical planning by application of the latest advances in sciences and technology.

Local planning regulations and building by-laws have a significant impact on land use planning and cost of land development for housing.

New developments:

Some basic principles of physical planning to ensure land use economy as well as economy in cost of development of land which need to be further researched and studied for practical adoption are:

ECONOMICAL SPACE NORMS:

Until the economic conditions of the masses improve , minimum space norms would have to be realistically laid down for built up accommodations , open spaces and residential densities, so that these are actually adopted and also progressively improved without adversely affecting the environmental conditions.

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1. HEALTHFUL HOUSING2. COMMUNICATION FACILITIES3. ADVANCES IN CONSTRUCTION TECHNOLOGY4. COMMUNITY PARTICIPATION

Land itself is a resource like labor or capital, especially when the land harbors deposits of natural resources like minerals, oil, or timber. It is also a fixed resource: the amount of available land on Earth is finite, although land speculation may create situations in which the supply of land cannot meet the demand. The way in which land is used can have a profound impact on a local or national economy, whether that use is urban or rural. Public and private uses of land and their sometimes conflicting needs are also of interest in land economics.

One of the fields of focus in land economics is the allocation of land. As a fixed resource, land's value is dictated by its availability, and the allocation of land resources can play a critical role in how land is treated. In packed cities, for example, land can be scarce and difficult to obtain, and it has a correspondingly high price. In rural regions, however, land may be very inexpensive due to decreased demand. Or, demand for land which can be used as housing may inflate the prices of farmland, making it difficult for farmers to buy or retain land for farming use.

Researchers in this field may look at issues like government acquisition of land to satisfy right of way requirements for roadways and utilities, and land use policies which force land to remain unoccupied and unused for large stretches of time. They also look at how land can be made more profitable, and how land values shift over time in response to a variety of factors including market pressures and the discovery of natural resources.

The study of land economics is often closely wrapped up in politics, especially politics on a local scale. Powerful planning commissions and lobbies may be able to push the nature of land use in their communities, shaping land use policies and the economics of locally available land in ways which sometimes surprise economists. Regional and national governments also play a role in land economics, by establishing policies which are designed to balance the needs of individuals against the needs of the government and the population as a whole.

2.2 LAND DEVELOPMENT AND CONSERVATION:

Land economics is a branch of economics field which focuses on the use of land and the role of land in economics.

Land itself is a resource like labour or capital, especially when the land harbours deposits of natural resources. It is also a fixed resource: the amount of available land on earth is finite,

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although land speculation may create situations in which the supply of land cannot meet the demand. The way in which the land is used can have a profound impact on a local or national economy, whether that use is urban or rural. Public and private uses of land and their sometimes conflicting needs are also of interest in land economics.

One of the fields of focus in land economics is the allocation of land. As a fixed resource, land value’s is dictated by its availability, and the allocation of land resources can play a critical role in how land is treated. In packed cities, for example, land can be scarce and difficult to obtain, and it has a correspondingly high price. In rural regions, however, land may be very inexpensive due to decreased demand. Or, demand for land which can be used as housing may inflate the prices of farmland, making it difficult for farmers to buy or retain land for farming use.

Researchers in this field may look at the issues like government acquisition of land to satisfy right of way requirements for roadways and utilities, and land use policies which force land to remain unoccupied and unused for large stretches of time. They also look at how land can be made more profitable, and land values shift over time in response to a variety of factors including market pressures and the discovery of natural resources. [1]

Land development :

Land development refers to altering the landscape in any number of ways such as:

Changing landforms from a natural or semi-natural state for a purpose such as agriculture or housing.

Subdividing real estate into lots, typically for the purpose of building homes. Developing property or changing its purpose, for example by converting an

unused factory complex into into individually owned units.

The conversion of land from one use to another is the generally accepted definition of land development. [2] This age old process began with ancient societies organised themselves into tribes, on and claiming land, forming villages and primitive towns, for the mutual protection and livelihood for all. The great civilisation of Egypt, Greece and Rome can be traced to humble beginnings of tribal communities. Their growth in size and complexity is typical of urban development and unlike what we are experiencing today. With their complex roadways, aqueducts, commercial markets and residential areas the ancient problems associated with land development endeavours- those of adequate transportation, waste disposal, drainage, water supply, population densities and others posed a challenge then and continue to require innovative solutions today.Today the process for finding solutions and developing scenarios for land use that serve the greater good is systematic one, and is to a large degree, uniform in principle and practise.

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The systematic approach to the land use planning, analysis and engineering is known as land development design.

Since the early 1950s, the conversion of land to a different use generally meant a more intense use. The definition formally applied almost exclusively to residential, commercial, retail, industrial and office uses. It did not take long however, before city planners and residents alike echoed to have areas preserved for recreational, educational, social and cultural activities. In response to this social need the definition of land development was broadened to include such as converting rural land to agricultural use constructing major transportation and utility systems, and even urban and suburban redevelopment projects. Thus, land development is the conversion of land from one use to another, usually of great intensity, and is typically applied to a single parcel or group of parcels and includes supporting uses and infrastructure improvements.

Land development design and consulting constitute the systematic process of collecting data, studying and understanding the data, extrapolating the data, and creating on paper the plans for reshaping the land to yield a land development project that is politically, economically and environmentally acceptable to the client and the public. Persuasion, salesmanship and negotiation are all part of each step in the land development design process. [3]

The steps involved in land development are:

Step1

Feasibility/programming initiates the process with a general review of proposed program and existing site conditions, with particular emphasis on identification of environmental, cultural and infrastructure resources.

Step2

Site analysis determines the allowable use of the site based on local master plans, codes and ordinances and recommends a course of action to accomplish the development program with respect to those documents.

Feasibility review and site analysis are usually performed concurrently, these studies result in a complete site inventory, identify usable site area and form the foundation of further design efforts through provision of adequate base mapping and establishment of project goals.

Step3

Conceptual design presents the initial organisation of the development program.

Step4

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Schematic design is a refinement of the initial concept sketches that adds scale, dimensions and precise testing of specific uses, including building arrangements and infrastructure systems.

Step5

Final design is the conclusion to the primary design effort. Carried out predominantly by engineers, preliminary plans are enhanced with a level of detail sufficient to construct all aspects of the project

Step6

Plan submission and permitting represent the formal regulatory review of final design (construction) documents by all governing agencies as well as application for procurement of all necessary site and building permits.

Step7

Construction is the final step in land development process. During construction the land development consultant is a valuable resource for both the client and the contractor and is often responsible for stake out, reviewing submittals, shop drawings and RFIs, certain inspections and field and formal revisions. [4]

Land Conservation:

Land is one of the most precious natural resources, the importance of which in human civilisation needs no elaboration. The total available land area in the state sets the limits within which the competing human needs have to be met. The needs of agricultural, industrial, domestic and others often result in diversion from one use to the other. Diversion of land from agriculture to non-agriculture uses adversely affects the growth in agriculture sector. Even the available land is subjected to soil erosion of varying degrees and degradation problems of different magnitudes. [5]

Land being the major non renewable natural resource is inelastic in nature. There is lot of pressure on land due to the increasing population from the agricultural, industrial and housing sectors. On the other hand, the land is subjected to soil erosion and land degradation problem due to rain and wind action and faulty cultivation practices resulting in loss of topsoil, which is the place where all nutrients are available. This leads to poor yields, uneconomic returns, reservoir sedimentation, and reduction in storage capacity, and shutdown of hydel power stations, ecological imbalance, environmental pollution, draughts and floods. Hence the conservation, development and management of the land resources which ensures the physical and chemical and biological health of soil profile is of prime importance.

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In a predominantly agricultural system, the objective of improving the productivity, profitability and prosperity of the farmers and achieving agricultural development on an ecological sustainable basis can be attained only when conservation, development and management of the land resources are assured. [6]

Conservation action provides benefits such as opportunities for active outdoor recreation, and for the appreciation of landscapes and the historic heritage.

Public conservation land and other natural areas also contribute other often overlooked products such as clean water supplies, and the benefits such as the regulation of the effects of flooding, erosion and climate change. [7]

References

1. http://www.wisegeek.com/what-is-land-economics.htm 2. http://en.wikipedia.org/wiki/Land_development - Pg-2 3. Land Development Handbook, Planning, Engineering & Surveying/ Dewberry, Third

Edition,Chapter-1- Overview of The Land Development Process, Pg- 34. Part-1- Overview-Pg-1 5. http://www.tn.gov.in/spctenthplan/CH_9_4.PDF 6. http://www.tn.gov.in/spc/annualplan/ap2004-05/ch9_4.pdf 7. http://www.doc.govt.nz/conservation/threats-and-impacts/benefits-of-

conservation/economic-impacts/

2.3 PUBLIC POLICIES ON LAND UTILIZATION AND DEVELOPMENT:

Public policy can be generally defined as the course of action or inaction taken by governmental entities (the decisions of government) with regard to a particular issue or set of issues. Other scholars define it as a system of "courses of action, regulatory measures, laws, and funding priorities concerning a given topic promulgated by a governmental entity or its representatives.

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"Public policy is commonly embodied "in constitutions, legislative acts, and judicial decisions." [1]

Urban Land Policy in India:

Land reform measures were initiated in rural India soon after independence in 1947. Urban Land Reforms were however, slow in coming. Some public interventions in different form were also made in the land market, but the first major step aimed at fundamental reforms in the urban land systems came only in 1976 when a comprehensive land ceiling legislation took place.

Despite these efforts India lacks a comprehensive Urban Land Policy. Neither the Government of India nor the State Government has formulated any such policy. While one may find expressions or intentions and isolated policy announcements, there has been no consistent Urban Land Policy formulated on the basis of detailed study of the problems that are encountered.

Sources of Land Policy:

The following constitute the vital sources of urban policy matters in India.

Reports/papers brought out by the central or State government Five year Plans Legislation

(i) Report of the Committee on Urban land Policy: The first attempt towards evolving an Urban Land Policy was made when the Government of India, Ministry of health consisted a Committee to examine the problems related to urban land Policy in1963. The report submitted by the committee in 1965 must be considered as a landmark in the field of urban policy literature in India. The committee took note of the declining man-land ratio and considering a comprehensive long policy measures.

(ii) Task force on housing and Urban Development: The planning Commission set up Task forces to evolve a long term perspective on housing and urban development Issues in 1982. The task Force on ‘Planning of urban development which submitted its report in 1983 critically examined, inter alia, the problems of urban land policies in India. It reviewed the existing approaches to land policy, especially with reference to Delhi and called for a new approach to promote efficiency in the allocation of land and to help the poor in their access to land for Shelter.

(iii) National housing Policy: The national Housing policy document of the government of India (1988) emphasized the need for the formulation and implementation of a purposeful land policy in the context of achieving the goal of eradicating houselessness in the country by the turn of the century. It also suggested strategies to augment the supply of land, particularly to meet the housing requirements of the weaker sections.

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(iv) National commission on Urbanization (1988): An important step towards understanding the urban problems of the country was taken by the government of India when it appointed national commission on urbanization. The Commission in its report examined the dimensions of urbanization and the issues relating to the existing urban patterns and policies in India and made recommendation on the range of policy interventions necessary to bring about more human and efficient urban seducements. It identified the failure to anticipate the rising demand for urban land and ensure an adequate land at affordable prices as possibly the most disastrous feature of the past four decades of urbanization in India. Emphasizing the significance of urbanized land as a vital resource that needs to be generated in sufficient quantities for appropriate usage. The commission strongly advocated a realistic land policy to overcome the problems of shortage of urban land and the rising land prices.

Five year plan:

The five year plans constitute an important source of state policy on issues relating to socio economic development in India. While the first two plans of the central government recognized the need for formulation of policies relating to urban planning and development, the first serious effort at laying down a broad policy with regard to urban development was made while formulating the third five year plan. The plan referred to the high costs of urban development in rapidly growing urban areas and proposed measures to control urban land values. The Fourth Five Year Plan stressed the need of urban land policy and called for action on the recommendations of the report of the committee on urban land policy of 1965.

The Fifth Five Year Plan is of great significance so far as urban land policy is concerned. It recognized that, perhaps the most important instrument necessary for achieving breakthrough in urban development will be the formulation of Urban Land Policy. In the Sixth Plan the thrust of urbanization policy was on development of small and medium towns and achieving balanced distribution of urban population. The Seventh Five Year Plan called for slowing down the growth of big metropolises and stressed the need for preparation of regional and sub-regional Urban Development Plans.

Legislations:

Legislation is a source as well as an instrument of Public Policy. The State seeks to achieve many of its policy objectives through enactment of laws. A major difficulty in the articulation of urban land policy is the plethora of existing legislation and regulation which govern the land market Planning Commission 1989.These laws relate primarily to land use regulation which restrict private rights, and direct intervention in the land market to gain social control of land.

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The most important constitutional provision in relation to Urban Land Policy is article 19(1)(f) which confers on individual the right to property. The operation of this provision is, however restricted by article 19(5) which empowers the state to place reasonable restrictions on property rights in public interest. It is this provision that enables the state to directly acquire private lands or restricts private rights over land. The various laws governing the land market passed by the Central and State government may be classified as follows:

1. Town Planning Legislation including Urban Development Authority Acts: To control the use of land with a view to regulate its planned growth and development.

2. Land Acquisition Act: To acquire land for public purposes.

3. Municipal enactment including building byelaws: To control building activities.

4. Slum Improvement and Clearance Act: To improve the living conditions of slum dwellers.

5. Urban Land Ceiling and Development Act: To improve ceiling limits on land holdings and achieve equitable distribution of urban land.

Objectives of Urban Land Policy:

The Committee on Urban Land Policy (1965) outlined four basic objectives:

1. Optimum social use of urban land.2. Supply of adequate quantity of land at reasonable prices.3. Encouraging community effort for land development and housing.4. Preventing concentration of land ownership.

Reference1. www.wikipedia.org. 2. URBAN LAND POLICY – Author : A. RAVINDRA, page no.- 35-39

2.4 THEORIES OF LAND VALUES:

The concept of land value may be classified as “the monetary evaluation of land use. It is dependent on both the present and the future use which , in turn , is influenced by the physical and economic characteristics of the site and the social control of land use” ( Clarke , 1965 ). According to Lichfield (1956), values are created and changed by the same forces that create and change uses. Clarke has clarified that the value may also change before any change of use actually takes place. For example, where the site possesses value for a future

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use its potential is reflected in the present price or rent. Value may, therefore, be classified as “current value”, i.e., value for the present use or “potential value”, i.e. value for a different and usually more valuable use at some future date.

Land value can be considered in two contexts. One is the market value, which is the price of a land parcel negotiated at the time of sale of the parcel, and the other is the assessed value, which is the estimated worth of the parcel made by a competent private or public assessor (Northam, 1975). The market value of a piece of land may be different from the assessed value.

The first important work on urban land use values was written by R.M. Hurd (1901), often regarded as the father of modern land economics. He adopted the principles put forward by Ricardo for agriculture land to the urban land.

Alfred Marshall (1916) introduced the concept of ‘location value’ which is expressed in the financial advantage derived from the location of the site. According to him, the site value was equal to the agricultural rental and the location value. In other words, the urban land value is determined by adding the location factor to the agricultural land value. One other factor influencing the value of urban land is the amount of floor space in the building.

R.M. Haig (1926) introduced the notion of the friction of space i.e. hindrance to perfect or immediate accessibility, for without such ‘friction’ there would be no transport costs and all locations would be perfect. He tried to establish a three-way relation of rent, transport costs and location which is independent.

Ratcliff (1949), carrying forward the argument of Haig opined that the utilization of land was ultimately determined by the relative efficiencies of the uses in various locations. Efficiency in use is measured by the ability to pay rent and the use that can extract the greatest return from a given site will be the successful bidder. [1]

The Valuation Of Real Estate. Theory Of Land Values

Agricultural land has value because of its fertility, that is, its ability to yield produce for its owners. However, the most fertile land is not always the most valuable. Proximity to communities and to means of transportation makes some agricultural land more valuable than other land, more fertile but also more remote. In cities, towns and villages, land is of use chiefly for placing buildings upon it. The use to which such buildings may be put determines the value of the land in relation to the other land in the community and their use depends to a great extent upon their location.

Current Financial Crisis, and How Economic Theory should be taught....

Yes, the current financial crisis highlights how scholars need to recast the economic theory that they teach. The key concept that is missing today is LAND VALUE. Classical economics divided factors of production into three: land, labor, and capital. Beginning around 1920, scholars conflated land with capital. This left them totally unprepared to cope with or

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explain the crash of 1929. At this time "macro-economics", as we now call it, rose to the fore. For a time it eclipsed "micro-economics", which had degenerated into the explanation of the allocation of resources among competing ends. Gradually, micro-economics came back to be integrated with macro, but in the process land value almost disappeared.

Scholars have "disappeared" land values in two main ways. One is to conflate them with values of man-made capital, overlooking or trivializing all differences. One obvious fault in this is that interest rates and land rents vary inversely.

The other way is simply to trivialize land values as a quantity. This is based on no respectable quantitative research whatever, and a systematic ignoring of research showing land values to be a major element of wealth.

When it comes to the dynamics that lead to crises like that of 2008, land values move in cycles of high amplitude, much higher than the values of reproducible capital. When values are high and rising they lead to great excesses of urban sprawl. These excesses fructify vast new areas around growing cities, resulting in an overhang of "ripening" land that far exceeds possible demands, resulting in a crash.

As to teaching money and banking, few or no texts recognize that expanding banks, by taking land under and around speculative developments, in effect "monetize" those speculative land values. When the wave of land values ebbs, and debtors default, banks have to contract, as they are now. Yet economic theorists, and those statesmen whom they have trained, attend mainly to the froth on the waves, ignoring the basic wave of land value that drives the cycle.

Another and related fault in theory is to ignore the turnover of capital. In a boom of land values, capital goes into investments that pay out slowly. The basis of allocating loans is not marginal productivity, but collateral security, as perceived by bankers who do not distinguish land from capital. The loan turnover of banks slows down, because a bank, no matter how positive its balance sheet, cannot lend much faster than its debtors repay their loans. The result is to slow down new loans and seize up the system, as we see today.

Tax theory is now based on the fallacy that a progressive tax must also be one that suppresses and distorts incentives. This reflects economists ignoring the high concentration of the ownership of land, and the positive incentive effects of taxing land in lieu of work, enterprise, building, and income-creating investing. [2]

Land value taxation (LVT)

Is an ad valorem tax on the value of land. This ignores buildings, improvements, and personal property. Because of this, LVT is different from other property taxes on real estate

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— the combination of land, buildings, and improvements to land. Every jurisdiction that has a real estate property tax has an element of land value tax, because land value contributes to overall property value.

Most taxes distort economic decisions. If labor, buildings, machinery or plants are taxed, people are dissuaded from constructive and beneficial activities. The efficiency are penalized due to the excess burden of taxation. This does not apply to LVT, which is payable regardless of how well the land is actually used, because the supply of land is inelastic. Market land rents depend on what tenants are prepared to pay rather than on the expenses of landlords, and so LVT cannot be passed on to tenants. The only direct effect of LVT on prices is to lower the market price of land.

In the other way, LVT is often said to be justified for economic reasons because if it is implemented properly, it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.

Nobel Prize winner William Vickrey believed that "removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction." A correlation between the use of LVT at the expense of traditional property taxes and greater market efficiency is predicted by economic theory, and has been observed in practice. [3]

Reference

1. Alan W. Evans, the Theory of Land Values. Publisher – University of reading department of Economics, 1988.

2. http://chestofbooks.com/real-estate/Real-Estate-Principles-Practices/chapter-XIV-the-valuation-of-real-estate-theory-of-land-va.html, paragraph 1 and 2.

3. Land value taxation in theory and practice. By Charles theory Chomley, Robert Leonard Outhwaite. Page no. 76

2.5 ACTS:

Land Use and Building Act (132/1999, amendment 222/2003 included):

General objective of the Act:The objective of this Act is to ensure that the use of land and water areas and building activities on them create preconditions for a favourable living environment and promote ecologically, economically, socially and culturally sustainable development.

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The Act also aims to ensure that everyone has the right to participate in the preparation process, and that planning is high quality and interactive, that expertise is comprehensive and that there is open provision of information on matters being processed.

Objectives in land use planning

The objective in land use planning is to promote the following through interactive planning and sufficient assessment of impact:

i. a safe, healthy, pleasant, socially functional living and working environment which provides for the needs of various population groups, such as children, the elderly and the handicapped;

ii. economical community structure and land use; iii. protection of the beauty of the built environment and of cultural values; iv. biological diversity and other natural values; v. environmental protection and prevention of environmental hazards;

vi. provident use of natural resources; vii. functionality of communities and good building;

viii. economical community building; ix. favourable business conditions; x. availability of services;

xi. An appropriate traffic system and, especially, public transport and non-motorized traffic.

Planning review

At least once each year, local authorities must draw up a review of all planning matters that are or will in the near future become pending in the local authority or the regional council and which are not of minor importance (planning review). The review briefly explains planning matters and the stage of processing reached as well as any such decisions and other actions which have an immediate influence on the basic premises, objectives, content and implementation of plans. Planning reviews must be publicized in a manner appropriate for their purpose.

Objectives of building guidance

The objective of building guidance is to promote: a) the creation of a good living environment that is socially functional and aesthetically

harmonious, safe and pleasant and serves the needs of its users; b) building based on approaches which have sustainable and economical life-cycle

properties and are socially and economically viable, and create and maintain cultural values;

c) The planned and continuous care and maintenance of the built environment and building stock.

Areas requiring planningAn area requiring planning is an area the use of which involves needs that require special measures, such as road, water main or sewer construction or arranging other areas. Provisions concerning areas requiring planning also apply to construction where the

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environmental impact is so substantial as to require more comprehensive consideration than the normal permit procedure. In a legally binding local master plan or building ordinance, local authorities may also designate areas where, due to their location, community development requiring planning may be expected, or where land use planning is warranted by particular environmental values or hazards, as areas requiring planning. An order in a local master plan or a building ordinance designating an area as requiring planning may be in force for a maximum of ten years at a time.

National land use objectives

National land use objectives are decided upon by the Council of State. National land use objectives may concern matters which have:

a) international or more extensive than regional bearing on local structure, land use, or the transport or power network;

b) a significant impact on national cultural or natural heritage; or c) Nationally significant impact on ecological sustainability, the economy of the local structure,

or avoidance of environmental hazards.

When national land use objectives are issued, the general objectives of this Act and the objectives for land use planning laid down in section 5 must be taken into account.

The Finnish Building Code

The competent ministry will issue technical and corresponding general regulations and instructions supplementing this Act, which are published in the Finnish Building Code. In addition, the ministry is in charge of harmonizing regulations concerning buildings issued by government authorities. Furthermore, regulations that concern building but are issued under other legislation may also be included in the Building Code. The regulations in the Building Code are binding. Instructions are not binding, however, and approaches other than those suggested in them may be applied if they meet the requirements set for building. The regulations in the Building Code concern the construction of new buildings. Unless otherwise specifically prescribed by the regulations, they are applicable to renovation and alteration work only in so far as the type and extent of the measure and a possible change in use of the building or part thereof require.

Building restriction

A building restriction is in force in areas designated by the regional plan as recreation or protection areas or areas for transportation or technical service networks. The area covered by building restrictions may be increased or decreased by a special order in the plan.

Land Acquisition (Companies) Rules, 1963:

The difficulties that come in the process of Land Acquisition in India are immense, given the population density and the type of land use in the country. This is evident from the fact that

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the fundamental issue in a number of top stories in the past few years has been the Process of Land Acquisition; be it Narmada Bachao Andolan or the recent Nandigram issue. With number of State Governments demarcating lands as Special Economic Zones the problem just is going to get worse. The evolution of Law of Land Acquisition as it exists today in various forms in different statutes in India has undergone an evolution in the last decade. Originally the wishes of owners of property were totally irrelevant, but at present, the law tries to provide various provisions for objections and alternative remedies in case of inadequacy of compensation.

Exercise of the powers conferred by section 55 of the Land Acquisition Act 1894 (1 of 1894), the Central Government hereby makes the following rules for the guidance of the State Government and the Officer of the Central Government and of the State Governments, namely :—

1. Short title and application

a. These rules may be called the Land Acquisition (Companies) Rules, 1963.

b. These rules shall apply to acquisition of land for all companies under Part VII of the Act.

2. Definitions

In these rules:

a. “Act” means the Land Acquisition Act,1894 (1 of 1894); and

b. “Committee” means the Land Acquisition Committee constituted under rule 3

3. Land Acquisition Committee.

a. For the purpose of advising the appropriate Government in relation to acquisition of land under Part VII of the Act the appropriate Government shall, by notification in the Official Gazette, constitute a Committee to be called the Land Acquisition Committee.

b. The Committee shall consist of:

i. The Secretaries to the Government of the Departments of Revenue, Agriculture and Industries or such other officers of each of the said Departments as the appropriate Government may appoint;

ii. Such other members as the appropriate Government may appoint for such term as that Government may, by order, specify; and

iii. The Secretary to the Department or any officer nominated by him dealing with the purposes for which the company proposes to acquire the land.

c. The appropriate Government shall appoint one of the members of the Committee to be its Chairman.

d. The Committee shall regulate its own procedure.

e. It shall be duty of the Committee to advise the appropriate Government on all matters relating to or arising out of acquisition of land under Part VII of the Act, on which it is consulted and to tender its advice within one month from the date on which it is consulted: provided that the appropriate Government may on a

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request being made in this behalf of the Committee and for sufficient reasons extend the said period to a further period not exceeding two months.

4. Appropriate Government to be satisfied with regard to certain matters before initiating acquisition proceedings

a. Whenever a company makes an application to the appropriate Government for acquisition of any land, that Government shall direct the Collector to submit a report to it on the following matters, namely :

i. that the company has made its best endeavour to find out lands in the locality suitable for the purpose of the acquisition;

ii. that the company has made all reasonable efforts to get such lands by negotiation with the person interested therein on payment of reasonable price and such efforts have failed;

iii. that the land proposed to be acquired is suitable for the purpose;

iv. that the area of land proposed to be acquired is not excessive;

v. that the company is in a position to utilise the land expeditiously; and

vi. Where the land proposed to be acquired is good agricultural land that no alternative suitable site can be found so as to avoid acquisition of that land.

b. The Collector shall, after giving the company a reasonable opportunity, to make any representation in this behalf, hold an enquiry into the matters referred to in sub-rule (1) and while holding such enquiry he shall :

i. in any case where the land proposed to be acquired is agricultural land, consult the Senior Agricultural Officer of the district whether or not such land is good agricultural land;

ii. determine, having regard to the provisions of sections 23 and 24 of the Act, the approximate amount of compensation likely to be payable in respect of the land, which, in the opinion of the Collector, should be acquired for the company; and

iii. Ascertain whether the company offered a reasonable price (not being less than the compensation so determined), to the persons interested in the land proposed to be acquired.

Explanation— For the purpose of this rule “good agricultural land” means any land which, considering the level of agricultural production and the crop pattern of the area in which it is situated, is of average or above average productivity and includes a garden or grove land.

c.As soon as may be after holding the enquiry under sub-rule (2), the Collector shall submit a report to the appropriate Government and a copy of the same be forwarded by that Government to the Committee.

d. No declaration shall be made by the appropriate Government under section 6 of the Act unless—

i. the appropriate Government has consulted the Committee and has considered the report submitted under this rule and the report, if any, submitted under section 5A of the Act; and

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ii. the agreement under section 41 of the Act has been executed by the company.

5. Conditions under which sanction may be given for transfer of land.

Where a company for which land has been acquired under the Act applies for the previous sanction of the appropriate Government for the transfer of that land or any part thereof by sale, gift, and lease or otherwise, no such sanction shall be given unless:

i. the proposed transfer of land along with dwelling houses, amenities, buildings or work, if any, is to some other company or where the company is a co-operative society, such transfer is to any or all of its members, or

ii. where the land has been acquired for the erection of the dwelling houses for workmen employed by the company, the proposed transfer of the land along with dwelling houses, if any, is to such workmen or their dependent heirs: Provided that before giving any such sanction the appropriate Government shall consult the Committee

6. Repeal.

All rules made by the appropriate Government for the guidance of its officers with respect to acquisition of land for companies under Part VII of the Act and in force immediately before the commencement of these rules shall, to the extent of the repugnancy, cease to have effect.

The Process of Land Acquisition

For the purposes of Land Acquisition Act of proceedings are carried on by an officer appointed by the government known as Land Acquisition Collector. The proceeding under the Land Acquisition Collector is of an administrative nature and not of a judicial or quasi judicial character. When a government intends to occupy a land in any locality is has to issue a notification under Section 4 in the official gazette, newspaper and give a public notice which entitles anyone on behalf of the government to enter the land for the purposes of digging, taking level, set out boundaries etc. The notification puts forward the intention of the government to acquire and entitles government officials to investigate and ascertain weather the land is suitable for the purpose. The section also makes it mandatory for the officer or person authorised by the government to give a notice of seven days signifying his intention to enter any or building or enclosed court in any locality. This is a mandatory provision of the process of land acquisition.

An officer or authorised person of the government has to tender payment for all necessary damage, and dispute all disputes to insufficiency of amount lie to the collector. Under Section 5(a) any person interested in land which is notified under section 4 (who is entitled to claim an interest in compensation) can raise an objection, in writing and in person. The collector after making inquiry to such objections has to forward the report to the government whose decision in this respect would be final. After considering such report made by the collector under section 5(a) the government may issue a declaration within one year of the notification under section 4 to acquire land for public purposes or company, this declaration is a mandatory requirement of the acquisition.

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After the declaration under Section 6, collector has to take order from the appropriate government weather state or central for the acquisition of land under section 7. The next step in the process of acquisition is that collector has to cause land to be marked out, measured and appropriate plan to be made accurately, unless it is already done. Requirement of this section deals only with approximation and does not require exact measurement. An important process that takes place under this section is demarcation which consists of marking out boundaries of land to be acquired, either by cutting trenches or fixing marks as posts. Object is to facilitate measurement and preparation of acquisition plan, but also let the private persons know what land is being taken. It is to be done by requiring body that is the government department or company whichever be the case. Obstruction under Section 8 and Section 4 are offence punishable with an imprisonment not exceeding one year and with fine not exceeding fifty rupees.

Section 9 requires the collector to cause a public notice at convenient places expressing government’s intention to take possession of the land and requiring all persons interested in the land to appear before him personally and make claims for compensation before him. In affect this section requires collector to issue two notices one to the locality of acquisition and other to occupants or people interested in lands to be acquired, and it is a mandatory requirement.

Next step in the process of acquisition requires a person to deliver names or information regarding any other person possessing interest in the land to be acquired and the profits out of the land for the last 3 years. It also binds the person by requiring him to deliver such information to the collector my making him liable under sections 175 and 176 of the Indian Penal Code. The object of this step is to enable the collector to ascertain the compensation by giving him a vague idea.

The Final set of collector’s proceedings involve an enquiry by the collector into the objections made by the interested persons regarding the proceedings under section 8 and 9 and making an award to persons claiming compensation as to the value of land on the date of notification under section 4. The enquiry involves hearing parties who appear with respect to the notices, investigate their claims, consider the objections and take all the information necessary for ascertain the value of the land, and such an enquiry can be adjourned from time to time as the collector thinks fit and award is to be made at the end of the enquiry. The award made must be under the following three heads:

Correct area of land Amount of compensation he thinks should be given

Apportionment of compensation

Section 11 makes it obligatory on the part of the collector to safeguard the interests of all persons interested, even though they might not have appeared before him. In awarding compensation the Land Acquisition Collector should look into estimate value of land, give due considerations to the other specific factors. Value of the property in the neighbourhood can be used as criteria. The award should be made within 2 years.

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References

1) The Constitution of India2) List of Statutesa) THE LAND ACQUISITION ACT, 18943) List of Cases Referred1. Somnawati v. State of Punjab AIR 1963 SC 151.2. Ratni Devi v. Chief Commissioner Delhi AIR 1975 SC 1699. 3. Bali Malimambu v. State of Gujrat AIR 1978 SC 515.4. Babu Barkya Thakur v. State of Bombay [1961] 1 SCR 128.5. Balwant Ramachandran v. Secretary of State ILR 29 Bom 480. 6. Hamabai Framjee v. Secretary of State AIR 1914 PC 20.7. Amulya Chandra Banerjee v. Corpn of Calcutta AIR 1922 PC 333.8. Clark v. Nash (1905) Law Co. 1085.9. Mathurbhai Hirajibhai Patel v. State of Gujrat AIR 1973 Guj 261.10. Valjibhai Muljibhai Soneji v. State of Bombay AIR 1963 SC 1890.11. V Doraiswami Pillai and Ors v. Government of Tamil Nadu AIR 1990 Mad 321. 12. Gajamand v. State of Madhya Pradesh AIR 2000 MP 2.13. Valliammal v. State of Madras AIR 1967 Mad 332.14. Pran Jivan Jaitha v. State of West Bengal AIR 1974 Cal 210.15. Jayaram Reddy and Ors. v. The Land Acquisition Officer (1997) 2 MLJ 85.16. Vellagapudi Kanaka Durga v. District Collector AIR 1971 AP. 17. Dossabhai v. Special Officer, Salsette ILR 36 Bom 599.18. Revenue Division Officer, Trichinopoly v. Varadachai AIR 1944 Mad 271.19. Ambyan Menon and Ors. V. State of Kerala AIR 1966 Ker 187.20. Khub Chand and Ors. v. State of Rajasthan AIR 1907 SC 1074.21. Narendrajit Singh and Anor. V. State of UP (1970) 1 SCC 125. 22. Raghunath Das v. District Collector of Deccan 11 CLJ 612.23. Luchmeswar Singh v. Darbhanga Municipality ILR 18 Cal 99. 24. Ponnaira v. Secretary of State AIR 1926 Mad 1099.25. Luitang v. Deputy Commissioner AIR 1961 Mani 31.26. Ram Charan v. State of U.P. AIR 1952 ALL 752.27. Hamabai Famjee v. Secretary of State ILR 39 Bom 279.28. Province of Bombay v. Khushal Das AIR 1950 SC 222.

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