Saturday, March 27, 2010


Till the recent real estate collapse, prices of agricultural land were ruling high, affordable only to big players with enormous resources. This is the reason why land acquisition by the state governments in various states for industrial projects had to face virulent agitation and resistance from the farmers. The shunting out of Tata Motors from Singur in West Bengal, is a typical example of what can go wrong in land acquisition proceedings and the suggestion, that prime agricultural land with high productivity should not be allowed to be diverted for non-agricultural projects, is worthy of consideration. On the other hand those farmers who get high prices, probably more than they deserve from private real estate developers, tend to fritter away the money they get, on conspicuous consumption, which is a matter of great concern.

"By Western standards, few of these farmers are truly rich. But in India, where the annual per capita income is about $1,000 and where roughly 800 million people live on less than $2 a day, some farmers have gotten windfalls of several million rupees by selling land. Over the years, farmers and others have sold more than 50,000 acres of farmland as Noida has evolved into a suburb of 300,000 people with shopping malls and office parks. That has created what might seem to be a pleasant predicament: What to do with the cash? Some farmers have bought more land, banked money, invested in their children's educations or made improvements to their homes. In Punjab, a few farmers told the Indian news media they wanted to use their land riches to move to Canada. But still others are broke after indulging in spending sprees for cars, holiday trips and other luxuries".

Land is an asset which has stood the test of time and rarely erodes in its value. Therefore it is imperative that sale proceeds from land is invested on permanent and non-depreciating assets by those who sell their land to developmental projects. It is worthwhile exploring whether GOI can think of bringing some legislation that will force the seller or the buyer to invest part of the sale proceeds in government bonds in the name of the seller with attractive annual interest. Already there is a provision in many states to prevent sale of agricultural land to non-agriculturists and this can be further stretched by including the clause that such sale is permissible if at least 25-50% of the proceeds is invested in government securities. Such a strategy will ensure that the sellers do not blow away the cash received from the land, pushing them to penury.


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