Land set for an artificial price rise

Land set for an artificial price rise
The sudden decision of the State government prohibiting the use of agricultural land for non-agricultural purposes will severely impact the growth of real estate market in the Bangalore, argues S SELVAKUMAR.
Deccan Herald

PROPERTY market in Bangalore was buoyant in the recent times. Land rates which were upwardly mobile were settling down, as mostly the end users were purchasing the property. As the real estate sector which is considered as mother of all industries was pulsating, many other sectors, which depend on this sector, were also prospering.

But the recent orders by the State government has stalled the growth of the property market as this sudden unexpected decision of prohibiting the use of agricultural land for non-agricultural purpose will have cascading effect on the real estate sector in the State, especially in the city of Bangalore.

Registration stopped

Registering authorities have stopped the registering the sale, gift, exchange, mortgage, agreement to sell, lease or assignment or otherwise of the following properties from May 6, 2005, consequent to government notification on April 23, 2005. The following types of land will have to bear the impact.

n Site with or without building in agricultural land which is not converted for non-agricultural purpose under section 95 of Karnataka Land Revenue Act 1964.

n Site described as Gramathana site (form no. 9, 10) or other site declared under form no. 19 under rules framed Karnataka Municipality Act 1964, but not actually converted as such site.

n Site on a revenue land described as Gramathana site or other site or a site with a building on which no layout plan is approved and a release certificate is issued from local planning authority like BDA, BMRDA, BIAAPA, BMIC, etc.

n Site on a revenue land described as Gramathana site or other site, flats, industrial site, commercial site, without requisite permission under section 79 A and B read with section 109 of Karnataka Land Reforms Act.

Thus the transfer of only the following properties are permitted:

a) Properties falling under Bangalore Mahanagara Palike.

b) Properties allotted by BDA.

c) Properties in BDA approved layouts.

d) Properties in layouts approved by other local planning authorities like BMRDA, BIAAPA, BMIC etc.

This prohibition on registration of transfer of certain properties has dealt a death blow to the property market in and around Bangalore and kept it in suspended animation.

To further compound the issue, the government by its order dated May 2, 2005 has ordered not to grant permission for conversation of agricultural land in and around Bangalore until further orders. Conversion of land is prior requisite for any development, and formation of layouts. By suspending the conversion of land, the government is promoting artificial scarcity of land, it will also lead to construction of unauthorised structures.

Impact

Many people have entered into sale agreements for purchase of properties in areas of village panchayats, City Municipalities by paying substantial amounts of advance. It would be difficult to get the refund of the advance paid, and the limitation period also operates against the purchaser. The properties cannot be registered. Thus hard earned money gets blocked, or may be lost for ever.

Many property developers have also invested crore of rupees in properties in forming layouts, constructing flats, villas, houses, but such layouts are not approved by planning authorities. BDA and other planning authorities are very lethargic and do not have proper infrastructure to approve the layouts in this fast developing sector. Prohibiting the registration of sites, flats in such layouts causes heavy loss to investors. This may lead to a rise in legal disputes between the vendors and purchasers.

The expected revenue from 12 registering offices in Bangalore is about Rs 1,000 crore. This is likely to go down by 50 per cent as number of registrations come down, because of the said prohibition on registration.

Demand for sites

The worst impact will be on price of the land, which was settling down to a reasonable level in the recent times. As the availability of the land is considerably reduced, the property prices will shoot up to unaffordable level, as even before this prohibition the supply was short of demand. About 20,000 sites are blocked in Arkavathy Layout and their availability for public will be after protracted legal battle depending upon the court verdict. The BDA has introduced the system of 10 years lease-cum-sale method, which will make the availability of the land very scarce.

Importantly, the method of operation will change. The parties will transfer the properties by executing power of attorneys, clandestine transactions will dominate the market, and no legally valid title will pass. The middle man will exploit the common man.

No doubt the steps taken by the government is to ensure proper and orderly growth of Bangalore and other cities and to avoid exploitation of innocent agriculturists from land mafia. But this should have been done much earlier. It would have been better if the government had allowed registration of dealings agreed under agreements up to a particular date. The government should have given an early warning before issuing such a far reaching notification. The value of the properties will increase in some pockets, and it will reduce in certain pockets where the registration is prohibited. People who are unaware of the government notification will invest money on such properties and finally have to lose the money.