Developers of large townships and realty projects who need to acquire 100 acres or more of land may find the going quite tough if the draft Land Acquisition and Rehabilitation and Resettlement Bill comes into effect.

Consultants and developers say the bone of contention is the clause: “Upon every transfer of land within 10 years of the date of acquisition, 20 per cent of the appreciated value shall be shared with the original owner whose land has been acquired.”

“If a private entrepreneur profits from appreciation in land (value) due to his enterprise and actions, I fail to see why it should be shared with the farmer? Such proposals will impact development of alternative cities and airports where government assistance is needed to acquire thousands of acres of land,” said Akshay Kumar, CEO of Park Lane Property Advisors.

Since the bill contains provisions for landowners to get between twice and six times the prevailing market value of the property, industry feels the move is like an additional 20 per cent tax on income from capital appreciation. “I don’t see this as a practical stipulation as every developer will have to open his books of accounts to a huge cross section of people,” said Nikhil Chaturvedi, managing director of ProZone Enterprises, a leading retail real estate developer.

Developers are taking strong exception to the provision that even after a purchase deal for land is closed, future appreciation accrues to the original landowner. “After acquiring the land, developers start investing in infrastructure, roads, light and drainage connectivity to the airport. The land value goes up four times due to the development of the area, which is done by the developer who takes all the risk to develop it. If the developer is taking all the risk and pain to develop the area then the reward should ideally go to him,” said Ravi Ahuja, executive director of Cushman Wakefield.

Real estate industry doyens say the original landowner has done nothing to ensure appreciation of the land parcel. “Besides it would be difficult to apportion what portion of the appreciation in the property is due to the land and what is because of the quality of construction and infrastructure,” said the managing director of a pan-India retail mall development company.

Cherag Ramakrishnan, CEO of Equinox Realty, promoted by Essar group, said nowadays even small township projects are over 100 acres in size. “I would much rather compensate the land holder upfront on the basis of a ready reckoner rate and if not I would stay away from large 100 acre plus projects,” said Ramakrishnan.

Developers point out that even if a project is deemed attractive enough to go ahead despite the appreciation-sharing clause there are several problems in its implementation.

They fear that handing over a land title in an apartment complex that comes under such stipulations could lead it getting lower value than market ratesbecause of the appreciation-sharing clause.