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The false ceiling

Print edition : Aug 01, 1998 T+T-

Urban Affairs Minister Ram Jethmalani has proposed the repeal of the Urban Land (Ceiling and Regulation) Act, 1976, in the belief that this would improve drastically the housing situation in the country. But, given the history of the legislation, his attempt is unlikely to succeed.

IN coalition politics the most innocuous of legislative initiatives can get entangled in controversy. This should be particularly so with a piece of legislation like the Urban Land (Ceiling and Regulation) Act (ULCRA): in the past decade, attempts made by various governments, even governments with comfortable majorities in Parliament, have had to abandon their attempts to amend the law in the face of stiff resistance from various quarters. Yet, Union Urban Affairs Minister Ram Jethmalani, who introduced a bill in the last session of Parliament to repeal the Act, was sanguine about its smooth passage.

Contrary to his expectations, 64 MPs, led by the activist-actress Shabhana Azmi, presented a memorandum opposing the bill to Prime Minister A.B. Vajpayee. The bill has since been referred to the Parliamentary Standing Committee on Urban Affairs. The chances of it getting passed in the current session have receded as even some Ministers of the previous United Front Government, which first proposed the repeal of the ULCRA, have done an about-turn and joined in the chorus of opposition. They include former Defence Minister Mulayam Singh Yadav, former Railway Minister Ram Vilas Paswan, Tamil Maanila Congress leader Jayanti Natarajan and former Welfare Minister B.S. Ramoowalia. With 22 out of the 45 members of the Parliamentary Standing Committee belonging to non-BJP parties, it is unlikely that the bill will be approved in its present form.

The proposal to repeal the ULCRA was based on the plea that the law never achieved the objective for which it was enacted. In fact, the bill goes one step further to propose that all vacant land acquired so far under the ULCRA, but not yet built upon, will be restored to the original owners if they returned the amount of compensation paid by the Government.

Few people can disagree with Jethmalani's assessment that the ULCRA has failed to check the concentration of a valuable and finite resource like land in a few hands, restricting the housing supply for the poor and the middle class. The ULCRA was enacted by the Indira Gandhi Government in 1976 as a sequel to the imposition of a ceiling on agricultural land "to prevent speculation and profiteering and to ensure equitable distribution of land in urban agglomerations to subserve the common good." It imposed a ceiling on the quantum of vacant land that any individual can possess in an urban agglomeration. In 'A' class cities such as Delhi and Mumbai, this was no more than 500 square metres. The excess land identified was to have been acquired by the government after compensating the owners and used to provide housing to various sections of the people.

However, things did not work out that way. Sections 20 and 21 of the ULCRA provided a host of escape routes for the landed gentry who were loath to part with their land. These sections empowered the State Governments to grant discretionary exemptions for a variety of reasons, prompting almost all landowners with excess land to claim such exemptions. The ULCRA thus became a vehicle for corruption. Those who could not or would not bribe their way to get exemption went to court, and the acquisition process became an agonising legal battle. Twenty-two years after the enactment of the ULCRA, less than eight per cent of the land that was identified as surplus has actually been acquired. This also explains why successive governments have toyed with the idea of amending or repealing the ULCRA, but never did so.

Frequent reviews of the legislation led to various recommendations. However, none of them sought to scrap the Act altogether. The Report of the National Commission on Urbanisation, by far the most important review that was released in 1990, called for the strengthening of state control over land and the elimination of all discretionary exemptions under Sections 20 and 21. It stated: "What is exempt is mandatory, and what is not exempt cannot be exempted by any authority." It recommended that all property developed in breach of norms, should be liable for confiscation by the state without payment of compensation. It also recommended that during the period when land in excess of the ceiling is kept vacant, a cess or tax, ranging from Rs. 3 to Rs. 50 per square metre, depending on the size of the town, location and so on, be paid to a Shelter Fund for each urban centre. The idea was to make people pay for keeping vacant land vacant. Even a National Housing Seminar held in New Delhi in October 1996 recommended only an amendment to the Act. While recommending "guided development" instead of the takeover of surplus land, the seminar suggested that a vacant land tax be imposed. It also recommended that the government mop up a part of the unearned increases in land values resulting from the implementation of the ULCRA.

THERE is unanimous agreement about the fact that the ULCRA suffered because of various loopholes and poor implementation. However, the repeal of a well-meaning legislation merely on the ground that it was not implemented seriously defies logic.

Yet, this is precisely what the BJP-led coalition Government has done. It has set in motion the process of repealing the Act and there is no mention of the Shelter Fund. Jethmalani told Frontline that the proposal to scrap the Act was first mooted by the United Front Government. According to him, now that the Punjab and Haryana legislatures have passed the enabling resolution seeking its repeal, he had no option but to oblige them. The ULCRA falls within the ambit of Article 252 (2) of the Constitution which stipulates that the Centre may enact a law on a State subject if any two States pass a resolution recommending such a measure. Subsequently, the State Governments that are keen on implementing the Central law will have to adopt it through the corresponding State legislation.

But Jethmalani glosses over the fact that while the governments of Punjab and Haryana (as also other States) will have a choice in the matter of the repeal as their legislatures have to adopt the measure, there will be no such leeway available to the Union Territories.

According to the Urban Affairs Ministry, once the ULCRA is repealed by Parliament, ceilings on vacant land holdings will cease to exist in Delhi, Chandigarh and Pondicherry. There are indications that some States, including Maharashtra, will adopt the repeal. (Incidentally, Tamil Nadu did not adopt the Central land ceiling law. It has its own ceiling norms, which will remain unaffected by the repeal by the Centre.)

It is no wonder then that champagne bottles are being uncorked in Delhi and Mumbai. If the Maharashtra legislature opts for the repeal, industrialist Adi Godrej alone will get back acres of prime real estate in Mumbai. In Delhi, the beneficiaries will largely be the feudal landowners, including some princely families.

WHAT will be the impact of the repeal on the housing scene? Will land prices going to drop significantly when surplus land locked in litigation reverts to their owners? If they do, will it translate into cheaper housing for the poor and the middle class?

"Extremely unlikely," says Professor Amitav Kundu of the Jawaharlal Nehru University, an expert on urbanisation. "You must remember that the land locked in dispute over acquisition by the government under the ULCRA will revert back to their owners now," he said, "but the value of the land that is reverting back to the owners has appreciated manifold in the 22 years since the ULCRA was passed." "This value appreciation came about almost entirely because of government investments in infrastructure, not because of any private initiative. All of this will now accrue to the landowners and the real estate developers who will buy the land from them without the government getting a penny out of it." Kundu also believes that while real estate prices may drop marginally in the next two years, they will increase in the long run. "Besides," he said, "most of the land that will be released will be in central areas of cities that are in any case out of the reach of the middle class, leave alone the poor, so much so that any fall in prices is unlikely to benefit them." According to him, builders will buy up prime real estate at prices that will make it unviable for them to build anything other than commercial complexes and deluxe apartments for the high income groups. This would, in turn, lead to downtown areas becoming increasingly elitist.

While presenting the Budget, Finance Minister Yashwant Sinha announced that the Government would construct 20 lakh houses for the urban poor. But can the poor afford houses built on land purchased at market prices?

Jethmalani believes that by giving tax breaks for housing for the poor, he can induce builders to build for the poor. However, Kamal Nayan Kabra, Professor at the Indian Institute of Public Administration asks: "The margins from elite housing will be much larger than the tax breaks. So where will you find takers for the tax breaks?" Kabra believes increased availability of land will not make any difference to the poor and the middle class who cannot afford it anyway. "The Land Ceiling Act did not increase the availability of land for housing for the poor because of poor implementation," he said. "The repeal of the law is not going to achieve it either." He also believes that the Act should have been amended and made to work, instead of being scrapped.

JETHMALANI has announced a few drastic policy measures for Delhi as well. At a joint press conference addressed by Jethmalani and Chief Minister Sahib Singh Verma in June, an announcement that all unauthorised colonies in Delhi would be regularised and that the Delhi Development Authority's monopoly over the development of land would end, was made. Private developers will henceforth be allowed to build apartments in the Lutyens Bungalow Zone, where high-rise buildings were not allowed to be put up till now.

The regularisation of unauthorised colonies will put a heavy burden on the capital's already stretched civic amenities. Infrastructure facilities, including electricity, water supply and so on are already being stretched beyond capacity. But even more striking is the jubilation of New Delhi's real estate developers who are confident that they can acquire the newly-regularised colonies from the occupants for throwaway prices. "It invariably happens," said Kundu, "every time you give land titles to the poor occupants of unauthorised colonies, builders coax them into parting with them at ridiculous prices." "Even as the poor move out to establish new unauthorised colonies, builders convert the land into elite colonies."

The DDA is blamed for the ills plaguing housing for the poor in the capital. However, the failure to acquire surplus land identified under the ULCRA is not the responsibility of the DDA, but of the State Government. The DDA, which has been providing affordable housing to the capital's middle class, will now have to buy land from the market at market rates, instead of getting subsidised land from the State Government. P.K.Ghosh, Vice-Chairman of the DDA, said: "Our costs will go up, but we will continue to cross-subsidise housing for the poor from our margins in commercial complexes."

Jethmalani also announced the BJP Government's decision to allow foreign investment in the housing sector. This, despite the fact that several elite apartment complexes and colonies built by non-resident Indians have remained unoccupied for years in cities such as Pune. Surely, the Urban Affairs Minister does not expect multinationals to invest in creating housing facilities for the poor.

In a country where the shortage of urban housing alone is estimated to be 9.5 million units, the BJP-led Government appears to be rushing into hitherto unchartered waters. Jethmalani's justification is: "The previous experiment failed. Let us try this one." But at what and whose cost?