Maharashtra moves to free vacant land exempted under ceiling Act

Maharashtra, India’s most urbanised state, may soon release vast tracts of land for construction activity, though not necessarily to overcome its chronic shortage of affordable housing.

In a move that will benefit a clutch of top business families and real estate developers, the BJP government in Maharashtra is set to lift curbs imposed on development of vacant land exempted under the erstwhile Urban Land (Ceiling and Regulation) Act, 1976.

Senior government officials confirmed that the government was working out modalities for an option that would permit trading of such land and relaxations in conditions for their development.

The Act in question, subsequently repealed in Maharashtra in 2007, had imposed a ceiling on how much vacant land an individual entity may hold across 64 urban agglomerates in India to prevent “concentration of urban land in a few hands”.

The law had also contained provisions allowing states to exempt surplus vacant land from this ceiling by imposing stringent conditions on their development.
In Maharashtra, the obligation included surrendering 5 per cent of tenements (40-80 sq m in size) built on such land free of cost to the government for housing economically weaker sections.

Further, while granting exemptions, the state had ordered that sale of the remaining 95 per cent of flats would take place at government-determined prices and after placing advertisements in newspapers. It had also put a condition that no change of use was permitted for such exempted land. For industrial and agricultural plots exempted from the ceiling, a rider prohibiting any change of use or trading of such land without government permission was introduced.

Government officials, however, admitted that these conditions were sparsely implemented even as the provisions were used to exempt most of such vacant land from the ceiling. The new policy under consideration, if implemented, will allow beneficiaries of such exemptions to completely “wriggle out of the obligations of surrendering flats or land to the government for affordable housing”, sources admitted.

About 1,405 housing schemes and 1,633 bungalow plot schemes on exempted land are yet to comply with the conditions, official statistics reveal.
Ironically, the Bombay High Court had last September dismissed a petition filed by the Maharashtra Chamber of Housing Industry (MCHI) that had argued against the validity of conditions imposed for such exemptions following the repealing of the Act. The then Congress-NCP government had strongly opposed MCHI’s contention. Ruling in favour of the government, the court had observed that “those who benefitted from such exemptions cannot wiggle out of the obligations of surrendering flats to the government”.

But even as MCHI’s appeal against the HC verdict is pending in the Supreme Court, the state government has begun work on the exit option. Sources confirmed that the MCHI, which had been holding deliberations with Maharashtra Chief Minister Devendra Fadnavis on “Ease of Doing Business” for the housing industry, had been pushing for such an exit option.

While modalities are yet to be finalised, senior government officials said the proposal was to allow the land owners to purchase the government’s share of such exempted land at 100 per cent of the ready reckoner rates. The plan is also to collect an additional 5-20 per cent premium at RR rates for waiver of conditions imposed for development of the remaining land. In same light, the government might get rid of the need for prior permissions for trading and change of use for industrial and agricultural land on payment of 20-25 per cent premium at RR values.

Top business families, industrial houses, and land owners holding vacant land in the space-starved Mumbai Metropolitan Region (MMR) could emerge as the biggest beneficiaries of the move. The region accounts for 5,582 acres of such exempted vacant land.

The sources said the government was also planning to regularise violations in development of such land by imposing fines.

The government, which cited lack of manpower and resources for implementation of the conditions, has argued that the exit option will eventually boost affordable housing stock. “The plan is to ring-fence monies earned through such premiums for affordable housing projects,” said a senior government official.

According to the sources, the government is also weighing the political implications of such a move. BJP’s ally Shiv Sena had earlier opposed the repealing of the Act arguing that it was “pro-rich” and “anti-affordable housing”. The government might even wait for the Supreme Court verdict before unveiling the exit option, said the sources.

Pravin Darade, Secretary to the CM, said, “We are formulating a transparent policy in this regard.” He refused to divulge further details.

Welcoming the initiative, MCHI president Dharmesh Jain said, “In order to fulfil the Maharashtra government’s vision of constructing 19 lakh affordable homes by 2022, it was crucial to release land for development.”

Jain refuted claims that the move would go against affordable housing, echoing the government’s stance that “premiums earned through it will eventually boost affordable housing stock”. Jain said developers were conscious of the rising demand for affordable houses.

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