India Inc on land buying spree

• Reliance Industries is hoping to be allotted more than 50,000 acres for its special economic zones.
• The Andhra Pradesh government has offered SemIndia 1,200 acres for Fab City.
• The Indonesia-based Salim-Ciputra group has plans to occupy 5,000 acres near Kolkata.
• South Korean steel major Posco's 12-million-tonne steel plant will come up on 4,000 acres in Orissa.

India Inc is going fast forward on land acquisition. Consider the scale. The land sought by just about a dozen companies adds up to 125,000-150,000 acres, which is more than the area of Pondicherry, and over a third the area of Delhi.

While the investments are large—Reliance Industries proposes to spend Rs 50,000 crore on its various projects—what is striking is the huge amount of land that is being acquired.

Says an official in the Maharashtra government, "In their anxiety to woo big companies and attract large investments, state governments may be allocating more land than is necessary for projects."

Sitting on fairly strong cash flows, corporates are using some of it to acquire land, especially now that many state governments have made it easier to do so.

Says Gulam Zia, head of advisory services at Knight Frank, "Whether it is for hospitals, hotels, petrol pumps or for sprawling technology campuses, Indian companies are scouting around to own some property."

So sharp has been the price escalation in recent months——as much as 120 per cent in areas like the Thane-Belapur belt in suburban Mumbai — that consultants like Akshay Kumar, CEO of Colliers, feel the time has come to  put in place some anti-speculation norms, like those prevalent in China.

Sanjay Dutt, ED of Cushman & Wakefield, says that even MNCs that have  traditionally believed in leasing land are now exploring options of owning land, in places where the government is subsidising the rates and the  titles are clear.

Microsoft acquired land in Hyderabad some time ago and others are likely to follow. The Andhra Pradesh government appears to be particularly generous while  allotting land. Consider the project being set up by SemIndia Inc, near the new Hyderabad airport, a $3-billion (Rs 13,500 crore) facility for the manufacture of semiconductors. The state government has offered to allot 1,200 acres at Tukkuguga, 20km from the city, for the Fab facility.

According to Ajay Shah, independent scholar, "A stand-alone Fab costing $3 billion occupies 25 acres (eg TI's in Dallas, Texas) and a full mini city with a Fab occupies 75 acres (eg Intel's Fab 18 in Israel). It is hard to explain the political allocation of 1,200 acres for SemIndia."

The Andhra Pradesh government has also agreed to provide a 550-acre plot for Infosys to set up a campus to house around 25,000 people, at a cost of Rs 12 lakh per acre. That works out to over 100 sq yards of land per employee!

That raises obvious questions about excess land being acquired, especially since Infosys packs 15,000 employees into its existing 80-acre facility in Bangalore's Electronics City.

According to the Infosys management, what will be additional in the Hyderabad facility compared with its other centres, are an extensive training facility, a residential complex, convenience stores and parking area.

In Orissa, where Posco is putting up a 12-million-tonne steel plant, there is indirect admission that the land originally allotted for the project was excessive. The company has scaled down its land requirement to 4,000 acres from the earlier request for 5,000 acres (in comparison, Posco's 16-million-tonne plant at Gwangyang in South Korea covers 3,558 acres).

According to Jeong Tae Hyun, overseas project head for Posco, "The plant area has been downsized after we came to know that 2,000 less families will have to be re-located. Now just 400 families will have to be taken care of."

Tribals in the region have been protesting the displacement on account of the steel plant, following which the government has set up an R&R policy committee.

One issue that has arisen in the land deals is that of fairness. The tribals who sold their land in Orissa contend that the government acquired the land from them at Rs 37,500 per acre, and is now selling the same land at Rs 3.7 lakh per acre, or nearly 10 times higher than what the government paid for the land.

The government says that the higher amount that it charges from the private companies will be used for building roads and developing infrastructure.

In Uttar Pradesh, the charge is not of profiteering by the government, but of the state subsidizing large companies. Former prime minister VP Singh has demanded a job for at least one member of each farmer's family that has provided land for the Dadri power project being set up by Reliance Energy.

Singh has questioned how the government could ignore farmers when it had exempted Reliance from paying stamp duty. The 5500 mw gas-based project, will be spread over 2,500 acres of land, entailing an estimated investment of Rs 12,000 crore.

About 2,500 acres are to be acquired in seven villages for the project and the land acquisition cost is to be shared by the UP government and Reliance in the ratio of 60:40.

However, the agreement between the state government and the company stipulates that any increase in the land acquisition cost will be borne by the state. Reliance Energy has paid Rs 80 crore towards acquisition of the land, according to a media release put out by the company.
 
In Kolkata, too, there have been protests against the Salim group's 5,000-acre Kolkata West International project, which has been cleared by the state Cabinet.

The government is yet to take a decision on the group's request for land to set up a two-wheeler project (65 acres) and a  commercial-cum-residential complex, spread over 400 acres in Howrah.

The details of how the remaining land is to be used are not available. The lease rent being talked about is Re 1 per acre per month, a fraction of what is being given to the farmers as compensation.

The Salim group is looking for land in southern and western Kolkata, and most of it is elevated farm land along the national highway.

Meanwhile, the twin SEZs coming up in the Mumbai mainland where Reliance Industries has taken the controlling interest through group companies, are spread over 35,000 acres.

The company has also asked for an additional 850 acres in the same area. Besides, the group has requested the Andhra Pradesh and Haryana governments for 25,000 acres each, one of them for a petrochmicals SEZ.

According to Shyam Chainani, environmentalist, a green belt around Mumbai is necessary, and with so many projects coming up in places such as Navi Mumbai, the city will be deprived of open spaces.

"Too much land is being given away by the government for commercial purposes and there is no thought being given to town planning," says Chainani.

Adds an urban land development expert, "While it is true that the concept of the work place is changing, with managements wanting to provide better housing and recreational facilities than before, the amount of land being asked for is substantial."

The advent of corporate farming is yet another reason for large-scale land acquisition by companies. Reliance Industries is one among many that are planning to take 'thousands of acres' on lease for crop farming.

Others such as the UB group, ITC, Bharti and Hindustan Lever are understood to be planning a foray into farming. Together, these groups will be investing Rs 500 crore in Punjab. The Bharti group has taken on lease 100 acres in Ladowal village near Ludhiana for five years.