Noida Authority Slashes Land Conversion Fee. Here Is Why This Matters.

On September 18, the Authority slashed the impact fee for land conversion from 25 per cent to 10 per cent. This move came a year after the Uttar Pradesh government approved mixed land use policy in Noida.

Residents of Noida, who own agricultural or industrial land, can now convert it to mixed-use property by paying 10 per cent of the difference between the price of the land according to the prevailing land use and price of the land according to the proposed land use. Earlier, the land owners had to pay 25 per cent of the price differential while converting their property in Noida.

Why does this matter?

• In Indian cities, land conversion is difficult. To convert agricultural land, for instance, the land owners need Non-Agricultural Use Clearance (NAC). To receive the NAC, sellers have to approach buyers, who have a pre-determined proposal, for which the local or state authorities are willing to provide the NAC. This can be an expensive deal for small firms and individuals.

• Additionally, the developers have to obtain change of land use permission (CLU). Private developers, even the established ones, find it difficult to obtain the change of land use permission. Earlier, the developers use to approach the government and acquire land using the Land Acquisition Act of 1894.  Under the 2013 Act, though it is difficult to acquire land, it still has provisions through which, the governments can acquire land on behalf of private companies. Yes, this is an expensive affair too.

• The ease of land conversion is one of the key reasons why some cities such as Gurgaon have flourished. In , after the NAC requirements were done away with it, private developers could easily acquire land. Much of the right to permit land conversion rested with the chief minister's office in Haryana, thus, making the process simpler. This also enabled easy infrastructural development in the city, including roads and highways. If the impact is same in Noida, the price of real estate in Noida will rise.

• Other restrictions on converting land remain intact in Noida. For instance, mixed-use is allowed only in 25 per cent of the floor area ratio (FAR). (FAR is the ratio of the floor space in a building to the area of the plot on which the building stands.) Now, on residential plots, construction of guest houses and banks would be permitted while on industrial plots, offices, and banks could be constructed. Much of the regulatory complexities in acquiring land would still remain. There is greater room for improvement. But, as the impact fee is slashed, it would become a lot easier for private developers and firms to convert land for other purposes.