Topic: The Land Commission Act and present developments

This message was edited 1 time. Last update was at 07/05/2009 11:38:20

The Land Commission Act established a Land Commission with two main functions. Firstly, it had to assess and collect a new levy on the development value of land. However, the state government, heeding to the major causes of the failure of the earlier development taxation model, fixed the new levy at 40 percent. But to deter the landowners from offering land for redevelopment, the levy was eventually hiked to 50 percent and even higher.

Secondly, the Commission could influence the allocation of resources by actively participating in the ups and downs in the real estate market. Armed with compulsory purchase powers, it was able to buy land ripe for development and resell it to other real estate developers, with public authorities and small house builders enjoying concessionary rates.

In practice, the schemes ran into difficulties. Not only did the cost of collecting the levy prove heavy enough land was also not available for development. While on the one hand, landowners were prepared to take a chance on a new government that is committed to abolition of the Land Commission, when returned to power, on the other hand, in three years time, the Land Commission accumulated only 2000 acres of land for development (as against an expected 50,000 acres per annum) largely because the local planning bodies proved to be a drag on its activities. Thus for developing landed Properties Kerala offered unique advantages and its investor savvy local bodies always made things easier for the private developers, while the government initiatives were caught up in vexed legal disputes.

Hence, when a new government took over, the Land Commission was abolished. The income on revenue was to be collected at a rate of 30 percent through the capital gains tax, which had been introduced earlier.

As a result of the public outcry against the profits made through speculation in land, a development gains tax was introduced. The tax was levied at the tax rate determined by the corporation for a company or a real estate firm at the marginal income-tax rate (excluding the investment surcharge), or for an individual due to an increase in the value of land arising from the planning permission given for a new use, and was payable on first lettings. It remained in force until replaced by the development land tax later on.

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