Land Monetisation

Context: To expedite the monetisation plans for government-owned land assets across the country, the National Land Monetisation Corporation (NLMC) has decided to rope in international property consultancy firms to help strategize and implement transactions from start to finish.

About Land Monetisation:

• Land Monetisation means transferring the revenue rights of the asset (could be idle land, infrastructure, PSU) to a private player for a specified period of time.
• In such a transaction, the government gets in return an upfront payment from the private entity, regular share of the revenue generated from the asset, a promise of steady investment into the asset, and the title rights to the monetised asset.
• In the case of land monetisation of certain spaces like offices, it can be done through a Real Estate Investment Trust (REIT), a company that owns and operates a land asset and sometimes, funds income-producing real estate.
• Assets of the government can also be monetised through the Public Private Partnerships (PPP) model.

Benefits of Land Monetisation:

• The monetisation of several lakh acres of the land pool with various central government agencies is expected to give a fillip to the Rs 111-trillion National Infrastructure Pipeline (NIP) in five years through FY25 and Gati Shakti connectivity projects, as well as the housing sector.
• The monetisation process aims to capture the real estate value of public land lying idle in monetary terms to improve or strengthen the finances of government bodies and local authorities.
• The 13th Finance Commission of India also underlined the importance of monetisation of land which has the potential for generating additional revenues from under-utilized prime lands of Public Sector Undertakings, Port Trusts, Airports, Railways, municipal corporations, etc.
• There is an estimate of the extent of land held by various government agencies in excess of 5 lakh hectares, of which, over 160,000 hectares are held across various airports, seaports, and railways.
• It allows certain State/ Centre funded projects to be created and financed from otherwise defunct assets or under-utilized land parcels.

Challenges faced in Land Monetization

• Complex legal and regulatory framework: The legal and regulatory framework for land ownership, land use, and land development is often complex and varies by region, making it difficult for CPSEs to navigate the process of monetising their land.
• Lack of fast Dispute Resolution Mechanism: More than 60% of the litigation in India is land-related and these disputes need to be resolved in a time-bound manner for timely land monetisation.
• Meeting disinvestment targets: The success of NLMC will depend on the government’s ability to meet its disinvestment targets.
  • The government has not been able to meet its targets in the past, which could affect the performance of the NLMC.
• Mapping the vacant lands: The estimation of surplus land may be a contentious issue in the absence of a clear land title, ongoing litigation, and encroachments.
• Ensuring adequate investment: Private players must invest adequately in the asset to ensure its growth and sustainability.
  • The government needs to ensure that the private players are fulfilling their investment commitments.
• Market conditions: The value of land is dependent on market conditions, which can be volatile, and subject to fluctuations.
  • Moreover, the vast difference between the state gazette valuation and market rate valuation can create problems.
• Use of PPPs: The use of PPPs as a monetisation model can pose challenges, as seen in the case of the Railways’ PPP initiative, which did not see much interest from private players.

Suggestive Measures:

• Digitization of land records: It will bring transparency to the land records maintenance system, digitize maps and surveys, update all settlement records, and minimize the scope of land disputes.
• Ensure transparency and fairness: The selection of private players should be through a competitive bidding process to avoid the creation of a monopoly or duopoly in operating surplus government land.
• Improve the disinvestment process: The government needs to streamline its disinvestment process and meet its disinvestment targets to generate more revenue.
  • This can be achieved by providing certainty to investors, and by setting realistic targets for disinvestment.
• Do it in phases: Multi-phased land monetization creates value for developers and investors and increases market appetite.
  • This will make the land more attractive to potential buyers, resulting in higher value and better returns.
• Partner with the government: Partnering with the government in a PPP model to help cover the holding costs of the land and streamline project clearances.
  • This will speed up the process and make it more efficient.

While privatisation of PSBs and PSUs has faced challenges, monetisation of idle government land requires specialised skills and expertise. Thus, NLMC will have necessary technical expertise to professionally manage and monetize land assets on behalf of CPSEs and other government agencies.

About National Land Monetisation Corporation:

• Introduced in the Union Budget 2021-22, NLMC is a wholly owned Government of India.
• The Board of Directors of NLMC will comprise senior Central Government officers and eminent experts to enable professional operations and management of the company.
• It falls under the Ministry of Finance and has been set up with an initial authorised share capital of Rs.5,000 crore and a paid-up capital of Rs.150 crore.
• NLMC is a Special Purpose Vehicle (SPV) that owns, holds, manages, and monetizes surplus land and assets of CPSEs under closure and the surplus non-core land assets of Government CPSEs under strategic disinvestment.

Source: The Hindu

Previous Year Question

Q.1) With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct? (2017)

1. It is an organ of NITI Aayog.
2. It has a corpus of Rs. 4, 00,000 crore at present.

Select the correct answer using the code given below:

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Q.2) With reference to ‘Financial Stability and Development Council’, consider the following statements :

1. It is an organ of NITI Aayog.
2. (2)It is headed by the Union Finance Minister.
3. It monitors macroprudential supervision of the economy.

Which of the statements given above is/are correct? (2016)

1. 1 and 2 only
2. 3 only
3. 2 and 3 only
4. 1, 2 and 3