Parameters considered while determining compensation in Land acquisition

The Government’s acquisition of land involves the compulsory seizure of privately owned land for a specified “public purpose,” unlike the simple purchase of land. The definition of “public purpose” currently encompasses defense projects, infrastructure projects, and projects related to housing for the underprivileged, among other things. Until 2014, the Land Acquisition Act of 1894 governed the land acquisition process.

When it comes to land acquisition, compensation is governed by specific legal frameworks that vary across countries. In India, for instance, compensation is primarily determined under The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (LARR Act). Here’s a breakdown of the legal parameters considered when determining compensation under this and similar laws:

1. Market Value of the Land (Section 26 of LARR Act)

• Average Sale Price: The compensation for the acquired land is determined based on the market value, calculated as the higher of:
  • The average sale price of similar types of land situated in the nearest village or urban area over the preceding three years, where the sale is evidenced by registered sale deeds.
  • The minimum value of the land, if applicable, as determined under the Stamp Act for the registration of sale deeds.
• Multiplication Factor: In rural areas, this value is multiplied by a factor (between 1 and 2, depending on the distance from urban areas) to account for future development prospects and the difference in land values.

2. Damage to Standing Crops and Trees (Section 28 of LARR Act)

• Compensation is also provided for the value of any standing crops, trees, or timber that are damaged due to land acquisition.
• Any structures (residential, commercial, or otherwise) on the land that are demolished or damaged due to the acquisition are also compensated.

3. Solatium (Section 30 of LARR Act)

• Additional Compensation: A solatium of 100% of the market value is added as compensation for the inconvenience and emotional hardship caused by the compulsory acquisition.
• This solatium is calculated as a percentage of the total compensation amount (market value + damages).

4. Compensation for Livelihood Loss (Section 31 and Rehabilitation and Resettlement Package)

• Land acquisition laws often provide for rehabilitation and resettlement, especially for those whose livelihoods are affected, such as farmers, tenants, or labourers. The LARR Act includes provisions for employment, resettlement allowance, and compensation for loss of livelihood.
• The Act mandates an additional employment or monetary compensation to family’s dependent on the acquired land, along with housing provisions in case of displacement.

5. Interest on Delayed Compensation (Section 80 of LARR Act)

• If there is a delay in providing compensation, an interest rate of 9% per annum is payable on the compensation amount from the time the Collector takes possession of the land until payment is made. If the delay exceeds one year, the interest increases to 15% per annum.

6. Compensation for Tenants and Leaseholders (Section 3 of LARR Act)

• The law mandates compensation not just for the landowners but also for tenants, leaseholders, and sharecroppers, who may lose their rights or livelihoods as a result of the acquisition. These individuals are often entitled to a share in the compensation or other resettlement benefits.

7. Proximity to Infrastructure and Future Use

• The future use of the land (e.g., infrastructure development, commercial or industrial projects) is often factored into determining compensation. This is particularly relevant in cases where the acquisition is for public purposes such as highways or urban infrastructure.
• Section 26 of the LARR Act allows for the market value to be adjusted based on location, proximity to infrastructure, and future development prospects.

This comprehensive legal framework aims to ensure that landowners and affected communities are adequately compensated and that the acquisition process is fair and transparent, in accordance with constitutional guarantees of justice and equity.