Land for Development: Market Versus Non-market Mechanisms

In this chapter we provide a critique of the traditional mechanismsMechanism to transfer landLand from agriculture to other developmental activities. We show that both the marketMarket mechanismMechanism and the Eminent DomainEminent domain have several serious shortcomings, especially in the Indian context. Eminent DomainEminent domain (Land AcquisitionLand acquisition) Law empowers governmentsGovernment to take away private properties for public purpose. In many cases, the affected owners approach the court to seek enhanced compensationCompensation. Indeed, disputes and litigationLitigation over compensation is an international phenomenon. In this paper, we compare the compensation provided by the GovernmentGovernment (executive) and the Courts (judiciaryJudiciary). Our analysis indicates that the compensation for expropriated properties is regressive—CompensationCompensation for high-value [low-value] properties is greater than [less than] their market valueMarket value. We argue that the land poolingLand pooling mechanismMechanism is a better alternative for ensuring availability of landLand for developmentDevelopment. We argue that the land poolingLand pooling is more efficientEfficient as well as equitable than the traditional means of land transfers. We demonstrate how suitably designed land poolingLand pooling mechanismsMechanism can protect property rightsProperty rights, induce voluntaryVoluntary participationParticipation in landLand transfer to and encourage productive investmentInvestment.