Don’t buy land for infrastructure, lease it

The Land Acquisition Act has been constantly running into rough political weather every now and then. And if the government caves into the loud opposition demands, many infrastructure projects (including smart cities, rural electrification programmes and industrial corridors, to list a few) will be stuck in limbo. However, the solution lies in turning the idea on its head. Land for such projects need not be bought but should be taken on a 99-year lease. Apart from the rent that would accrue to the land owner some token compensation should be made such that the land owner can buy a piece of land elsewhere for agriculture activity and he should also be given a share in the super-profits on the project to bring the land owner an upside. This solution can ensure that the capex for such projects is contained, the land owner continues to get rent for subsistence, he does not end up destroying his wealth and capital and he can continue to be an agriculturist with another piece of land. Renting land for infra projects is a viable and practical solution. It will help save capital by:

  1. not requiring the locking up of a large amount of capital
  2. saving time in purchase and the entire process of land acquisition thereby fast tracking projects

Some industries already follow the model of leasing lands instead of acquiring it. Oil & gas extraction usually follows the model of leasing lands. Renewable energy projects such as Wind Power & Solar farms and Bio-fuel projects often lease the land from land owners instead of trying to acquire the land which could make the projects prohibitively expensive.

So lease land and release capex required.