Land Acquisition Compensation : Deduction For Development Costs Is To Made To Arrive At Market Value Of Undeveloped Land

In a case related to land acquisition compensation, the Supreme Court has approved the deduction of 50% towards developmental costs.

Referring to precedents, the Court observed that  deduction for development is to be made to arrive at the market value of large tracts of undeveloped agricultural land (with potential for developments).  The deduction varies from 20% to 75% of the price of such developed plots.

A bench comprising Justices Hemant Gupta and V Ramasubramanian was deciding an appeal filed by land owners seeking enhancement of compensation. The cases arose from proceedings initiated under the Land Acquisition Act 1894.

In the instant case, the Court noted that the land in question was rocky and had a moorum soil. Such land is not cultivable. The possession of the land was taken for construction of government quarters and a road. Since the use of the land for a government quarter was known, therefore, the smaller area was sold keeping in view the intended use of the land acquired for the residential purposes.

From the circumstances, the Court held that the deduction of 50% is proper.

"...we find that deduction towards the development cost at the rate of 50% is warranted in the facts of the present case", the Court said in it judgment.

The Court noted that the precedent in Kasturi and Ors. v. State of Haryana (2003) 1 SCC 354 had held hat there may be various factual factors which may have to be taken into consideration while applying the cut in payment of compensation towards developmental charges. 

The Court quoted from the precedent in Lal Chand v. Union of India and Anr(2009) 15 SCC 769 as follows :

"The "deduction for development" consists of two components. The first is with reference to the area required to be utilised for developmental works and the second is the cost of the development works. For example, if a residential layout is formed by DDA or similar statutory authority, it may utilise around 40% of the land area in the layout, for roads, drains, parks, playgrounds and civic amenities (community facilities), etc.

The development authority will also incur considerable expenditure for development of undeveloped land into a developed layout, which includes the cost of levelling the land, cost of providing roads, underground drainage and sewage facilities, laying water lines, electricity lines and developing parks and civil amenities, which would be about 35% of the value of the developed plot. The two factors taken together would be the "deduction for development" and can account for as much as 75% of the cost of the developed plot".

Case Title : Shankarrao Bhagwantrao Patil Etc. versus The State of Maharashtra | Civil Appeal No.5712/2021

Citation : LL 2021 SC 497

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