Capitalised Value

By Ramesh Akkineni

From an Article in Financial Express

On acquisitions for private use

In a market economy, compensation should also be at market rates. In the absence of proper land markets in India, an evaluation of land rates by the government or the private parties will be open to dispute. One can arrive at the market rate by an open bidding process between opposite parties with government acting as facilitator and regulator to curb unfair practices.

On acquisitions for public projects like roads

The capitalised value of land can be paid to the farmer. This can be calculated by multiplying the yield of the land into say 30 years (the working years of the farmer). This is how it is done all over the world. As these projects are made on BOT (build, operate, transfer basis), the final land ownership remains with the government. While this value may be lesser in such transactions in the absence of a bid, the principle of greater common good may justify it.

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