Speculation Threatens Access And Best Use Of Land

 

Thorin Waeschle

 

Land is the most critical resource for Nepal’s people and its economy. The fertile lowlands of the Terai and the valleys in the hills are the backbone of what is still a predominantly agrarian economy. Where growing cities are entrenched in narrow valleys, land is especially desired.

Owning and farming a sufficiently large piece of land is synonymous to independency and relative economic security. Yet land is unequally distributed, with almost a third of the population owning very little or virtually no ground. As poverty and prosperity are correlated highly with the size and quality of an individual’s land holdings, this is worrisome. A small elite consisting of the upper 7 per cent of households occupies 30 per cent of agricultural land.

The ceiling provision in the current land regime aims to curb this problem by allowing individuals not to hold more than 25 bighas in the Terai, 80 ropanis in the hills or 50 ropanis in Kathmandu. But implementation has been sluggish so far.

 

Promising investment

From its economic importance, land derives the status of a promising investment. In a seven-year period running up to 2010, land prices in Nepal increased by 300 per cent, as a study by UN Habitat showed. Demand was fuelled by safe-haven buying, as investors were looking for solid ground amidst a negative investment climate.

The motto is that land will always be needed. But it is not only during bad times that land prices can rise. Especially regions which develop rapidly see rising quotations. Such land booms can have severe social and economic implications, depending on the initial distribution of the land and the extent of land speculation.

Currently, a striking real estate boom is underway in Attaryia, a town in the far west of Nepal. Land prices there have skyrocketed, following reports that Attaryia will be made the capital of the new Province 7, as the national media reported last week. Within a short time, prices per kattha have more than doubled from Rs. 10 to Rs. 20 million in adjoining areas, and traders are expecting fabulous profits.

Land speculation is one of those realms where unimaginable profits can still be gained overnight – if one is in the right place at the right time. These opportunities are created by rapid development through political or economic changes, as in Attaryia. In other cases, it is inevitable demand for land by huge infrastructure projects which causes prices to rise.

A case in point is the transformation of the Lumbini airport, where the unveiling of an upgradation plan has caused land prices nearby to soar. The government now has to spend far more than expected on the acquisition of the needed areas, something which is bound to happen in Attaryia as well if public projects are undertaken in the future. News about the creation of an international airport in Nijgadh and road construction through the Bagmati River bank are further examples of this.

This dynamics can be easily explained by the laws of limited supply and demand. But since the issue of land access is of such crucial importance in Nepal, it is worth taking a closer look at the economic and social implications of land speculation.

What is the reason for the huge price increase in Attaryia? Its potential new role as the province capital would lead to increased public investment, new businesses opening and jobs being created. In a growing town, opportunities increase, more division of labour leads to higher productivity and more public and private services are available at close reach.

All these benefits which are created by the entirety of social, political and economic actors are of immense value and materialise themselves in the higher price of the land. Since one needs a piece of land to access all these local benefits, its price is like an entrance fee, which rises with the attractiveness of the show.

Yet the one cashing in on this rise is the speculator, while the social community goes away empty-handed. Faced only with higher costs, they are increasingly unable to afford access. While there is nothing illegal about this practice, there is certainly a slight feel of injustice attached to it.

And more so, land speculation can have other concretely damaging effects on the economy. The practice of splitting up land into building plots for individual resale is a highly profitable business, but the Ministry of Land Reform has warned that this causes much of the land to be left fallow while awaiting construction. Lower productivity is the consequence, which has caused food crises in a country which used to export food crops until 1990.

 

Fair access to land

But the real issue at stake is how a land regime can grant fair access to land to a maximum of people to make the best use of it. Calls by the Commission for Investigation of Abuse of Authority on the government to finally seize land from individuals breaching the land ceiling reflect this need. The land regime needs to be designed and implemented so as to enable productive access for the best use of the land, and not to serve as a tool for exclusion and exploitation. To avoid the latter, a watchful eye is necessary where excessive land speculation takes place.

(The author is on an internship at the FES Nepal Office)

 

 

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