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Rationalising government land auction


Rationalising government land auction

Last updated: July 13 2007
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  • Rationalising government land auction

    The precedent of the government selling land that was encroached upon, has disadvantages. Rationalising the present system of land auction can get better value both for the Government and the buyers, says Dr G Pandu Naik.

    Government of Karnataka has been selling the land which was recovered from the encroachers, to the public. Confined only to Bangalore Urban district, so far about 600 acres of land has been sold through auction. While some land has fetched prices much above the market value, the remaining are either sold at moderate prices or not sold at all for want of buyers. The present system of land auction has both advantages and disadvantages from the buyer’s point of view. Rationalising the auction procedure can help get better value both for the Government and the buyers.


    Buying land directly from the Government has several advantages. For example the buyer gets ownership of land free from all defects and possession of land without any encroachment or dispute. There is no need to pay hefty commission to real estate agents since the sale is directly from the Government. As the land is directly sold by the government the buyer need not pay the stamp duty for registration which is around 9% of the sale price. It is sufficient if he spends about 1% of the property value towards registration charges.

    There are a lot many other advantages to the buyer. Under the Karnataka Land Revenue Act, non-agriculturists cannot buy agricultural lands without seeking permission of the government and getting such permission involves lot of red tapism and corruption. Thus the ongoing auctions of lands provide an opportunity to anybody to buy land without seeking any permission.

    Another major problem associated with buying agricultural lands from private parties, is the bureaucracy and corruption associated with conversion of land from agriculture to non-agriculture purpose. Revenue department officials are smart enough to refuse conversion on any flimsy grounds if their demands are not met. These problems can be eliminated by buying lands directly from the Government, because there cannot be any grounds for the revenue officials to refuse conversion since the title deeds are correct and the very purpose of purchaser was for non agricultural purpose.

    Getting loans from the banks/ financial institutions is very difficult if we buy land from private parties due to the legal complications involved. Here since the land is purchased directly from the government with clear title deeds, getting loans sanctioned becomes easier.


    As many as there are advantages, there are equally disadvantages too, some of which are very critical. The Government should consider eliminating these disadvantages to attract more number of genuine buyers.

    The government has fixed Rs 10 lakh per acre as advance deposit for participating in the auction. This amount is illogical capable of helping the builders’ lobby and denying opportunity to the other buyers. Let us see how.
    Sale by auction of immovable property does require payment of initial deposit to ensure commitment of the buyer. But it is based on the value of the property and should normally be 25% to 50% of the guidance value.
    Properties closer to the city in good localities are being sold for Rs 1-2 crores range per acre. Such high value properties are purchased by builders and for them initial deposit of Rs 10 lakhs per acre works out to be less than 10% of the sale price.

    On the other hand, the same Rs 10 lakh amount of initial deposit is equivalent to 200% of the guidance value of the land in Bagganadoddi village of Kasaba hobli in Anekal taluk. It means the initial deposit payable here is much more than the actual cost of the land. Two plots of 10 acres and 12 acres belonging to this locality was not auctioned for want of buyers. The local people cannot participate in the auction since they have to pay initial deposit equivalent to 200% of the cost of land. Therefore the government has to rationalise the initial deposit amount by keeping it around 25%-50% of the guidance value for larger participation of buyers.

    The second disadvantage is that in most of the cases, the land use has not been mentioned on the ground that comprehensive development plan is in the process of finalisation. If a buyer purchases the land hoping to start his factory and the government converts it into green belt area, the entire plan of investment collapses to zero. Therefore government may consider postponing the auction till the land use pattern is finalised.

    The third disadvantage is that government wants the prospective buyers to visit the villages concerned, and see the lands before action with the help of local village accountants. Rather, the government may consider arranging transportation, from deputy commissioner’s office every morning, for the benefit of prospective buyers so that inspection of the property can become a smooth affair.

    The fourth disadvantage is that prospective buyers have to fill the application form, at least one day prior to the date of action and obtain the identity card by clearly mentioning the property they want to buy. This information can be passed from deputy commissioner’s office to organised buyers so that they can quote lesser price as they are aware that there are not many bidders. Therefore government should not insist on the prospective buyers to disclose in advance which properties they want to buy.
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