Draft National Land Policy 4 February, 2010 - The draft national land policy has measures aimed at limiting land ownership, controlling land speculation, reviewing land taxes and encouraging affordable housing.

An 11-member task force from the Land Commission, Ministry of Agriculture, Works and Human Settlement, Ministry of Economic Affairs and the national environment commission drafted the policy in December 2009.

The policy says that the maximum land holding restriction of 25 acres in the Land Act 2007 should be removed entirely. Instead the policy says that progressive tax rates should be applied for land holdings above an acre in urban areas and 10 acres in rural areas.

Progressive tax rates will, however, be exempted for land being used actively for food production. The existing land ceiling will also be removed to encourage commercial agriculture and large-scale development where appropriate.

“What we found at the ground level was that families were simply splitting land amongst themselves in different thrams when they were reaching the 25 acre mark which does not prevent land hoarding,” said a land commission officer.

The land policy calls for a review of land and property taxes, especially in rural areas, that has not been revised since the 1960s and remain only a token amount. On the other hand many pockets of rural areas have emerged where income from land related activities are equivalent to urban areas.

It calls for a suitable taxation regime based on scientifically assessed valuation taking production or market value into account. This, the policy says, is necessary to reduce the gap between rich and poor and also ensuring equitable contribution to the exchequer.

To prevent land speculation the policy says that ‘capital gains taxes’ or taxes on the profit of land transactions would be applied where land bought by a buyer is sold within three years.

“Land speculators buy large parcels of land and sell them plot wise, making significant untaxed profit,” says the policy. Currently land transactions are not taxed.

It says that this three year time period will help in deciding whether the land transaction is a normal one or a commercial one and discourage speculators. “Land prices normally go up with inflation but with speculation the prices shoot up overnight as speculators buy land and then sell them for big margins within short periods,” said a land commission official.

Land policy’s salient points •No 25-acre land ceiling but progressive taxes after 10 acres •Review of rural land taxes •Tax on resale of land before three years to prevent speculation •Inheritance tax for inheriting large land property •Mortgaged land to reflect mortgage details on thram •Tax on vacant plots in urban areas with high housing demand

To control land accumulation Inheritance taxes will also be levied on some inherited land when it might be at excessive levels.

Some transaction like low value family homes or inheritance of a family home could be excluded.

To prevent fraud and insecurity in land transactions it will be mandatory to register all mortgages in the thram. Procedures will be developed to allow the financial institutions to access these records. “The problem right now is that some unscrupulous persons sell already mortgaged land to unsuspecting buyers or even re mortgage their land to get more loans,” said an official.

The policy says that regulations should be put in place to prevent cases like a husband mortgaging his wife’s land without her fully understanding the implications.

To provide land for housing in urban areas the policy says that development of vacant land should be encouraged by introducing a vacant land tax and amending restrictive legislation.

“Though there is severe shortage in housing and despite the fact that municipal boundaries have been expanded many plots are left vacant by speculators,” says the policy. But there will be no vacant land tax where there is no demand for housing.

For mining, the policy says that affected landowners shall also be encouraged to participate in the project as shareholders or be given a share of the revenue.