Change to state land laws may make M&As in IT parks smooth

Industry:    2020-01-16

A recent amendment to Karnataka’s land laws is expected to help developers of technology parks, industrial estates and special economic zones (SEZs) as well as investors as it opens up opportunities in mergers and acquisitions (M&A) deals.

Chief Minister BS Yediyurappa and revenue minister R Ashoka took the lead in amending the law by first discussing it in the Cabinet. After the Cabinet nod, the Raj Bhavan recently promulgated an Ordinance giving effect to the enabling provision in the law.

Section 109 of the Karnataka Land Reforms Act, 1961 threatened to derail the Coffee Day Group’s proposed sale of 90-acre Global Village Tech Park in Bengaluru to US private equity giant Blackstone group. The government quickly responded when the revenue department as well as the chief minister’s office were alerted about the legal hurdle.

“This is a significant amendment, and we hope to see more investments and more jobs in Karnataka as a result of this,” Ashoka told ET.

Section 109 of the Karnataka Land Reforms Act, 1961 permits purchase of agriculture land for industrial purposes after the said investment is cleared by the single-window committees headed either by the chief minister or industries minister depending on the size of investment. If a developer or the company finds it necessary to sell off the industry, or park, estate or SEZ, the law now provides for such sale after seven years of operation. Such permission, however, accompanies the condition that the land will continue to be used for the same purpose for which it was allotted/acquired.

“When industries pass through difficult times, they are left with few options but sell assets to clear debts and improve their financial health,” the revenue minister said. These industrial lands or technology parks are not government plots, but owned by respective private investors. The government only permits them to sell, where necessary, subject to certain conditions, the minister explained.

In the case of Coffee Day, Ashoka said, the company had to consider selling its tech park to pay back debts and save the company as it has, over a period of time, provided jobs to about 50,000 people. “We hope the amendment will lead to fresh investments and revival of companies that are in distress so that people get jobs, and government gets taxes.” The biggest beneficiary of the amendment, the minister said, are banks and financial institutions that are bogged down by non-performing assets (NPAs).

“You will not find such provisions in law in any other state,” Ashoka said referring to the restrictions imposed by Section 109 of the Land Reforms Act. The government, he added, will make revenue laws investor-friendly.

Toyota Kirloskar vice-chairman Shekar Viswanathan hailed the government’s step. “It will improve the marketability of these industrial plots, and make such plots more productive with increased economic activities,” he said, and added: “Land is like gold; its value will increase when put to use.”

The Global Village off Mysuru Road in Bengaluru was designed for 10 million sqft of office space, but only 4.5 million sft has been developed. Passing it on to a new investor will lead to further development opening up space for more tech firms to come in, and adding jobs, an industry executive said.

The Coffee Day Group is battling hard times after the tragic death of founder VG Siddhartha in July last year.

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