Project – An evaluation of the problems of compulsory acquisition and compensation as it affects property development

CHAPTER ONE

INTRODUCTION

 

1.1 Background Of The Study

Compulsory acquisition refers to the legal process by which the government or its agencies can acquire private property for public purposes, typically in exchange for compensation. This process is often viewed as a necessary tool for facilitating urban development, infrastructure expansion, or social welfare projects (Feldman, 2016). However, the practice can have significant repercussions on property development. The unpredictability of compulsory acquisition can affect the stability of the real estate market, influence investment decisions, and hinder developers’ ability to plan long-term projects. According to Riddel (2020), compulsory acquisition can create a sense of uncertainty among developers, as it introduces the possibility of losing property to state authorities without prior notice. This unpredictability can reduce the willingness of developers to invest in areas that might be subject to compulsory acquisition.

A key concern in compulsory acquisition is the adequacy of compensation provided to property owners and developers. The compensation process is central to ensuring that property rights are respected and that individuals or businesses are not unduly disadvantaged. According to Harris (2018), in many cases, compensation does not fully reflect the market value of the property, leading to disputes and dissatisfaction. While compensation is often supposed to cover the loss of property and relocation costs, critics argue that it fails to account for the loss of future development potential or the emotional distress associated with forced relocation (Lund, 2019). The lack of adequate compensation can exacerbate social tensions and contribute to public resistance to development projects that involve compulsory acquisition.

Several studies have explored the legal frameworks surrounding compulsory acquisition and compensation. These frameworks vary significantly across jurisdictions, and differences in legal and procedural standards can lead to inconsistencies in how property owners are treated. For instance, the United Kingdom’s system, which relies on statutory compensation mechanisms, contrasts with practices in developing countries where compensation standards are often vague and underfunded (Buchanan & Laux, 2021). In many developing countries, the challenge lies not only in ensuring that compensation is adequate but also in the timely delivery of compensation, which often causes delays in property development projects (Akinmoladun, 2022). These delays can lead to financial losses for developers and inhibit the broader goals of public infrastructure development.

The impact of compulsory acquisition on property development is also linked to the political and social dynamics within a given region. In many cases, compulsory acquisition can be perceived as a tool for political maneuvering or to benefit powerful interest groups at the expense of vulnerable property owners (Tan, 2020). The unequal distribution of compensation can create tensions between different sectors of society, especially if the process disproportionately affects marginalized or low-income communities. Furthermore, the displacement of communities due to compulsory acquisition often results in social dislocation, which can increase the costs of urban development by creating a need for additional public services or social programs (Chakrabarty, 2018). As a result, developers may face resistance from local communities, complicating their efforts to implement projects efficiently.

An additional challenge is the impact of compulsory acquisition on the availability of land for property development. Land is a finite resource in urban areas, and as cities continue to grow, the pressure on available land increases. When large swathes of land are compulsorily acquired for public use, it can create shortages of land available for private sector development (Nguyen & Tay, 2021). In some instances, the government’s acquisition of land for infrastructure projects or urban renewal can lead to the displacement of existing communities, further reducing the availability of developable land. This reduction in supply can drive up land prices, making it more difficult for developers to acquire sites at affordable prices, ultimately driving up the cost of housing and other real estate developments (Smith, 2020).

The relationship between compulsory acquisition and the broader economic environment also plays a crucial role in determining its impact on property development. For example, during periods of economic downturn, compulsory acquisition may exacerbate the financial difficulties faced by property owners and developers. The economic uncertainty caused by changes in property values and the potential for reduced demand for land can create additional challenges for developers, especially if the compensation they receive is insufficient to cover the costs of their investments (Miller & Scott, 2022). In such scenarios, developers may be reluctant to invest in certain areas due to fears of government intervention or property acquisition. Conversely, in periods of economic growth, compulsory acquisition can sometimes help accelerate infrastructure projects that stimulate property development by increasing the availability of public services, reducing transportation bottlenecks, and improving the overall urban environment (Gauthier & Martel, 2020).

Compulsory acquisition is a statutory practice in Nigeria under the Land Use Act Cap L5 LFN 2004 available to the government to acquire land (Sections 28 (1); 2 (a), (b), (c); 3(a), (b), (c), (d) and (4)) as government cannot rely on land markets alone when and where land is needed to provide major infrastructure facilities for the general public. Owners of property have their rights on the properties revoked for overriding public interest with promise to pay compensation.

Katsina, a state located in northern Nigeria, has due to significant positive development witnessed urbanization in recent years (Shehu, 2017). With the growing need for land for various public projects, compulsory acquisition has become a common practice in the state. However, there are concerns about the effectiveness and fairness of the compulsory acquisition process, as well as the compensation provided to affected landowners. These concerns have prompted the need for a comprehensive evaluation of the problems associated with compulsory acquisition and compensation in Katsina and their impact on development.

1.2 Statement Of Research Problem

In Nigeria, compulsory acquisition refers to the process by which the government or its agencies can acquire private land for public purposes, such as infrastructure development, urban renewal, or environmental conservation. While compulsory acquisition is legally recognized as a tool for facilitating national development, it poses significant challenges to property developers and landowners. One of the major issues associated with compulsory acquisition is the inadequate compensation offered to affected property owners. Many landowners argue that the compensation provided by the government is insufficient and does not reflect the true market value of the property, leading to financial losses and dissatisfaction among the affected parties (Akinmoladun, 2022). This inadequacy is particularly problematic in a country like Nigeria, where property values can fluctuate significantly due to inflation, changing market conditions, and the lack of a transparent property valuation system. The insufficient compensation undermines trust in the process and discourages investment in affected areas, thus negatively impacting property development.

Another critical problem is the lack of a clear and consistent legal framework for compulsory acquisition and compensation in Nigeria. Although there are laws governing land acquisition, such as the Land Use Act of 1978, the implementation of these laws often lacks transparency and consistency. The process of determining compensation, the timelines for payment, and the criteria for evaluating the value of land or property are often ambiguous and subject to political influence (Feldman, 2016). This lack of clarity not only creates a sense of uncertainty among landowners but also makes it difficult for developers to plan long-term projects in areas that are prone to compulsory acquisition. In many cases, the government’s ability to acquire land swiftly and without adequate notice leaves developers in a vulnerable position, causing delays, increased costs, and missed opportunities in property development.

Moreover, compulsory acquisition often leads to the displacement of communities, which can have broader social and economic implications. The forced relocation of families or businesses can create social tensions, disrupt livelihoods, and increase the pressure on already overstretched public services in receiving areas (Chakrabarty, 2018). Developers who are impacted by compulsory acquisition may also face challenges in maintaining project timelines, particularly if their projects are located in areas where large-scale acquisitions are taking place. Additionally, the displacement of communities can create resistance to development projects, further complicating the work of property developers. The lack of adequate planning for the resettlement and reintegration of displaced individuals often exacerbates these problems, leading to additional costs for both the government and developers.

Compulsory acquisition also has significant financial implications for property developers. In some cases, developers face challenges in obtaining financing for projects that are located in areas with a high likelihood of compulsory acquisition. Financial institutions are often hesitant to lend to developers in such areas due to the uncertainty surrounding the security of their investments (Miller & Scott, 2022). This lack of investment security discourages property developers from pursuing projects in certain regions, especially those targeted for urban renewal or public infrastructure development. As a result, there is a potential underutilization of land in critical urban areas, which hinders the overall growth and development of the real estate sector. This problem is compounded by the slow pace of compensation payments, which often cause delays in project implementation, further straining developers’ financial resources and limiting their ability to complete projects on time.

The political environment also plays a significant role in the problems surrounding compulsory acquisition and compensation in Nigeria. In many instances, the process of land acquisition is influenced by political considerations, with land being allocated to politically connected individuals or groups rather than being used for the intended public purpose (Tan, 2020). This politicization of compulsory acquisition creates an atmosphere of distrust among property developers, who fear that land acquisition processes may be used as a tool for political gain rather than for genuine public development. As a result, developers may be reluctant to engage in projects that involve land in areas with significant political instability or uncertainty, further stalling the growth of the property development sector. Furthermore, the lack of political will to ensure timely and fair compensation exacerbates the negative effects of compulsory acquisition, creating an environment in which developers and landowners are often at odds with governmental authorities.

Finally, the broader economic context in Nigeria, characterized by inflation, fluctuating exchange rates, and a volatile real estate market, contributes to the challenges posed by compulsory acquisition. Property values in Nigeria are highly susceptible to economic changes, making it difficult to determine the appropriate level of compensation for affected landowners and developers (Nguyen & Tay, 2021). In periods of high inflation or currency devaluation, the gap between the compensation offered and the actual value of the property can become even more pronounced, leading to heightened dissatisfaction among affected parties. This economic instability further complicates the process of property development, as developers must contend with rising construction costs, reduced demand for real estate, and a lack of financial liquidity. The intersection of compulsory acquisition with these economic challenges creates a perfect storm that can impede the growth of the real estate sector in Nigeria.

1.3 Aim Of Study

 The aim of this study is to evaluate the problems of compulsory acquisition and compensation as it affects property development in Katsina metropolis. With a view to propose a framework for adequate compulsory acquisition and compensation. The specific objectives are:

1. To identify problems associated with compulsory acquisition and compensation in Katsina metropolis.
2. To examine the process of compulsory acquisition and compensation in Katsina metropolis.
3. To evaluate the level of satisfaction of claimants on compensation paid.
4. To propose a framework for compulsory acquisition and compensation to facilitate property development in Katsina metropolis

1.4 Research Questions

To achieve the study objectives, the following research questions will guide the research:

1. What are the problems associated with compulsory acquisition and compensation in Katsina metropolis?
2. How does the process of compulsory acquisition and compensation work in Katsina metropolis?
3. What is the level of satisfaction of claimants on the compensation paid in Katsina metropolis?
4. What framework can be proposed for compulsory acquisition and compensation to facilitate property development in Katsina metropolis?

 

1.5 Significance Of The Study

 

This study is mainly concentrated on land acquisition, payment of compensation and land resources. This work therefore, will be of some interest and relevance to the Nigerian land owner and potential land owners. Professionals in environmental fields and students of Estate Management as well as Urban and Regional Planning will find this work useful.  This study will be of importance to the policy makers in public and private sectors. The government and oil companies will not be left out in benefiting from this study in terms of the adequacy of compensation to be paid according to the land use act, so as to ascertain that all compensations would be considered fair.

This study’s findings will be of great significance to various stakeholders involved in land and property development in Katsina. The study will provide valuable insights into the problems and challenges associated with compulsory acquisition and compensation and their impact on development. The findings can serve as a basis for policy recommendations and improvements in the legal framework, institutional mechanisms, and compensation practices in Katsina, ultimately leading to more equitable and sustainable development in the state.

1.6 Scope Of the Study

Research on compulsory acquisition and compensation is a lengthy and complicated process that cannot be dealt with exhaustively in such a limited period of time. This study will focus on the problems of compulsory acquisition and compensation in Katsina and their impact on development. The research will be limited to property developers specific to the state.

 

1.7 Limitation Of the Study

Compulsory acquisition and compensation is a very broad subject, it’s practice spans throughout the country but for the purpose detailed interview the study is restricted to GRA Katsina and Kofar Kaura layout both in Katsina metropolis. For the purpose of this study, analysis is limited to lands and buildings.

1.8 Definition Of Operational Terms

 

Eminent domain: This is right or power of the government to acquire a private property for public use, with the provision of a payment of compensation.

Compensation: This is typically a monetary or other payment awarded to an individual in recognition of loss, suffering or injury.

Land: Land is a vacant and undeveloped property which has no improvements made on it, it encompasses all physical elements bestowed by nature.

Public amenities: These are basic facilities that are available to every individual in a locality to help provide comfort and convenience.

Land expropriation: This is also known as eminent domain or compulsory acquisition, it is the right or power of the government to acquire a private property for public use, with the provision of a payment of compensation.

Private property: This is a legal property owned by an individual or a non-governmental legal entity.

Stakeholders: This entails people with interest or concern in the acquisition process i.e the valuer, the government officials and the expropriated individuals.

Policy makers: These are individuals responsible for creating ideas and plans to formulate or amend an existing policy.

Property development: This is the process of improving the use-value of buildings or land.

Claimants: These are the individuals affected by the acquisition exercise, they are often referred to as expropriated individuals.

1.9 History And Description Of The Study Area

Katsina is a Local Government Area and the capital city of Katsina state, in Northern Nigeria. Katsina is located 260 kilometers east of the city of Sokoto and 135 kilometers northwest of Kano, close to the border of Niger Republic (KSG, 2016). The primary occupations of the residents include farming, traditional handicrafts, and animal husbandry. The people of Katsina State primarily speak Hausa and Fulfude languages (Shehu, 2017). While Islam is the dominant religion, there are still a few known families practicing Christianity and traditional religions in some homesteads, (KSG, 2016). The population of Katsina metropolis was estimated by the Katsina metro area population to be 524,000 in 2023.

Figure 1.1: Map of the study area

Project – An evaluation of the problems of compulsory acquisition and compensation as it affects property development