India is preparing for the Union Budget 2026–27, and as discussions intensify, one proposal has sparked major debate: a “vacant-land tax”. Supporters say this could free up unused land for factories and infrastructure, while critics warn it could encourage rent-seeking and misuse. The larger question is how the government should balance public interest with private property rights in a country where land scarcity affects everything—from agriculture to industrial growth.
In recent years, the government has brought major changes in taxation and provided relief to taxpayers. Many believe tax policies should now remain stable and aligned with global norms. Instead of new tax surprises, economists are urging the government to use the upcoming Budget to push policies that strengthen India’s long-term economic capacity.
One common suggestion from a group of economists who met the finance minister was to improve the production-linked incentives (PLI) scheme. They argued that PLI benefits should be widened to cover more businesses. They also pointed out that the current policy has helped only a few sectors and has mostly encouraged assembly-based production dependent on imported materials. A revised PLI scheme could focus more on value addition and reducing imports, making Indian manufacturing stronger.
However, another recommendation from the economists attracted far more attention. They proposed a “vacant-land tax” to reduce the amount of unused land sitting idle across the country. The idea is that landowners would be encouraged to repurpose or sell unused plots, making them available for industrial use. This could help build logistics parks, technology hubs, factories, and other facilities that create jobs and support economic growth.
Supporters of this idea believe that land, especially in and around cities, is too valuable to be left unused. With growing demand for industrial spaces, they argue that a targeted tax would push owners to make productive use of their land instead of holding it only for speculation and profit.
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Debates about land policy in India are not new. Historically, land acquisition has been shaped by the principle of “Eminent Domain,” which gives the state power to acquire private land for projects that serve public interest. Earlier, the right to property was a fundamental right under the Constitution, but it was later changed to a legal right, giving the government greater freedom in acquiring land for development.
Because of past misuse and unfair compensation, the land acquisition policy had long been criticised for being arbitrary and unjust. This changed with the introduction of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The Act strengthened protections for people whose land is acquired. It ensured better compensation and made rehabilitation of affected families a legal duty. It also introduced social impact assessment, which evaluates whether a proposed project truly benefits the public.
Despite these improvements, problems still exist. In many areas, large tracts of farmland have been acquired for industrial or real estate projects, but some of this land remains unused for years. Cases of land being purchased at cheap rates and later sold at high prices have also raised concerns about corruption and misuse. Even well-intended policies like Special Economic Zones (SEZs) have, at times, encouraged land hoarding rather than direct industrial development.
Another major issue is fragmented farmland ownership. Small land parcels make farming less productive, yet consolidation remains slow. Efforts to digitise land records have helped improve clarity of land titles, but more needs to be done to streamline land use.
Government departments also hold vast amounts of unused land—such as the defence ministry, railways, and port authorities. Attempts to unlock this land for public or industrial use have not been fully successful. As a result, valuable land remains idle while businesses struggle to find space for expansion.
In this context, the idea of a vacant-land tax is gaining attention. Supporters believe that taxing idle land will discourage hoarding and help bring unused plots into productive use. If designed carefully, such a tax could reduce speculation and ensure that land is used for building industries, infrastructure, and jobs.
However, critics caution that such a tax must be implemented with great care. If poorly designed, it could lead to harassment of small landowners or create opportunities for corrupt officials to misuse power. There must be clear rules to identify which land qualifies as “vacant,” how exemptions will work, and how the policy will prevent unfair targeting.
Another concern is that landowners might rush into distress sales if the tax burden is too high. This could push land into the hands of large companies or politically connected groups, repeating old mistakes. Therefore, any policy should protect small landholders while focusing on those who engage in speculative land hoarding.
The challenge for the government is to strike the right balance. India needs more land for industries and infrastructure, but it must also respect private property rights and ensure fairness. Policies must encourage growth without encouraging rent-seeking or misuse of power.
As the Budget approaches, the vacant-land tax debate highlights a deeper issue: how India should manage its limited land resources in a way that benefits the economy, protects citizens, and promotes fairness. A well-designed policy could help unlock development, but only if it avoids past pitfalls and puts public interest at the centre.
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