The removal of the NALA tax is expected to aid faster development as the conversion of land-use becomes less cumbersome.
Published Aug 27, 2025 | 11:01 AM ⚊ Updated Aug 27, 2025 | 11:01 AM
Amaravati capital city design by previous TDP government. (Supplied)
Synopsis: The recent decision of the Andhra Pradesh Cabinet to repeal the NALA Act is expected to kindle construction activity not only in Amaravati but also elsewhere in the state. Developers and industries have been saying that the Act was choking growth as projects had stalled and unauthorised layouts mushroomed.
The recent decision of the Andhra Pradesh Cabinet to repeal the Agricultural Land (Conversion for Non-Agricultural Purposes) Act, 2006 — popularly known as the NALA Act — is expected to kindle construction activity not only in Amaravati but also elsewhere in the state
The NALA Act was, in fact, introduced to protect farmland. It imposed a five percent conversion tax and forced landowners through a maze of approvals if they wanted to get a change of land use clearance. Over time, it became a symbol of red tape, delays, and corruption.
Developers and industries have been saying that the Act was choking growth as projects had stalled and unauthorised layouts mushroomed. Many investors turned to neighbouring states.
Trade bodies raised an alarm, and Confederation of Real Estate Developers’ Associations of India (CREDAI) Andhra Pradesh called the tax burdensome. Andhra Pradesh Chambers branded the law an inconvenience. In May this year, it urged Chief Minister N Chandrababu Naidu to scrap it without delay.
Acting on their request, Naidu announced his decision to repeal it at the District Collectors’ Conference on 27 March. “Laws obstructing development will be eliminated, even if they generate revenue,” he said.
Later, a ministerial panel examined the issue. Led by Revenue Minister Anagani Satya Prasad, it included Finance Minister Payyavula Keshav and Municipal Administration Minister P Narayana. They concluded that the Act duplicated existing urban laws, created avenues for bribery, and slowed down projects.
On 21 August, the state cabinet approved a draft repeal bill. The new system is simpler as land conversion becomes automatic after payment of a reduced External Development Charge (EDC).
After repeal (once in force), the state NALA tax goes away; conversion would be self-declaratory/automatic, and local bodies, especially Gram Panchayats, would collect/retain local fees associated with development, rather than a state-level NALA tax.
Rates, under the new dispensation, will be two percent of the basic value of land for industrial projects in municipalities, three percent for others in panchayats. Collections will be handled by the Municipal Administration and Urban Development department.
The impact is expected to be sweeping. The removal of the NALA tax is expected to aid faster development as the conversion of land-use becomes less cumbersome.
It bodes well for the development which has been kick-started in Amaravati, where the ₹1.5 lakh crore capital project is in the pipeline. The construction of government complexes and residential zones is likely to begin by October.
Construction is expected to hasten in Visakhapatnam and Vijayawada. The Visakhapatnam–Chennai Industrial Corridor is poised for take off, while the Krishnapatnam Railway Line is on the cards.
Housing is also set for a lift. Affordable units under Pradhan Mantri Awas Yojana (PMAY) could rise by 40 percent. The state faces a shortage of more than 10 lakh homes.
Coastal projects in Bhogapuram and eco-tourism hubs are expected to gain momentum. Environmental clearances will now fall under the Andhra Pradesh Environment Protection Act.
Economists predict a 20–30 percent jump in construction within 18 months. Real estate already contributes eight percent of the state’s GDP. With this reform, GDP growth could rise by up to 2% by 2026–27. Over five lakh jobs are expected, helping reduce unemployment.
Industry bodies cheered the decision of the cabinet. National Real Estate Development Council (NAREDCO) called the repeal move “historic” and CREDAI said it would cut costs for developers and buyers. Andhra Pradesh Chambers welcomed faster investments and higher revenues for the state.
However, not all are convinced. Environmentalists warned of farmland loss and ecological damage. The government counters the arguments claiming that safeguards remain in place under other laws.
M Yugandhar Reddy, a political analyst in Visakhapatnam, said: “Though concerns remain over development taking place at the cost of the environment, the state also needs to grow. For one thing, NALA eliminates scope for corruption, which has become endemic. In this perspective, it is a welcome development.”
“The state should keep the realtors on the leash from going overboard at the cost of the environment,” he cautioned.
(Edited by Muhammed Fazil.)
