The full complexity of value change must be considered

Value change calculation is a particularly complex area when existing landowners are seeking not just the current land value but also future land value increases and the loss of future earnings. A further complexity is introduced when neighbors claim compensation for blight from development.

When calculating the total compensation amount, ascertaining a value will usually follow a negotiated process as subjective elements are involved. These negotiations can take a long time, sometimes years. Transparency is very important as public authorities need to show they are not abusing their power to obtain land by failing to fully compensate owners.

Even when an established land acquisition process is in place, there can still be costly uncertainty. This is especially true when the legal process to arrive at an agreed amount favors landowners or is protracted. For example, to assist in the private financing of roads in Spain, the government has recently re-assumed the risk of assembling the required land. Private financiers were no longer willing to take on this risk because courts were awarding greater amounts of compensation than forecast.1 A further challenge is that resolving land issues, including the compensation costs, can be out of step with the planned procurement timetable and be a significant cause of procurement delay. In India, a government review discovered that at least 70 percent of 190 delayed infrastructure projects had stalled because of problems over land acquisition, and the compensation to be paid to landowners was an especially important factor in these delays.2