(1) All lands vesting in a Gram Mandal by way of Gramdan or otherwise for the purpose of this Act shall constitute the land-pool.
(2) The Mandal shall, having regard to the declarations made under section 5, either set apart not less than five per cent of the area of lands out of the land-pool as the Mandal may determine for the benefit of landless persons, and the remaining lands for return to their former owners, as hereinafter provided or the Mandal may alternatively purchase a compact block of land of an area not less than five per cent of all the donated lands at the cost of the donors, and each donor shall pay towards the purchase price a sum for an area equal to five per cent of land donated by him.