Land Price Correction Possible For Mumbai

Source: www.business-standard.com If, Maharashtra government’s new initiatives for improving land supply in the city fructify, land prices in some parts of Mumbai could see a correction of up to 25%. Some of the new initiatives planned to increase the supply of land include norms, such as, repeal of the Urban Land Ceiling Act (ULCA), re-development of Dharavi, salt pan re-development and a new housing policy with incentives for rental housing and carpet area.

A study conducted by Knight Frank, International Property Consultant informs, the per-capita land availability for housing in Mumbai at 103-sq. ft., is but one-tenth of international standards. Further, the study points, out of 475.07-sq. km. of Mumbai’s land mass, only 120.55-sq. km. is available for housing, just 25.26% of the total. The first signs of a slow down in prices have emerged from the re-development of Dharavi, a project expected to cost Rs. 9,300-crore, as the government aims to develop 14-million sq. ft. of commercial space and 30-million sq. ft. of residential space, all in the next seven years.

Once developed, industry experts are of the opinion that the area could have a cooling effect on surrounding areas, including Bandra Kurla Complex, Sion Bandra, Khar and Santacruz. Pranay Vakil, Chairman - Knight Frank, believes the mere announcement of Dharavi re-development, would have a salutary effect on sobering of prices. “You would see the impact on prices in 7-8 days. Even, Bandra Kurla Complex (BKC), where prices go up to as high as Rs. 30,000 per sq. ft., prices could slump to Rs. 7,000 per sq. ft.” The Repeal of Urban Land Ceiling and Regulation Act (ULCRA) in the monsoon legislative session, could well be the next major factor to contribute to land supply, as Mumbai along with its suburbs sees around 25,000-acres of land freed up for development. Industry analysts expect a 25-30% price correction, whenever this sort of land supply hits the market. “If this happens, there will be a slowdown in property prices. Since, there is acute shortage of land, developers will benefit,” says Rajesh Mehta, Chairman, Raha Realtors.

As salt pan land re-development frees up 5,500-acres of land in the island city, surrounding areas could see a correction of up to 15 – 20% in the salt pan land areas of Vikhorli, Kanjurmarg, Trombay, Bhandup etc. Mohan Deshmukh, President - Maharashtra Chamber of Housing Industry, believes that the measures could yield the results in two years time. “Today not much land is available for developers due to multiple approvals, ULCRA, salt pans, Rent Control Act and so on.

The crucial factor is that you can not increase the land but the demand for it is growing,” adding, the government should increase land supply by repealing the ULCRA and amending the Rent Control Act. Nearly, 100,000 housing units could be freed up with 500,000 people getting housing, if, amendments to the housing policy are legislated, with incentives for rental housing and carpet area norms.

“If, the government amends the Rent Control Act, people will come forward to give their houses on rent; it could lessen the demand for housing and indirectly have a impact on spiralling prices,” said Deshmukh. Denying any major price corrections across the city, R.S. Ajmera, President - Confederation of Real Estate Developers’ Associations of India (CREDAI) believes prices could correct in areas, where supply is released.

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