The Hindu Business Line : Repealing land ceiling a relief to realtors

The long-awaited repeal of the Urban Land Ceiling Regulation Act (ULCRA) by the Maharashtra Assembly would come as a relief to real estate players who are increasingly trying to speed up project execution time and bring more revenues to the table.

ULCRA forced companies holding in excess of 500 square metres of land to either give it up or get regulatory clearance to develop such land for the required purpose. Repeal of the Act now implies that real estate developers or companies holding land are free to develop the same without seeking this permission.

Supply Situation

The repeal broadly addresses two issues. One, more land would be made available for various development purposes in the space-starved Mumbai city. Companies such as Godrej Industries, who hold huge tracts of land may decide to develop the same. While this would not result in an over-night decline in property prices, this may well ease supply situation over the medium-term and in turn bring prices to more realistic levels.

The repeal may also considerably reduce the lead time from buying land to executing and delivering a project. Industry players have earlier lamented that while in China it takes 15-18 months for a developer to deliver a middle-income housing project, in India planning for the project alone takes such time and delivery can drag on to even 5-6 years. This was in part due to the delays and hassles in getting land clearance from the respective authorities.

This means that project time and, therefore, the proportionate revenue booked over various periods may undergo a change for real estate players in Mumbai. Real estate players such as Peninsula Land, Mahindra World City and recent entrants to the listed space – HDIL and Akruti Nirman – may benefit from the move.

Companies may also do away with complicated structures of holding land through group companies in order to keep the land holding within the ULC stipulation.

Structural Changes

While the repeal may usher in structural changes such as the above, investors need to keep in mind that in the absence of an increase in the Floor Space Index (FSI); saleable area/volumes will not see any change.

Land that the State Government has so far acquired through this Act may also get a new lease of life, as it may now be able to utilise funds from the Jawaharlal Nehru National Urban Renewal Mission.

More Stories on : Real Estate & Construction | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page