During the past two weeks the Mumbai real estate market has witnessed two major developments- repealing of a decade old Urban Land Ceiling & Regulation Act (ULCRA) and a land auction which set new records in Mumbai’s zooming property prices.
Last week, the Maharashtra government had scrapped ULCRA which is likely to release around 17,000 acres of land for development in the Mumbai market. Around 338 private firms including corporates like Godrej, Birlas and Wadhawan will be cashing in on from the release of large tracts of prime real estate in the financial hub.
“Physically, it will free up a lot of land for development. We believe that the move could free up to 15,000-17,000 acres,” says Pranay Vakil, chairman of real estate consultancy Knight Frank India.
According to industry sources the Godrej group firms like Godrej Industries and Godrej Consumers, Birlas through Century Textile and Wadhawan’s through their real estate firm Housing Development and Infrastructure (HDIL) hold over 5,000— 6,000 acres of developable land in Mumbai.
Though some these plots face slum encroachment problems and legal issues, in the next three to five years, around 4,000-5,000 acres of land will be available for development in Mumbai, said Vakil. “Apart from the availability of fresh land for development, the ULCRA removal will help up us to save more time as the procedures related to get a non-objection certificate (NoC) from government for the development of a land under ULCRA,” said Sarang Wadhawan, MD,HDIL.
Analysts feel that the move would primarily help companies which have land to sell but were tied down because of the restrictions and potential buyers are unlikely to gain much as property prices are already high. It is believed that thousands of hectares of land is also likely to be available for development in Maharashtra’s other crowded cities, such as Pune and Nagpur.
In a separate development, the Mumbai Metropolitan Region Development Authority (MMRDA) concluded the biggest land deal in the Bandra-Kurla (BKC) region. Three plots were sold for in BKC for Rs 2,791 crore in Mumbai. The amount involved in the deals is almost 180% higher than the reserve price set by MMRDA, which auctioned the plots. Reliance Industries, Wadhwa Builders and Purnendu Chatterjee’s real estate arm TCG (along with the Hiranandani group), which bid successfully for the 75,350 sq mt BKC land.
Wadhwa Builders and the TCG-Hiranandani jointly grabbed two plots earmarked for commercial and office use. RIL won the bid for the third plot, which is reserved for a multi-storied car parking and commercial complex. Seeing the increasing demand for parking space, MMRDA had proposed to allocate one plot to develop a commercial complex and a multi-storied parking facility for a minimum of 550 cars.
Wadhwa Builders, the highest bidder valued the 16,500 sq mt land at Rs 831 crore, or Rs 5.03 lakh per sq mt. TCG quoted Rs 3.67 lakh per sq mt for the 28,300 sq mt plot, valuing it at Rs 1,041 crore. Both these plots are meant for commercial use. Reliance Industries quoted Rs 3.4 lakh per sq mt for the third plot, the total amount being Rs 941 crore. Each plot had a reserve price of Rs 1.53 lakh per sq m.
Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj (JLLM), has justified the deal prize in the current scenario. He said, “The MMRDA land deal has created history in Indian real estate. In the current scenario, when the economy is clocking an 8-9% growth with the demand-supply gap favouring the demand side, the business maths works out. It may be sustained for another 18-24 months till the two assumptions hold well. But after that, when supply starts coming in, sustainability will be difficult.”
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