Tuesday, July 31, 2007

Maharashtra govt tables ULCRA repeal Bill

BS Reporter / Mumbai August 01, 2007
Buckling under pressure from the Centre, the Maharashtra government finally tabled the Bill to repeal the Urban Land Ceiling and Regulation Act (ULCRA) in the state legislature today. The matter will come up for discussion tomorrow.

Though Maharashtra is set to be the 10th state to rescind the Act, the impact of the repeal on Mumbai’s realty market is going to be minimal. A major chunk of surplus land is covered by the Coastal Regulatory Zone (CRZ), No Development Zone (NDZ), forests and slums.

Introduced in 1976 with an aim to provide affordable housing to lower- and middle-income groups in urban areas, the Act prohibits any individual from holding more than 500 sq mt of land.

However, companies and trusts were exempted from this provision with a catch that they could use the land only for the purpose for which they had been set up. They were barred from trading these lands or developing housing schemes on these lands.

The Assembly has merely three days in the current session to take up the Bill and it is unlikely that both the Houses of the state legislature would give their nod converting it into a law.

After the Act was repealed by the Centre in 1999, each state had to repeal the respective Act by passing separate Bills since land is a state subject. Taking advantage of this fact, Maharashtra government, along with nine other state governments including Tamil Nadu, West Bengal and Jharkhand chose not to repeal the Act.

However, Jawaharlal Nehru Urban Renewal Mission (JNURM), under which states get funds from the Union government for urban infrastructure projects, made it mandatory to repeal land ceiling Acts to get the aid.

In the absence of repeal of ULCRA, the Maharashtra government, which has planned infrastructure projects worth Rs 40,000 crore for Mumbai’s makeover, stands to lose nearly Rs 10,000 crore as central aid under JNURM.

According to an affidavit filed by the state government in the Bombay High Court in 2006 following a public interest litigation (PIL), out of 30,000 acres of land in Mumbai Urban Agglomeration that could have been acquired under ULCRA, the state government acquired only 2,000 acres of land till 2006 and promised the high court that it would acquire another 1,000 acres by the year-end. The state government has also given exemption of 3,000 acres of land from ULCRA.

Even if the Act gets repealed in the current session, according to informed sources, the impact on the Mumbai realty market is going to be marginal.

As nearly 12,000 acre of land is under CRZ, NDZ, forests and in litigation, while nearly 5,000 to 6,000 acres is encroached by the slums. After all this, merely 6,000 to 7,000 acres will become available for housing or other development projects.

Real estate industry hopes that repealing of ULCRA will make trading of land more easier since buyers of vacant land will get clear title. “It will help foreign investors and real estate funds who are particular about titles, to invest in properties. Land buyers also can mortgage the vacant land now and get loans,” said RS Ajmera, president, Confederation of Real Estate Developers Association of India (CREDAI).

Maharashtra Chamber of Housing and Industry (MCHI) president Mohan Deshmukh said the impact of the repeal on the Mumbai real estate could be seen over a period of a year or so.

“In Mumbai, only 400-500 acres are vacant and the rest unoccupiable. Nonetheless, the repeal can ease the shortage of dwelling units in Mumbai, which is as much as 35,000 units. However, tier-II cities in the state could see a major correction in land prices where the prices have gone up drastically.

“For instance, in Pune, land prices 5 to 7 km away from the city have risen 300 to 400 times. An acre of land was sold at Rs 12 lakh three years ago in Pune, today the same land is sold at Rs 45 lakh. After the repeal, more land supply will come and prices will stabilise.”

Deshmukh believes since major land holdings are held by trusts and corporates, more players could come into the market. “Either the land owners would develop the land or would go for joint development with existing developers,” Deshmukh said.

Property developers in Nagpur expect the repeal would free up a lot of land in the heart of the city and its suburbs. Noted builder Ashutosh Shewalkar said that most of the land had been utilised under the Talegaon Dhabade Scheme and Sections 20 and 21 of the Act which allowed developers to go for development on the land falling under the ULCRA, if they handed over 25 per cent of the developed land to the government.

“Nagpur should witness a cooling period as more land will be available for development. However, with the ambitious cargo hub project shaping up, the city would be well in position to accommodate the extra land being freed,” he said.

A Mumbai-based developer said on condition of anonymity that the repeal could stop the corruption in getting the no-objection certificate (NOC) under the ULCRA for development.

The state has powers to give exemption from the Act in certain cases. “Developers were spending Rs 100 per sq feet in getting the NOCs. Now we can save all that,” he said.

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