Saturday, December 01, 2007

Advantage New Developers As Mumbai Land Prices Seen Falling

"They will also benefit from the local govt picking up the tab for developing roads, water supply, electricity lines"

The repeal of the Urban Land Ceiling Act (Ulca) by the Maharashtra assembly on Thursday will benefit new township developers in a big way. But the profits of developers who had invested in townships on the basis of the old law might take a hit.

Existing developers will have to compete with new realtors who will not only benefit from buying land at softer prices following more land being available in the market but also have the benefit of the local government taking on the cost of infrastructure such as roads, water supply, sewage lines and electricity distribution lines within townships, said Kumar Gera, chairman of Confederation of Real Estate Developers Associations of India, a lobby representing real estate developers. The cost of new infrastructure could make a difference of up to 20% of the project cost, he said.

According to a recent report on integrated townships by real estate consultant firm DTZ, 12 townships are being planned in Mumbai and Pune on a total of 8,053 acres. Typically in Mumbai, land costs are between 50-80% of total project cost depending on the area, with the interest costs an additional 12-13%.

Across the state, about 17,000 acres of land is expected to be released into the market on account of the repeal of the Act. While upmarket locales in Mumbai such as south Mumbai, tony suburbs such as Bandra, Khar and Santa Cruz have little vacant land, the repeal is expected to trigger development in surburbs, such as Kandivali and Malad in the west where land lies vacant, and Thane and beyond among the central suburbs. It would also release land in tier II cities such as Pune, Nagpur and Nashik.

No comments: