By Krittivas Mukherjee
MUMBAI (Reuters) - India's richest state, Maharashtra, has scrapped a law that controls urban land holdings, potentially freeing up large tracts of prime real estate in the financial hub of Mumbai, a move which sent shares of property firms up sharply.
A government spokesman said the assembly of the western state of Maharashtra on Thursday repealed the Urban Land (Ceiling & Regulation) Act.
Analysts and property developers said the law, which has been in place for three decades, has hampered construction of homes and offices and contributed to soaring property prices, and scrapping it may bring thousands of acres of prime land to the market.
"Physically, it will free up a lot of land for development. Our estimate is that it could free up 15,000-17,000 acres (6,100-6,900 hectares)," said Pranay Vakil, chairman of real estate consultancy Knight Frank.
"Admittedly, a lot of this land is embroiled in legal issues, so it's not like tomorrow hundreds of acres of land will be available. It will take time."
Developers said the move could free up to 25,000 hectares of land in Mumbai, where property prices match, or in many cases overtake, prices in New York and Tokyo.
Shares of real estate firms soared on the news, with Housing Development & Infrastructure Ltd gaining more than 8 percent, while the main share index was up 1.5 percent.
Some analysts said the move would primarily help companies which have land to sell but could not previously because of the restrictions, and the potential buyers may not gain much as property prices are already high.
Thousands of hectares of land will also be available for development in Maharashtra's other crowded cities, such as Pune and Nagpur, where there is a high demand for houses and office spaces.
Critics of the land ceiling law say freeing up land will make way for commercial redevelopment and crucial infrastructure.
But supporters of the law, particularly the communists, say the move will help builders, not the common man.
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