Mumbai has sunk Rs275 billion in land since 2005
Moneylife Digital Team 02 April 2012

The paradox of the situation is that despite sitting on such massive money resources, Mumbai is unable to generate funds to finance its most essential requirements

According to a report by Jones Lang LaSalle, Mumbai’s realty and infrastructure situation now needs a serious boost. The city has invested Rs 275 billion in land since 2005, and the city needs a similar amount of in within five years to only complete the infrastructure projects that are underway.

“The city of Mumbai needs additional investments of about Rs275 billion in the infrastructure sector over the next five years if these projects are to be completed on schedule. This is equal to the amount that the city has buried in its land. The paradox of the situation is that despite sitting on such massive money resources, Mumbai is unable to generate funds to finance its most essential requirements. This would be an apt time for the authorities and policy makers to focus on breaking this deadlock,” says Subhankar Mitra, head-strategic consulting (West) Jones Lang LaSalle India.

He also says that most of the investments in land, particularly in South Mumbai, have actually remained non-yielding. Incidentally, South Mumbai is the area where maximum investments were made. Investors have not been able to fully monetize their investments and the end users have faced spiralling price rises despite economic slowdowns. Add to that, with the change in DCR (Development Control Rules), both the builders and customers have been left in the limbo.

In 2005, when FDI in real estate was enabled, Mumbai saw many high profile land deals and since then, many projects have been launched. Apart from the recorded transactions amounting to Rs 276 billion; there are unaccounted investments made in slum rehabilitation and redevelopment projects—which can amount to another Rs100 billion. 2008 saw an exemplary rise in investments in South Mumbai, says the report.

However, the city has managed to launch 2.5 lakh of residential units in the last five years—and all of them are yet to be completed. The report says that quantum of investments in mega infrastructure projects amounts to only 60% of the investments made in prime land in the city, approximately in the same period.

In other words, Mumbai needs to beef up its infrastructure, and fast. But the realty situation does not look very bright either. Sky-high prices are putting off buyers, and the developers are also confused with the new DCR. The proposed hike in stamp duty of leave-license agreements will also dampen the spirit of those who want to rent an apartment. Read Maharashtra Stamp duty hike: “Neither can you afford to own a home, nor take it on rent”

Pankaj Kapoor, MD, Liases Foras, however, finds it surprising that such a huge amount has been invested in land; because the RBI (Reserve Bank of India) does not allow foreign direct investment (FDI) in buying land. “What this money has done is that it has created speculation; and has created unproductive land values. If you check builders’ balance sheets, they are burdened with debt”, he said. “Residential realty does not really need money—and no amount of money will solve the problem. It needs sales; but the prices are too high. Instead of getting more money, builders should make housing affordable,” Mr Kapoor said. As of December, more than one lakh housing units remain unsold in Mumbai.

1 decade ago
The prices are just not budging , the market is stagnant now .It seems people are more interested in getting into old building/properties rather than getting into an unpredictable zone of under construction & redevelopment projects.
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