Continuous escalation of land prices and no Development Plans in place are causing bottlenecks in keeping prices down, says ARCHANA SINHA.

The housing industry is on the revival path: more because of the incentives that were offered by the banks, with lower interest rates and a good amount of corrections in the market. The second most important factor was the government's incentive to augment its own agenda of affordable housing, by offering incentives for the same.

However after the initial euphoria and a flurry of activity from the government agencies, things seem to have cooled down a bit too soon. Some tasks remain unfulfilled. Continuous rise in land prices in Pune, escalation of construction material costs and no new land to develop are throwing the agenda of affordable housing in jeopardy. The recent ready reckoner has officially pushed the land prices up.

Mr. Kumar Gera, chairman, Confederation of Real Estate Associations of India (CREDAI National) says, "Rising land prices is a natural phenomenon as land is not manufactured in factories. Secondly, the value of the land is directly related to the quality of life that is offered around it, infrastructural facilities and closeness to work place.

However for a certain agenda to be fulfilled the government has to come up with the right policies to control indiscriminate rise of land prices. What is happening in Pune is the artificial creation of this shortage by not passing the Development Plans (DP), which can create more developable lands by including the fringe areas. Moreover granting additional FSI, putting infrastructure in place and facilitating faster development would help control the housing prices."

Adding to this view Anuj Bhandari, MD, B.D. Bhandari group says, "Difference in land prices between Pune and other similar cities is rather too much. High land prices plus cost of construction are pushing up the selling price. This is going to be unsustainable in the long run. New projects are not being launched even though there is a huge pent-up demand. No new land stock is being released from the government as the DP is not in place. Once that is done you need to put the infrastructure in place.The selling price is higher than other cities. The DP clearance will solve the problem once and for all. Prices of the a home depends a lot on the land pricing in most cases 25 to 30 percent of the cost can be controlled with the right land pricing."

Satish Magar, President, CREDAI Pune says, "I don't know what is stopping the government from sanctioning the DPs. There is a general belief that if land parcels are released the developers would grab them and leave them undeveloped until the prices escalate. It is a complete myth. Moreover there can be policies to counter that tendency. Our business is development and the faster we are out of the project the better it is for us. The DP is pending; as a result agricultural land conversion is also pending. Shortage of land keeps supply crippled and does not encourage competition among the builders for keeping the prices low."

Kapil Gandhi, MD, Sigma One Landmark Developers is also of the same view. He says, "As long as the DPs are not sanctioned and FSI remains less, the prices would remain high. Without the final sanction there is no clarity as to which piece of land is earmarked for infrastructure; which part is reserved for roads, sewage and water lines, how much is reserved for rehabilitation of the villagers. Most developers have stalled their plans of construction, as no one wants to get into a trouble for using a piece of land that could fall into a restricted area. These hit supply, resulting in scrambling for grabbing from whatever is available."

The government, of course, has its own argument about land prices going high. According to the officials, the proceeds are pumped back into development of infrastructure.

Reacting to this, Mohammed Aslam, Head, Pune, Jones Lang LaSalle Meghraj, says, "The government has to earn from the assets that are under its control, to pump it back in infrastructure and development. But this is highly achievable by working out a viable formula. Passing the DPs and freeing up locked lands for development is most important. They must clearly mark out the areas reserved for the purposes like infrastructure and rehabilitation of project affected people and finally share the proceeds with developers for making infrastructure on PPP model. There is a solution to everything ... and all these problems are inter-related. Real estate prices have already stabilized and cannot go down further."

Aslam adds, "The government has to provide for single window clearance for processing and approvals so that there is faster turnaround time and faster exit. Offering extra FSI would also be a good incentive ... there are ways, after all."

Ashok Kumar, MD, Cresa Partners says, "They must put a ceiling on bidding too ... There are enough ways to help bring down the prices ... The idea is to act quickly and not continue to contemplate on things like sanctioning the DPs."

Gera concludes, "One of the finest examples of keeping land prices under control is Ahmadabad city. Look at the way they have opened the land for development outside the city limits. Development of multiple ring roads allows you reach the city centers within 20 minutes. So who would mind going further out? It works well."