Doing away with ULCRA

Till last week, West Bengal, Jharkhand, Andhra Pradesh, Assam and Maharashtra were the only states yet to do away with the archaic Urban Land Ceiling and Regulation Act, 1976...

Till last week, West Bengal, Jharkhand, Andhra Pradesh, Assam and Maharashtra were the only states yet to do away with the archaic Urban Land Ceiling and Regulation Act, 1976, repealed by the Centre in 1999. The Union Urban Development Ministry has made urban land reforms mandatory for all states and local bodies to qualify for applying funds under the Jawaharlal Nehru National Urban Renewal Mission. Now, as Maharashtra repealed the Act on Thursday, what it would mean for the state in general and the commercial capital, Mumbai, in particular:

8226; Why was the scrapping of the ULCRA delayed in the case of Maharashtra, and what catalysed it now?

The Central Government had not considered states like Maharashtra and Andhra Pradesh when it repealed the ULCRA in other states like Gujarat, Karnataka and Punjab. Repealing the Urban Land Ceiling Act was definitely the need of the hour. While it was certainly envisaged as a means of protection to landowners, it has not served any of the purposes it was created for. It became evident that the ULCRA rendered valuable land useless for all practical purposes. In India, land constitutes approximately 50 per cent of the price of real estate.

8226; Now that ULCRA is scrapped, what are the implications for the real estate sector in Maharashtra?

With the repealing of the Urban Land Ceiling Act in Maharashtra, considerable portions of land are free in central areas of cities. However, these are out of the reach of middle-income buyers to begin with, so they will not benefit. The land locked under the ULCRA and now being reverted to its owners has appreciated in tandem with market dynamics since the passing of the Act 22 years ago. In any case, it will meet no more than 5 per cent of the overall demand in Mumbai over the next one year.

8226; How does the sector stand to benefit in real terms?

Now that the Act is scrapped, projects will come out at a faster pace, and developers will pass the benefits of speedier approvals on to the consumers. Also, by repealing this archaic Act, the Government has assured that the real estate sector will grow by at least 14 per cent by the year 2011-12. Real estate8217;s contribution to the national GDP so far has been about 11per cent. With the scrapping of ULCRA, this figure will increase substantially. This is an excellent and much-awaited move by the Government, and definitely a step in the right direction.

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8226; How much land has been released for development by repealing the Act? Who are the biggest landowners in question here?

Approximately 25,000-acre land has been freed. However, only around 10,000 of these are in developable zones, while the remaining 15,000 fall in areas with restrictions, such as coastal zones, forest lands etc. The players with the biggest land holdings previously locked by the ULCRA within Mumbai include Godrej, the Wadia Trust and the Indian Railways, with Hiranandani from the developer community.

8226; Will it impact the real estate prices? Will they come down?

By scrapping of ULCRA in Maharashtra, property prices will not come down in Mumbai because the released land meets only a very small part of the overall demand. Also it will not bring down prices in middle income housing because all the released land is in central areas that command very high property prices.

Anuj Puri, Chairman 038; Country Head, Jones Lang Lasalle Meghraj