After ULCRA : Reality & Speculations

Following the repeal of the Urban Land Ceiling (Regulation) Act (Ulcra), around 22,000
acres of land is set to be released in the real estate market in Pune. As a result, buyers are
hoping for a dip in property prices. However, unless the Act repeal is supplemented by a series
of other corrective measures, the much-hoped decline in prices will not come to fruition
immediately, although it may stabilise the property prices in the fringe and suburban areas.
Abhijit Atre reports

The long wait is over. The Urban Land Ceiling (Regulation) Act (Ulcra), 1976, is finally gone.
While the political leaders may pat their back for abolishing the Act, it is a common knowledge
that the state had no other option as the Union government had warned that the urban areas in the
state will not get the promised grants under the Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) unless the Act is abolished by March 31, 2008.

The move comes as a good news to the builders who are eyeing the availability of the vacant
lands while the prospective property buyers are hoping for a correction in the property rates.

The Ulcra had imposed a ceiling on the maximum land holding by an individual in Pune at 1,000
square metres, that is, around 10,000 square feet. (It is 500 sq.m in Mumbai and varies from city
to city). According to the Act, the amount of land in excess to 10,000 sq. feet was declared as
“surplus” and the government was authorised to either acquire it or allow to develop it provided
he/she grants 10 per cent of the constructed area to the government.

Based on the logic that more the availability of land, less the property prices, it has been
predicated that property prices will fall inevitably. However, since the 22,000 acres of land is
mostly located in the fringe villages, the sale of it will affect the property rates in the suburbs that
are close to these villages, and not the main city.

For example, the availability of land places like Lohegaon and Wadgaon Sheri will help stabilise
the property prices in nearby Vimannagar and Kalyaninagar, as a buyer may not mind to move
few kilometres ahead if the rates in the nearby villages drop following the release of the Ulcra
land.

Such is not the case in the main city. The lands that were under Ulcra in the main city have been
already developed under the provisions of section 20 of the Act. The said provision empowers
the land owner to develop the property and hand over 10 per cent of the constructed tenements to
the government, free of cost.

Even in the villages, there is no guarantee that the land owners will release the land for
development at one go or immediately. It is, therefore, the state urban development department
has formulated a proposal to impose a 10 per cent annual surcharge on vacant residential lands.
However, this proposal, aimed at curbing the practise of land holding, is yet to be tabled before
the house.

There are few other issues as well, Promoters’ and Builders’ Association (PBAP) president
Lalitkumar Jain said, adding, “The move needs to be supplemented with the sanctioning of the
Development Plan for the 23 villages and speeding up the infrastructure projects.”

Elaborating on the issue, Jain said that several residential lands in these villages have been
reserved in the water sacristy zones (WSZ) while many border on the proposed Bio-Diversity
Parks (BDP). In the WSZs, the Floor Space Index is limited while no construction is allowed in
the BDP.

“It’s still to be assertion as to how much surplus land falls in these zones as this land will not be
available for construction. The availability of infrastructure around the lands is also an issue
which needs to be considered. Till then, it will be hasty to predict that the Ulcra abolition alone
will lead to immediate fall in property prices,” Jain said.

More so because, though the lower rates of land will be seen in the immediate term, this land
after being purchased (a process that takes 3-4 months) needs to go through the planning and
approval process (further 8-12 months). The impact of the lower land prices as a result of this
action will, therefore, only be seen on homes that will be offered into the market to the customers
12-18 months from now, he said.

State chairman of the Government Liaisoning Committee of the Confederation of the Real
Estate Developers Association of India (CREDAI) Hemant Naiknavare said that the demand for
housing in Pune is constantly escalating and there is a shortage of houses even after the prices
have increased.

According to a PBAP study, currently there is a shortage of four lakh houses in Pune. “But I still
feel that the Ulcra abolition will help stabilise property prices. At least the speed at which the
property rates in Pune had escalated will be brought under check,” Naiknavare said

While the possibility of a correction in the property prices is being debated, the developers are,
however, unanimous that the scrapping of Ulcra will usher in greater transparency in land deals
and will help planned development of mini townships.

“The move signals the end of speculative land deals. The speculators and the fly-by-nigh
operators will cease to exit. The market will open up for genuine developers,” PBAP chairman
Lalitkumar Jain said.

Elaborating, CREDAI’s Hemant Naiknavare said that hitherto procuring a large land was nearly
impossible in fast-developing cities like Pune.

“We used to feel proud even if we got an one-acre plot. Now, there is a possibility that we may
be able to purchase large lands to develop mini-townships. This will ensure funding for
prominent financial institutions. It will, thus, usher in corporate discipline and planned
development,” Naiknavare said.

Also, as these land deals will be effected through a proper registered agreement, the government
will earn a handsome revenue by way of stamp duty and registration charges. The land deals will
thus become more transparent, Naiknavare felt.
President of the Marathi Bandhkam Vyavasayik Sanghatana S.R. Kulkarni pointed out that not
just the builders but even the individuals (who plan to construct bungalows) will be saved from
the red tape and corruption while seeking Ulcra clearance certificates. Chairman of CREDAI
Kumar Gera also asserted that the abolition will ensure that significant amount of land will come
into the market and that there will be opportunities to develop large-sized schemes.

“There was an artificial shortage of land owing to the Act. I would definitely expect softening of
land prices in Mumbai, Thane, Pune, Nashik, Nagpur & Kolhapur. But, how much will this be, it
really cannot be foretold,” he said. Also, the softening will vary from place to place and will
depend on a number of factors. “Each product price impact needs to be evaluated based on
looking at the increase in the last 2 or 3 years. Perhaps, the future increase will be at a lower
percentage because of this relief.” he said.

The real land for real estate

The prime areas, which share the 22,000 acres of land mainly includes the villages that were
merged in the Pune Municipal Corporation (PMC) and Pimpri-Chinchwad Municipal
Corporation (PCMC) in 1997, and even those, which were later de-linked from the two
municipal bodies. Some of the prime villages, which will witness land stock getting released for
real estate development include Baner, Balewadi, Warje, Wadgaon, Hingne, Sasanenagar,
Mohamadwadi, Wadgaon Sheri, Danori, Tingrenagar, Kharadi, Kondhwa, Katraj,
Khadakwasala, Lohegaon, Dhairi, Shivne and Ambegaon. Also, villages around Pimpri-
Chinchwad, Dehu Cantonment Board, Talegaon also have the Ulcra surplus lands. Thus, the
land is not concentrated in one particular belt but is spread along the outer limits of Pune and
Pimpri-Chinchwad township.

REALITY AFTER ULCRA

Ulcra land likely to be released in Pune

22,000 acres
Shortfall of houses in Pune
4 lakh

Proposal to impose surcharge of land is yet to be tabled

Development Plan for the 23 fringe villages is on hold

Infrastructure in the villages needs to be developed

Rates in the suburbs near the villages may drop

Hoping for clarity in land deals