Land sales dip after real estate slump
Oct 27, 2015
Source : Toi
 
PUNE: On a humid weekday afternoon last month, Sunil Thube wiped his brow, sipped his tea, and glanced every few seconds at his iPhone ringing impatiently. He answered a couple of calls and gave updates on land deals he was working on.

Thube, who procures land from farmers for major builders, appeared to have a brisk business on hand, "but deals are down by 80%", he said, adding that the inquiries he was getting might not translate into real transactions.

The hectic pace at which builders had been picking up land on the city's outskirts has over the past few months slowed down - an unlikely phenomenon after a decade of a real estate blitzkrieg when tall buildings cropped up on farmlands that once yielded grains and vegetables.

The slump in the real estate sector has had a cascading effect, albeit delayed, on the demand for land among builders who have huge land banks lying unused and are finally wary of picking up more land. Their reasons are largely rooted in the stratospheric land prices and the cost-intensive exercise of land procurement.

"At least 20 major builders in the city are each sitting on a land bank of 100-300 acres," says an industry insider, adding that no projects have been planned on these plots as builders have become wary with the collective inventory of unsold flats in Pune inching towards a lakh.

The slump in land deals is visible in the stamp and registration department's records. In the 2012-13 fiscal, there were over 11.61 lakh transactions of flat and land deals up to September that dropped to 11.4 lakh in 2013-14. The deals went up by a mere 2,000 in the last fiscal up to September, and this year by another 2,000. (See graphics)

"We do not keep a break-up of flat and land deals in the total transactions, but an estimated 70% of these deals are of flats and the remaining are of land," said an IGR official.

Despite the slowdown in the sale of flats, land prices have continued to remain high. "In most cases, farmers are aware of the kind of prices they can quote. Besides, many of them are entering joint ventures where the builder gives, say, Rs 3 crore and 20 flats in a huge township. This gives farmers the assurance of continued returns from their land," said Vishwambhar Choudhari, environmentalist and a land acquisition activist.

If high property prices are rooted in the high land cost, the heavy land procurement expense of the builder adds to it. Land procurement now is a professionally-run, cost-intensive process, with an estimated 5 lakh licensed agents working across the country for various builders, said Ravi Varma, the chairman of National Association of Realtors (NAR). Their role is critical as land holding pattern is complex - multiple heirs of each plot of land and each staking a share. Agents iron out these multiple creases and deliver a legally clear land parcel to the builder. Famers, too, use consultants to ensure they get the best deal and developers rope in big-ticket legal firms at a steep price to ensure their project's execution is hiccup-free.

Property consultant Dileep Loomba said land that was available at Rs 800 per sq foot in Wagholi until three years ago, was now going at Rs 3,000 a square foot. "It is not easy to buy farmers' land. There are issues of some relative owning one-seventh share of a plot who also needs a share to put his or her signature on the land deal. Then, for agricultural land, the builder needs an NA certificate. Almost all builders have people working for them and the builder gets on his plate a good parcel of land that increases the land price. The person mediating adds to the cost (of the final product) and the end-user pays for everything," Loomba said.

The economics of the construction business has changed. D S Kulkarni, the chairman and managing director of Kulkarni Constructions, said until 12 years ago, the total project cost could be divided somewhat like this: one-third construction cost, one-third the cost of land and the remaining one-third the gross profit. "Nowadays, major finance goes into land purchase, say about 65-70%, followed by 25% in construction and 10% gross profit," he said, adding that land purchase in Pune was once simple with land available in abundance on the city's periphery. But after a decade of "chasing land", it has become a scarce commodity.

For those waiting to buy their dream homes, the message is simple: a price correction despite the surplus number of vacant flats available is unlikely. "For a while, salaries kept pace with the increase in land price. But then land prices shot up drastically, but salaries did not," said Varma of NAR, explaining the current-day paradox of a huge demand for an estimated 20 million homes across the country, but the supply available at an unaffordable price.

"Land rates will not go down. Farmers are either going for joint ventures with builders, or constructing a marriage hall on their land and renting it out. It is a steady income," said Irshad Shabbir, who deals with plots in Wagholi, Salunkhe Vihar and Koregaon Park.



pune Picture

financial Year Property Transactions *(up To September)

2012-13 11,61,487

2013-14 11,40,803

2014-15 11,42,054

2015-16 11,44,683

* Property Transaction Figures For Both Flat And Land Sales

source: Igr

same Story Elsewhere

bangalore

land Prices In The Area Around The International Airport And Bangalore-mysore Highway Have Shot Up. If Five Years Ago, An Acre Was Going For Rs 50 Lakh, Now It Is Rs 1.25 Crore. In Hennur, Rates Went Up From Rs 2,500 Per Sqft To Rs 5,000 Now.

"there Are A Few Launches Though The Market Is Slow," Said Wasim Taher, Member Of The Bangalore Realtors Association Of India.

delhi

about 16km From Gurgaon Is Sona, Where The Land Rate Was Rs 1.5 To Rs 2 Crore Per Acre. "but After The Dp Was Released, It Touched Rs 5 Crore Per Acre.

"farmers Know The Converted Land (from Land To Buildings) Has More Value. Most Builders Have Their Own Land Acquisition Departments," Said Col K J Singh, The President Of Association Of Certified Realtors Of India.

kolkata

land Acquisition Of An Ambitious Seven-phase Township Came To A Standstill Midway Through The Project. Among The Many Reasons Was The Tricky Land Acquisition.

"land Prices In The Growth Zone Of Rajarhat-madhyamgram Have Shot Up From Rs 2 To 3 Lakh Per Cottah (1 Cottah Is 720 Sqft) About Seven Years Ago To Upward Of Rs 20 Now," Says Amit Rudra, General Manager (marketing And Sales), Ganguly Group, Kolkata.

the Urban Land Ceiling Act Is Also In Place In Kolkata, Complicating The Acquisition Process Further. Kinshuk Kumar, Local Director Of Land Service With Jll, Said: "we Are Only Now Feeling The Slowdown. Developers Were Still Keen On Buying Land Until Two Months Ago."
 

 

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