Maharashtra scraps the Land Ceiling Act. The expected changes will take a while in coming.

Reality Check

Land: Some 1,200 acres of land freed, but only 65 acres with no legal issues

    * Another 2,282 acres to be available later, when legal issues are sorted out
    * 6,000 acres held by business families, could face environment laws
    * Legal: Legal procedures could take a few years to be sorted out
    * Less bureaucracy, easier norms for builders and real estate developers

*     Prices: No immediate impact on property prices; it can stabilise in a couple of years

*     Urban Infrastructure: State government moots Vacant Land Tax to replace ULCRA

*     Question of mass and affordable housing remains unresolved

It has taken less than a week for reality to sink in. Maharashtra's decision to repeal the Urban Land (Ceiling and Regulation) Act or ULCRA—which empowered it to acquire excess urban land to create affordable housing—has met with jubilation in most quarters. The repeal is supposed to temper property prices and make available large tracts of prime real estate for development. But now it seems the impact is unlikely to be all-encompassing, and will not manifest itself instantly in Mumbai or elsewhere in Maharashtra.

The repeal didn't go smoothly. Though the initial draft of the Bill to repeal ULCRA was formulated during the Shiv Sena-BJP government, Sena mlas voted against it on November 29, the day it was passed. The party now terms the repeal as "pro-rich and anti-Maharashtrian" and is preparing a campaign in urban areas around this theme. A section of the Congress was against the repeal too, but bowed to an ultimatum issued from New Delhi. To calm political waters, the state is now considering a vacant land tax levied on landowners if they keep land vacant for over three years.

Clearly, the Act had to go. In its 30-year history, ULCRA had led to vested interests amongst the ruling class who arbitrarily exercised power to grant exemptions, mostly under Sections 20 and 21. It's an open secret that these exemptions—and no-objection certificates—were decided by ministers and bureaucrats on a case-by-case basis, fuelling corruption. Also, upgradation of infrastructure in Mumbai and eight other cities depended on the repeal, without which funds from the Jawaharlal Nehru National Urban Renewal Mission would not be released to Maharashtra. The Centre cleared only half of the nearly 90 project proposals worth Rs 24,000 crore submitted by Maharashtra; many of the remaining hinged on ULCRA being repealed.

Now that ULCRA is history, how can it impact ground realities? How much land will be released in the open market, and how long will this process take? In Mumbai, land held under ULCRA is a little over 50 acres, though in the absence of certified numbers, there are wide-ranging estimates. The state's urban development department (UDD) is still figuring out the extent of land acquired, or in various stages of acquisition, under ULCRA. While the state government had declared 17,000 acres as surplus, it exempted nearly 13,827 acres of it under various sections of ULCRA. The acquisition proceedings were initiated for only 3,500 acres, most of it over the last two years, when the repeal was imminent.

So far, the UDD has acquired 2,282 acres, but over two-thirds of it has been legally challenged. A back-of-the-bill assessment shows barely 1,200 acres is available for development now, of which only about 65 acres—free of legal encumbrances and encroachments—is most likely to come first into the open market.

Then there're the 6,000 acres with large landowners like the Godrej family, the Wadia-controlled FE Dinshaw Charities, the Mahindras, the Birlas and the Wadhawans.

About half of this land is either under mangroves and salt pans or is marked in the no-development zone. In fact, the Godrej family owns some 2,500 acres of mangroves in Mumbai. Given environmental regulations—the business families of Godrej, Wadia, Wadhawan, and Mahindra were unwilling to discuss plans—it's anybody's guess how much of this land will be in the market for development. "Though some of these lands face slum encroachment and other legal issues, in the next three to five years around 4,000-5,000 acres will be available to them for development," says Pranay Vakil, chairman, Knight Frank India.

In the eight other cities in Maharashtra that fell within ULCRA's ambit, the script unfolds on similar lines—much of the land acquired is under litigation. But it differs in one significant way. The land available in Mumbai is largely in the suburbs and outer areas, though well within the Mumbai Metropolitan Region (MMR). Land available in Pune, Nagpur, Nashik, Aurangabad, Thane, Ulhasnagar, Kolhapur, and Sangli falls within central areas of these cities. Estimates show that nearly 60,000 acres will be released in the eight cities, but UDD officials suggest one-third of it as a realistic figure.

It's quite clear that the amount of land released will depend on overcoming legal roadblocks for nearly 1,200 acres in Mumbai and close to 2,000 acres in other cities. The pending litigation is of various kinds—where owners have challenged the government acquisition order; where the process of acquiring has been stayed by local judiciary till land titles and similar issues are sorted out; where the government has moved courts against reluctant landowners; and, finally, where exemptions granted under ULCRA is challenged by individuals, activists or corporates.

All legal proceedings initiated under the ULCRA now stand invalid, but the cases have to be closed and paperwork completed. This could take a few months to two-three years in some cases. Land will be available in driblets and landowners are unlikely to offload large portions at one go. "The impact of the repeal will depend upon how the litigation issues are dealt with," remarks Mohan Deshmukh, president of the Maharashtra Chamber of Housing Industry (MCHI).

The impact on property prices is also keenly debated. While major real estate developers are upbeat about prices becoming more realistic and housing more affordable, financiers and activists are circumspect. The developers aver that while property prices may not change drastically, considering the huge sums already invested, they could and should stabilise. More importantly, this is unlikely to be immediate, and a realistic time-frame would be two-three years. "The repeal will not result in an overnight decline in property prices, but it will ease supply over the medium-term, which in turn will bring prices to more realistic levels," points out Pranay Vakil. Adds Niranjan Hiranandani, managing director of Hiranandani Construction: "Mumbai will see announcements of large projects...the housing stock release will have a sobering effect on prices."

Elsewhere in the state, though, prices could tumble by about 30 per cent in the next few years, depending on how landowners release or develop the freed land. But Mumbai is another story. "Property prices will decline only if mass housing stock rises, but this won't happen," argues urban planner and architect Chandrashekar Prabhu. "Land value is phenomenal. It's unviable for builders to make anything other than commercial complexes or high-end apartments."

Urban planners also cite the chances that Mumbai let go—when nearly 600 acres of textile mill surplus land in the heart of the city was made available for re-development, almost none of it was used for affordable housing.

Far from bringing down property prices in central Mumbai, the re-development of commercial complexes, malls and deluxe apartments pushed prices up by nearly 100 per cent. Besides, property prices in Mumbai are increasingly linked to costs for Transfer of Development Rights (TDR), which forms a major chunk of construction costs. tdr costs in most areas are twice that of two years ago.

The housing issue is, of course, a political hot potato. Various party governments promised affordable housing to slum dwellers and others. The Sena-bjp government had even declared free tenements for slum dwellers. If the existence of ULCRA did not make mass housing possible—one of its objectives—how do we expect to see mass and affordable housing after its repeal, wonders planner and architect P.K. Das. The best example of such housing is the model colony in Goregaon suburb, where veteran socialists Mrinal Gore and P.B. Samant helped acquire land under ULCRA a few years ago. The next phase of the project, for which over 10,000 people have registered and Rs 100 crore collected as seed money, is stuck because the government dragged its feet on releasing land. To meet the ULCRA objective in spite of its repeal, Chief Minister Vilasrao Deshmukh says incentives will be given to developers and builders if they construct low-cost housing.

Uma Adusumilli, chief planner of the Mumbai Metropolitan Region Development Authority, has another worry. Irrespective of what kind of housing stock is made available, it will overload the infrastructure, she says. Infrastructure planning usually takes into account population estimates in a zone; most of them will have to be revised now as open spaces become populated. The number-crunching is yet to begin. Environmental activists, of course, worry about the open spaces—mangroves and salt pan land falling victim to the development sharks. "What we need is a holistic policy now for urban development, whether in Mumbai or elsewhere. Just repealing ULCRA won't do," suggests former adman and AGNI co-founder Gerson da Cunha. Clearly, it remains to be seen how the impact of the repeal plays itself out among a warren of possibilities.

© Outlook Publishing (India) Private Limited