Curb lifted on Mumbai development
Saturday, 1 December 2007
Joe Leahy, FT Syndication Service
MUMBAI: Indian legislators have scrapped a law that has held back development in the financial capital of Mumbai, boosting shares of developers, construction companies and land-rich groups.
The state of Maharashtra legislative assembly, which governs Mumbai, repealed the Urban Land (Ceiling & Regulatory) Act, which,say analysts, could free up 17,000 acres in space-deprived Mumbai in the long term.
Developer Housing Development & Infrastructure rose 5.08 per cent to Rs796.75 per share, Lok Housing 6.1 per cent to Rs212.15, land-rich Bombay Dyeing 3.06 per cent to Rs688.15 and Godrej Industries 4.99 per cent to Rs268.50. The benchmark Sensex index was up 0.33 per cent at 19,003.26 points.
Pranay Vakil, chairman of Knight Frank in India, said: "It's a win for the middle class because now we will see some more development."
The law is one of a series of anachronistic regulations that critics believe are delaying large-scale development in Mumbai, in which commercial land values have risen by almost 50 per cent in the past year.
The urban land act was introduced in 1976 to prevent hoarding of real estate. Property owners must register vacant land beyond a certain size with the government, which then imposes restrictions on how it can be developed, such as requiring the construction of small flats for lower-income earners.
Developers have opposed the restrictions, arguing they violate free market principles.
But even though the news of the repeal of the act pushed up share prices of landowners and developers, the practical effect of the move could be to damp property values as more supply comes on to the market.
Mr Vakil said the repeal of the act was likely to free 2,000-3,000 acres of new land for development over the next three to five years.
The remaining estimated 13,000 acres affected by the act was mired in litigation or suffering from slum encroachment and would likely take longer to reach the market.
Mr Vakil said the new supply from the repeal of the act would come on top of existing expected supply of about 3,000 acres.
MUMBAI: Indian legislators have scrapped a law that has held back development in the financial capital of Mumbai, boosting shares of developers, construction companies and land-rich groups.
The state of Maharashtra legislative assembly, which governs Mumbai, repealed the Urban Land (Ceiling & Regulatory) Act, which,say analysts, could free up 17,000 acres in space-deprived Mumbai in the long term.
Developer Housing Development & Infrastructure rose 5.08 per cent to Rs796.75 per share, Lok Housing 6.1 per cent to Rs212.15, land-rich Bombay Dyeing 3.06 per cent to Rs688.15 and Godrej Industries 4.99 per cent to Rs268.50. The benchmark Sensex index was up 0.33 per cent at 19,003.26 points.
Pranay Vakil, chairman of Knight Frank in India, said: "It's a win for the middle class because now we will see some more development."
The law is one of a series of anachronistic regulations that critics believe are delaying large-scale development in Mumbai, in which commercial land values have risen by almost 50 per cent in the past year.
The urban land act was introduced in 1976 to prevent hoarding of real estate. Property owners must register vacant land beyond a certain size with the government, which then imposes restrictions on how it can be developed, such as requiring the construction of small flats for lower-income earners.
Developers have opposed the restrictions, arguing they violate free market principles.
But even though the news of the repeal of the act pushed up share prices of landowners and developers, the practical effect of the move could be to damp property values as more supply comes on to the market.
Mr Vakil said the repeal of the act was likely to free 2,000-3,000 acres of new land for development over the next three to five years.
The remaining estimated 13,000 acres affected by the act was mired in litigation or suffering from slum encroachment and would likely take longer to reach the market.
Mr Vakil said the new supply from the repeal of the act would come on top of existing expected supply of about 3,000 acres.