New land pooling regulations in Delhi are expected to create more opportunities for property developers and could lead to house prices falling around the Indian capital, experts said.
India’s ministry of urban development last week approved a policy for Delhi that allows landowners to pool their land for the development of infrastructure by the Delhi Development Authority (DDA). Up to 60 per cent of the developed land will then be returned to the landowners, which could be used by private developers.
“The policy is estimated to unlock between 20,000 and 25,000 hectares of land across Delhi, primarily in the urban villages and smaller towns at the city’s peripheries,” said Rohan Sharma, the associate director of research and real estate intelligence services at JLL India. “Such development is likely to result in a healthy availability of residential dwelling units, which will not only enable availability but also help in keeping a control on residential prices.”
The authority has not managed to acquire any land in Delhi for the past decade amid a difficult regulatory climate.
House prices have soared in Delhi in recent years, which has hurt demand. The city is one of the fastest growing in the world in terms of its population, and the prime residential land rose by 24.9 per cent in the two years to April 2014, according to a Knight Frank index. Most of the region’s housing development over the past few years has been taking place in satellite cities such as Gurgaon and Noida.
The policy “is likely to result in residential development projects across the prime city, which has an acute shortage of housing and where most of the housing needs are fulfilled by the DDA” and should lead to more private companies building housing across the city, Mr Sharma said.
“The idea behind the policy is to have private sector participation in land consolidation and development, while DDA assumes a larger role of a facilitator,” he said.
Developers in the region who have been held back by high land costs are hoping to benefit from the policy.
Pradeep Jain, the chairman of Parsvnath Developers, said he welcomed the move as something that had the “potential to change the real estate scenario” of the region.
“It will open up a floodgate to developing land in Delhi itself,” said Mr Jain. “This will facilitate affordable housing development in Delhi. As the cost of land has gone so high, it has pushed affordable realty markets to the peripherals of the national capital region. This move will reverse the scenario and help buyers with affordable options in Delhi.”
But there remain a number of other issues that need to be addressed, he added.
“The execution challenges would still remain unless the government forms a single window clearance mechanism to grant approval of layouts and development licenses. Also, there is no clarity on reduction or exemption of stamp duty for developers who surrender their land to DDA. Though it is a desirable development as far as consumers are concerned, government needs to fix the issues to make it lucrative for developers as well.”
The new land pooling regulations could eventually have wider implications for India’s property market as a whole, according to analysts.
“If implemented successfully, it has the potential to emerge as a prototype for other state and municipal development authorities for pooling land and encouraging private participation in urban development,” said Anshuman Magazine, the chairman and managing director of CBRE South Asia.
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