Real Estate: The Land Mafia At Work, But A Revolution Can Turn It All Around
Las Vegas is a standing example that crime pays, without killing people. The only difference: those who own the land own everything, even in a desert state like Nevada. Delhi is no different, built on the fringes of the Thar, it's homegrown Realtors have achieved just that. They have cornered all possible parcels of land in and around the NCR and also in the main metro cities of India, some land banks with the large Realtors exceed ten years of construction demand. Which implies they can carry on maintaing the high rates for Land and Apartment prices for atleast 2 decades. Banks and Financial Institutions have been willing partners having funded acquisition of these land banks, which sit in the books and create scarcity-a structural issue for the Real Estate sector.
The top 9 real estate companies beginning with DLF, Unitech, Jaypee Infra and HDIL control 2058 mn sq feet of Land. Of this stupendous Land holding just 277 mn sq feet is being developed or just about 13 per cent of the Land Bank. Worse compared to the land bank and projects under development the delivered supplies have been a mere 34 mn sq feet. Take today's price of land in the NCR, Bombay, Bangalore, Hyderabad and Pune and see what is the colossal sums of money stuck into unproductive use. Quite extraordinarily, just 0.01 per cent of the land bank has been delivered to the people looking for homes.
This brings us to the important question haven't the LIC, LIC HF, GICHF, Dewan, Canbank HF and such institutions have colluded and deprived the masses of a cheaper place to live. Such a massive allocation of resources to Land is the main reason behind the current shortfall of over Rs 100,000 crore in the Banking system and the reason behind the spurt in both borrowing and lending rates to astronomical levels. Short of a revolution of the type witnessed in Egypt, India's poor and middle classes should forget their dream of ever owning an affordable house in their entire lifetime.
Shortages have been created, deliberately
Many real estate developers develop only a fraction of their land bank at any given point of time. They have cited the ubiquitous regulatory issues for the slow progress in their projects. We are note sure if real estate developers are unwilling or unable to develop their large land banks or are simply sitting on them in order to restrict supply and extract high prices from potential customers for the small quantities of developed properties. From the figures given below it can be seen that most developers are developing only a small portion of their land banks currently.
The numbers are stark: DLF; Land Bank-399 mn sq feet ,under development 56.4 mn sq feet, sold 6.5 mn sq feet; Unitech 327, 34, 5, Sobha; 235, 9, 2; Purvankara; 101, 20, 2; Oberoi; 20, 10, 0.4; JPInfra; 530, 24, 7; DBRealty; 69, 20, 3; HDIL; 241, 87, 4; IBREL; 136, 17, 5.
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