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A Groundswell

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Builders are not a community that is known to hold mass protests. But on 3 May, realty developers will hit the streets to protest the government's ‘over-regulation'. The one-day token strike announced by the Maharashtra Chamber of Housing Industry (MCHI)  will be marked by a freeze of all commercial activity by the construction industry in MMR (Mumbai Metropolitan Region) and a mass rally by 50,000, including builders, their supporters and employees, at Azad Maidan in south Mumbai. The Mumbai action will find an echo in Delhi too with Credai (Confederation of Real Estate Developers' Association of India) threatening to hold protests outside Parliament.

Dharmesh Jain, vice-president of MCHI, says that the construction industry is hit by the "deliberate holding back of clearances for new projects". He says that 10 years ago, a file used to take 30 days to clear; now it takes two years. "It is a systemic problem building up over many years," says Jain, who heads the construction group, Nirmal Lifestyle. MCHI president Paras Gundecha claims that last year Mumbai's municipal corporation only cleared 10 per cent of the total number of building proposals.

Jain says ‘over-regulation' was having an adverse impact on costs and the price of housing stock. "Every year of delay raises the project cost by 50 per cent; if we can't increase the sales volume, there can be no price correction," says the builder.

# Developers are hitting the streets in Mumbai and Delhi on 3 May
# Builders say affordable housing is also awaiting sanction

On being told that volumes are low not because of over-regulation but consumer resistance to high prices, Jain says there is hardly any inventory of under-construction homes in Mumbai. "Mumbai was ahead of the National Capital Region (NCR) in sales a few years ago; today Mumbai's volume is half that of NCR."

Data, however, shows that high prices are a deterrent to sales. According to property tracking agency Liases Foras, the average cost of residential apartments in Mumbai is Rs 10,000 per sq. ft, compared to Rs 3,234 in the NCR, Rs 3,806 in Chennai and Rs 3,935 in Pune. In the January-March 2012 quarter, Mumbai's residential sales bucked the trend and improved 20 per cent over the previous quarter, mainly on the back of 150 new projects launched last year. Liases Foras's managing director Pankaj Kapoor says that with prices going up 17 per cent, it will take 40 months to clear the inventory.

According to MCHI figures, sales in Mumbai fell from 20 million sq. ft in the April-June 2009 quarter to 8 million sq. ft in the last quarter. In contrast, supply in Noida, which was 23 million sq. ft between 2008 and 2010, rose to 135 million sq. ft in the pipeline between 2011 and 2013.

The MCHI has signed an MoU with the state government to build 500,000 units of affordable homes. Jain says most of the projects for affordable homes are pending for want of clearances.

What has triggered this latest protest by builders? Market insiders point to a spat the representatives of developers recently had with Mumbai's municipal commissioner Subodh Kumar. The latter reportedly refused to tone down his strict regime for building proposals. With Kumar slated to retire by end-April, the construction lobby is hoping that things will ease up.

(This story was published in Businessworld Issue Dated 07-05-2012)