Land deals push up real estate prices in Kolkata

Defying the overall slowdown in the real estate sector, exorbitant land prices are pushing housing prices in Kolkata.

Land prices have gone up by more than 50 per cent in many plush localities, as demand remains steady and hardly any new townships have come up in urban and semi-urban areas in city fringes.

The recent land auction by government bodies like Kolkata Municipal Corporation (KMC) and Housing Infrastructure and Development Corporation (Hidco) give a fair idea of the burgeoning land prices in the city. In June this year, KMC sold a 2-acre plot on EM Bypass for Rs 115 crore, making it the biggest land deal in the city so far. The last big land deal was in 2009, when a 3.35-acre plot on EM Bypass sold for Rs 135 crore. More recently, in the IT township of Rajarhat, a 2.5-acre plot for a retail-cum-office complex fetched Rs 51.13 crore for Hidco.

“The value of land has gone up by around 50 per cent in Kolkata, the impact of which will be reflected in the upcoming project. The land supply is reducing, but the demand remains steady and there are hardly any new townships coming up to meet the demand,” said Santosh Rungta, a city-based realtor.

The abysmal rise in land prices in West Bengal is not new. Around 2009, in the earlier Left Front regime, government agencies made windfall gains by selling land in prime locations.

For example, three prominent government agencies involved in land deals in and around Kolkata · the Kolkata Metropolitan Development Authority (KMDA), Kolkata Municipal Corporation and West Bengal Housing Board· signed deals worth more thanRs 18,000 crore, for over 5,250 acres of land during the period in little over two years. In fact, KMDA was credited with signing deals, worth more thanRs 800 crore with real estate developers on a single day.

One of the biggest hurdles in developing new townships in West Bengal is the the Urban Land (Ceiling and Regulation) Act (ULCA), 1976. According to the Act, the ceiling limit on vacant land in a category ‘A’ city like Kolkata is 7.5 cottah or about 500 square meters.

West Bengal is one of the few states in the country to have a legislation like the ULCA. The move is in sync with the apprehensions of the chief minister. After all, Banerjee had once wondered, “What will happen if someone wants to buy the city?"

The demand for repealing the ULCA was raised for the first time by Godrej Properties chairman Adi Godrej, at an industry meet within the first month of Banerjee taking over the chief minister’s office.

However, much to the disappointment of the developers, urban development minister Firhad Hakim has recently ruled out the possibility of repealing the Act. “We are not going to abolish the Land Ceiling Act," he said. “Instead, we will give permission to developers for purchase of land beyond ceiling, provided they reserve 30 per cent housing for low-income housing segment."

“In Kolkata, the real estate prices have not gone down, and the market is steady. Prices have gone up by around 15 per cent in some localities,” said Pradip Chopra, chairman and managing dierctor, PS Group.

Notably, unlike the real estate market in Delhi and Mumbai, in Kolkata the real estate sector is driven by consumers, rather than investors. As a result, the prices generally remain steady in times of boom or slowdown.

Thus, even as the housing market in the city has been insulated to recession, the commercial real estate market has been facing a slowdown.

“The occupancy rate office space is low and there are lot of vacant spaces in Sector V and Rajarhat,” said Chopra.

The growth of commercial real estate market is slow in Kolkata, even as the housing market has been growing. In some cases the office rentals have also corrected, but prices have not gone down,” said Pradeep Sureka, Managing Director of the Sureka Group.