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Over Rs 25,000-cr mumbai realty in a limbo

This article was posted on Dec 13, 2009 and is filed under Market News

Body blow for real estate developers as state switches off tap to high-rise projects

The Maharashtra government’s decision not to provide water connection to high-rise buildings (above seven floors) in Mumbai till 2012 has dealt a body blow to the city’s real estate developers.

Developers and independent observers said investments of over Rs 25,000 in the construction of around 1,400 high-rise buildings in the city are now in jeopardy.

The decision was announced by Chief Minister Ashok Chavan in the state legislature yesterday in view of the prevailing water scarcity in Mumbai. Stung by the decision, real estate developers have requested the state government to reconsider its decision on the ground that this will worsen the shortage of houses in the metropolis.

A Mumbai-based analyst, who did not want to be quoted, said the decision can be challenged in a court of law because it has made the real estate developers the sacrificial goat for its own failure to provide basic amenities like water.

A senior government official said the damage of Rs 25,000 crore is based on a minimum sale price of Rs 3,000 per sq ft for 1,400 projects. The loss to the real estate developers could be still higher if the sale price of Rs 7,000 per sq ft is considered.

He, however, defended the government’s decision in view of the 15 per cent water cut already in place in the city. This would in fact go up to 30 per cent if Mumbai did not have adequate rainfall by July next year. Water availability will be possible only after three reservoirs are built by 2012. Hence the ban, he said.

The official said builders and developers should also take the responsibility and avoid rampant wastage of water by going in for water recycling and treatment of saline water. Very few developers have adopted these measures and want the government to carry the can.

Niranjan Hiranandani, the managing director of Hiranandani Construction, wondered why the government ban was only for the private sector and not on the projects set up by the state-run Maharashtra Housing and Area Development Authority. “While every effort is needed to curb leakages and theft of water, the government should not do injustice to those who won’t get water despite paying the required development charges and fees,” he said, adding that his company has recycled water at its projects for the last 20 years.

Dharmesh Jain and Rajan Bandelkar, vice-presidents of the Maharashtra Chamber of Housing Industry, said a representation would be made shortly to Chief Minister Chavan in this regard. Bandelkar said any such decision should have been only on a case by case basis, and a blanket ban didn’t serve any logic.

Ranjit Naiknavare, executive committee member of the Confederation of Real Estate Developers Association of India, termed the government’s move irrational. “The government cannot simply stop giving commencement and completion approvals. Instead, the government can ask builders and developers to organise water supply on their own if the proposed reservoir projects are not complete within the stipulated time,” he added.

It would also be a long wait for consumers who have already paid a part of the booking amount in these projects.

source: Business Standard

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