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Supertech verdict: Land prices likely to zoom by 20% in Noida

May 05, 2014 09:20 IST

Supertech verdict: Land prices likely to zoom by 20% in Noida

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Surajeet Das Gupta & Mansi Taneja

By conservative estimates, the average sale price for a square foot of property in Noida is Rs 5,000 — Rs 2,500-3,000 of that is floor space price and the rest is construction cost. 

Realty developers in Noida, on the outskirts of the national capital, are set to take a hit of up to Rs 9,000 crore (Rs 90 billion), thanks to a recent Allahabad High Court order that bars them from using about 30 million square feet of floor space available to them in their existing projects under a liberal floor area ratio (FAR) regime.

Amid a scramble for fresh land, as vertical growth becomes severely restricted, prices are likely to rise 20 per cent, pushing up apartment prices, too.

FAR is the relationship between total floor space in a building and the area of the plot it stands on. A higher FAR allows builders to grow vertically on the same piece of land, reducing their need to acquire more land.

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Image: Supernova
Photographs: Courtesy, Supertech
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Supertech verdict: Land prices likely to zoom by 20% in Noida

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By conservative estimates, the average sale price for a square foot of property in Noida is Rs 5,000 — Rs 2,500-3,000 of that is floor space price and the rest is construction cost.

So, a combined loss of 30 million sq ft means the developers will not earn the Rs 7,500-9,000 crore (Rs 75-90 billion) they could have made by selling that space.

The Allahabad High Court recently directed real estate firm Supertech to demolish two 40-storeyed residential towers, as these violated building regulations. Of the 857 apartments in these towers, 600 had already been booked.

The residents’ welfare association of Emerald Court Group Housing Society, the petitioner in this case, had alleged the construction of the towers violated the provisions of the Uttar Pradesh Apartments Act, 2010.

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Photographs: Courtesy, Supertech

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Supertech verdict: Land prices likely to zoom by 20% in Noida

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Supertech has moved the Supreme Court against the high court order.

According to the UP Apartments Act, to utilise or buy additional floor space from the government in the same project, developers need to take permission from 60 per cent of the existing residents.

The Noida authorities are strictly enforcing this provision since the high court judgment.

The state government had gradually increased FAR from 1.75 to 3.5, giving a bonanza to property developers, who were allowed to grow vertically on a limited amount of land.

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Photographs: Reuters

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Supertech verdict: Land prices likely to zoom by 20% in Noida

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According to real estate experts, a tightening in compliance with FAR requirements will increase apartment prices. Santhosh Kumar, chief executive officer (operations), Jones Lang LaSalle Property Consultants (India), says an average 20 per cent increase in land price could be expected.

 “So, the number of apartments a developer will be able to build in a similarly sized project will be 20-30 per cent fewer than earlier. As a result, apartment prices will shoot up and end users will have to eventually bear the burden.”

Devinder Gupta, managing director of DBS Realtors, a leading broker in the region, echoes the view: “We have seen queries for land go up substantially since the (high court) judgment.”

Developers say only about 100 acres with unutilised FAR are available in the Noida region. This, they say, could generate only 10 million square feet of additional floor space; that is only a third of what the developers controlled earlier. So, land prices are rising and most of them, with restricted vertical growth possibility on existing land, need to buy fresh land for future projects and expansion.

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Photographs: Reuters

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A senior executive at a leading real estate company says most developers start their projects and depend on permissions for FAR to add units. “This way, we didn’t need to buy more land, as expansion was done vertically. But the court ruling might put pressure on prices.”

REAL WORRIES

  • Rs 10,000 crore: Estimated loss to Noida realtors on account of restriction on use of 30 mn sq ft of floor space available under easier FAR rules   20%: Likely increase in land price in the region as more realty companies vie for limited fresh land
  • 100 acres: Estimated land with unutilised FAR available in the Noida region; this could generate only 10 mn sq ft of additional floor space (only a third of what the developers controlled earlier)
  • Disadvantage: Under easier FAR rules, realty developers could grow vertically and build more floor space on the same amount of land; but under a tightened regime, they need to buy fresh land for expansion
  • Floor space increase: Firms have to pay between Rs 200 and Rs 1,500 per sq ft for increase in their floor space for construction; also, they have to get permission from 60% of existing flat owners

Photographs: Reuters
Tags: FAR , Noida

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