Mumbai: Large tracts of industrial land in Mumbai suburbs are expected to be freed for sale after a Maharashtra government decision to slash the premium charged on these plots.
On 17 January, the state government decided to cut by a massive 75% transfer charges payable on the sale of plots leased out by the Maharashtra Industrial Development Corporation (MIDC). This means buyers would now have to pay just 25% of the total value of land as transfer charges as against the earlier norm of paying 100%. However, this is only applicable if the land parcel is being used for industrial purposes.
Maharashtra chief minister Devendra Fadnavis, who holds the urban development portfolio, told Mint that the idea was to facilitate industrial use of vacant plots of land or those plots where the manufacturing units have turned sick.
“The reduction in transfer charges only applies to those plots which were leased out by the MIDC for industrial purposes but which for some reason have failed to do so or stopped delivering this purpose," Fadnavis said.
The decision would help supply land for industries where MIDC has set up industrial estates, particularly in the Thane-Belapur industrial belt and the larger Mumbai Metropolitan Region, he said.
The high premium charged by the government over and above the land cost had made land transactions around the Thane-Belapur area hugely expensive in the last few years.
Real estate experts and developers said the decision would help fast-track industrial land transactions and push land supply in Mumbai suburbs.
Though it is hard to say at this point exactly how much land can be unlocked in the process, land brokers said over 200 acres in the Thane-Belapur corridor are currently on the block.
According to Gautam Saraf, managing director (Mumbai), Cushman & Wakefield, the reduction in transfer charges will unlock at least 150-200 acres around Thane-Belapur in the near future.
To be sure, most of the industrial land plots leased out by the MIDC came under the purview of the Urban Land (Ceiling and Regulation) or ULCR Act though it was repealed in 2007. Under this law, if any individual/firm owns more than 500 sq. metres of land in Mumbai, the state government can acquire the surplus land to create affordable housing stock.
Though the Act was repealed, Section 20 of the Act was retained authorizing the state government to grant exemption to those owners who agree to allocate surplus portion for affordable housing or for purposes prescribed by the government.
An industry department official, who did not wish to be named, said the most industrial plots which now lie vacant have been leased out by the MIDC under this exemption. If any firm or individual wanted to buy these land plots, a premium was charged by the government to release the land from the ULCR purview as transfer fee. However, several developers had complained that land transactions were stuck because of lack of clarity over the ULCR Act and because of confusion over the charges applicable for transfer of land.
“Transaction and development of these lands have been a challenge because the ambiguity surrounding ULC premiums was hindering decision-making for sellers as well as buyers", said Nishant Kabra, Local Director, JLL India.
However, the old charges of 100% will continue to apply if the land is transferred for commercial or residential purposes, the Maharashtra chief minister clarified.
“We are still estimating how much land will actually become available through this route. This is largely a government policy initiative and we have to wait for the results," Fadnavis said.
However, government officials, on condition of anonymity, said boosting affordable housing may be the intended outcome of this move as the government may give some concession in transfer charges if owners agree to carry out affordable housing projects on these plots.
According to Vrushank Mehta, head (corporate strategy and land acquisition), Wadhwa Group, a Mumbai-based property firm, while the overall land cost will come down, more land in defunct industries will be unlocked. This could lead to a softening of land prices in the near future, he said.