The Urban Land ceiling Act (ULCRA) was introduced during Prime Minister Indira Gandhi’s regime as a means for lower income sections to fulfill their dreams for a home. The main purpose of the Act was to prevent hoarding or excessive holding of land in urban agglomerations by few people so as to facilitate proper distribution and uniform development of all sectors of urban areas. The Act applied to large cities because the shortage of land was felt more grievously there as there was a constant influx of population.
But due to faulty governmental policies the Urban Land Ceiling Act (1976) distorted land markets in urban areas, led to the growth of slums and limited the growth of private enterprises by creating an artificial shortage of land which never existed and this led to land rates shooting up beyond their actual value. This completely defeated the objectives of the Act, as the land was further out from the reach of the marginalized sections of the society than before the Act was passed.
The Central Government repealed this 1999, but the state governments have not followed the lead. States like Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan, Gujarat and Haryana have repealed this act but states like Maharashtra and Bihar, Delhi are still favoring the ULC Act.
And now Maharashtra is all set to repeal this Act.
With around 22,000 acres of land which is set to be released in the real estate market, as a result of the scrapping of the Urban Land Ceiling (ULC) Act, builders and government officials here are predicting a fall in property rates in suburban as well as fringe areas of the city.
The availability of excess land, will result in fall of land rates in and around Maharashtra. Since the 22,000 acres of land is mostly located in the fringe villages, the sale of this land will have a direct impact on property rates in suburbs that are close to these villages. However, the property prices in the city will not fall, though it may get stabilized.
With Maharashtra set to become the 10th state in the country to repeal the Urban Land Ceiling & Regulation Act (ULCRA),the megapolis of Mumbai and its suburbs Thane and Navi Mumbai could see around 25,000 acres of land being freed up for development.
On February 6, 2006, these entities faced a serious setback with the urban land ceiling department of Maharashtra issuing a circular to the registrar of properties not to register any of their documents which fell under the ULCRA. Once the Act is repealed, these entities will be free to trade in their land.
The Maharashtra government moved a resolution to repeal ULCRA on the last day of the Assembly session on Monday. This means the matter will be taken up for debate in the coming monsoon session of the state legislature.
Real estate industry analysts expect a 25 to 30 per cent price correction when this kind of land supply hits the market. "If this happens, there will be a slowdown in property prices. Since there is acute shortage of land, developers will benefit," says Rajesh Mehta, chairman, Raha Realtors.
Developers also feel they can save significantly on the money spent on getting permission under ULCRA for land development. "Most developers spend Rs 100 per sq ft on getting permission from the ULC dept. Now we can save on that cost and pass it on to the consumer," a Mumbai-based developer said.
"Earlier, nobody knew what was going on in many of the real estate firms, with the holding company creating many subsidiaries to buy huge tracts of land for projects like townships. This was due to the ceiling on land acquisition and ownership," said Vikas Agarwal, GM, ICRA, a credit rating firm.
"Now, the main company can buy land and overseas investors can also be assured of how it has been bought and developed," he added
The state government may have brought in a Bill to repeal the Urban Land Ceiling Regulation Act (ULCRA), but that has not stopped it from embarking on a land-acquiring spree under the Act. The Bill to scrap ULCRA introduced in the Budget session of the state legislature held in March, and a final call will be taken during the Monsoon session in July.
Sources in the ULC department said that the government had announced its decision to scrap the ULC Act about a year ago. But in the last one year, they have managed to acquire 400 hectares of land in Mumbai alone. Currently they are in the process of acquiring another 200 hectares of land before the Act is finally repealed by the state legislature.
The irregularities in the Talegaon Dabhade scheme and land acquisitions in Thane, Pune, Nagpur, Nashik and Kolhapur were discussed. A senior secretary in Mantralaya, who is opposed to the ULC Act, said, "When the government is repealing the Act where is the need to conduct a meeting for assessing progress of land acquisitions? It appears that the government wants to reap maximum benefits under the Act before it is finally set aside".
The Act was enacted in 1976 to impose a ceiling on vacant land in urban areas. The idea was to give impetus to mass housing, especially for the urban poor. But since it hindered growth, the World Bank, Planning Commission and the Union government asked the state to scrap it. Initially, the government limited the provisions of the Act to nine cities, including Mumbai, Thane, Nagpur, Nashik, Kolhapur and Pune. About a year ago, it decided to initiate proceedings to have the Act scrapped.