The state government should permit construction of high-rise buildings only in some areas as it is putting pressure on local resources like water, roads and so on. The higher floor-space of index has proved to be a tool in the hands of the greedy builders. The greedy landowners who have given their land for development insist that builders build many more floors so that the number of flats that would come to the share of landowners would be many.
But the inexperienced developers comply with the request, as there is nothing for them to lose in the bargain. The builders are building 40-50 floor structures in places where they are supposed to build only 15-20 floor structures, putting pressure on the infrastructural amenities there. It was high-time the state government opened its eyes and allowed the construction of high-rise buildings only in some pockets only. Otherwise, the city growth would be thrown out of gear.
The middle classes and the common man are not in a position to buy houses in Hyderabad city. Even small builders are not able to afford construction of apartments, given the prevailing worse conditions in the real estate market. A piquant situation developed by virtue of which one is a dilemma whether to appreciate the development of Hyderabad or feel bad as dream of owning a house for middle classes is becoming far from realty.
Prior to Covid-19, an acre was sold in the Financial District of Western Hyderabad ranged between Rs 10 crore and Rs 15 crore. Flats were sold then at less than Rs 6000 per sft. This was attributed to developers building only 15 or 20-floor structures developing a total plinth area of 1.70 lakh sft. The builder and site owner used to share the property in the ratio of either 40:60 or 50:50. However, there was a drastic change in the situation in the post-Covid era.
Building 4 lakh sft in an acre
After the pandemic situation got over, there was a perceptible change in the mindset of the land owners as unlimited FSI was allowed. Telangana state allows construction of buildings up to any height depending on the size of the plot and the road in front of it. Prior to Covid-19, the state government issued a GO No. 50 which permitted the builders not to leave any setbacks no matter how tall the structure is. The GO came as a great boon for the land owners. As the setbacks are done away with, the build-up area is bound to increase. The trend of constructing a plinth area of 4.0 lakh to 4.5-lakh sft in an acre has set in as against the previous practice of building only 1.6-1.7 lakh sft. The builders have started building 30 or 40-floor structures instead of 15 or 20 floor structures. The builder retains rest of the plinth area parting one lakh sft to the land owner.
Land owners used to give their land for development to those builders who would give them the highest plinth area of the built structure. But some experienced developers used to backtrack going by the condition. However, developers who entered the market afresh are agreeing to such conditions. They give some amount towards advance and raise the rest of the amount through pre-launch or UDS selling of the project. The land owner is bothered about how much developed area he or she would get, but stopped thinking whether the builder would be able to execute the project or not.
An acre priced at Rs 120 cr?
Yes. You read it right. In Financial District of Hyderabad an acre would cost Rs 120 crore. Earlier, it was sold for Rs 25 to Rs 30 crore only. What is the cause for such a sharp appreciation of the land cost? In Kondapur, an acre of site would fetch Rs 90 crore, appreciating sharply from Rs 20 crore earlier. What is the cause for the sharp appreciation of the land cost? In Kismatpur, an acre would cost anything between Rs 50 or Rs 60 crore as against the earlier Rs 10 to Rs 15 crore.
‘What is the cause for the cost escalation?
If a builder develops apartments in five-storey structure, the total plinth area would be no more than 1.10 lakh sft. If the builder were to build 15-20 floored structures, the build-up area would increase largely to 1.70 lakh sft. As the current trend would have it, the builder is constructing at least 4.5 lakh sft of the structures, deviating from building 15-20-storey structures. Now, builders construct 40-storey structures, developing 4 to 4.5 lakh sft. Of the total plinth area, the land owners share would be 1.0 lakh sft.
If the land owner were to sell his share of the developed flats at Rs 12,000 per sft, he would realize Rs 120 crore. Making such calculations, the builders demand for more build-up area. In Kismatpur, when one lakh sft of plinth area has been developed, the share of the landowner would be Rs 60 crore. The greed, an unwarranted trend noticed in the real estate market, would have adverse impact on the realty sector. The undesirable consequences are:
- Small builders exiting from the market
- The prices of properties would go out of range of the middle classes
- The greedy new crop of developers are likely to abandon the project in the middle
It is advisable for the land owners not to become so greedy expecting builders to give them more developed area. There is every danger of their greed might attract the attention of inexperienced builders putting their land in trouble.
The way forward for the government?
Because of government allowing high FSI, the land owners became greedy and have been putting the demand for more space. Therefore, some builders, without weighing various pros and cons, launching their 30 or 40-floor projects at will. To overcome the problem, the state government should allow construction of high-rise structures only in some areas. It should amend the rules to this effect.
- With land costs rising steeply, majority of land owners are keeping their sites vacant. They are also not practicing agriculture in it. Agricultural lands are fast turning into realty ventures. The cultivation of vegetables in Rangareddy district and its adjoining areas has come down drastically. Therefore, agriculture in these areas should be encouraged. The government should impose tax on vacant sites.
- A mechanism to regulate the land prices should be put in place by the government. A special wing should be created. It should be entrusted with the task of identifying areas where high-rise structures are allowed, development of infrastructure, imposing tax on vacant sites should be entrusted to the department.
- Divergent views are being expressed on government imposing curbs on the FSI. Therefore, minister KT Rama Rao should hold a special meeting with real estate bodies and take a final call on the issue.
