It has been over a few months now that the farmers, builders, home buyers and even the Greater Noida Industrial Development Authority are in a flux without any clue as to what’s there in future. While the court has given a deadline of August 12 to find out a solution, the talks between GNIDA and farmers have failed again on August 1. The reason was simple: farmers want higher compensation; and in his discussion with the farmers Rama Raman, CEO, GNIDA, failed to give any assurance in this regard. This actually made me think, what if they fail to arrive to what the court says an amicable solution? In that case, the court will be left with no other option than to give a verdict that has two key points - return the land to the farmers and refund money to the home buyers. But the question remains on whose will this decision go? Who will gain the most?
Well, in order to find out the biggest gainer, we first need to find out the future impact on the three parties who are at stake; namely the farmers, builders and home buyers.
Farmers: Considering the verdict assumed above, the farmers get their land back. But the only problem is that construction work had already started on most part of this land, and thus the fertility of the land is a big question.
Builders: As per this verdict, they will be at a double loss. First they will lose their investment on the land and the construction activities they have carried on so far. Second, they have to pay back to the home buyers, and most probably with interest. This will not only trouble them in funding them their other ongoing projects, but will also obstruct in getting funded by banks or other sources. Home buyer: Well, they may look like the safest lot as they will get back their money with interest. But the problem is that by the time they get back their money (assuming that the process of refund will take three to six months to complete), their affordable home will not remain affordable anymore. The prices of affordable housing around the same region (where these home buyers are likely to move) have already gone up by Rs.1,500 to Rs.2,000 per sq. mtr. Considering such escalation in price and adding up the very fact that builders will soon raise this price to make for their losses at Greater Noida, when the home buyers will book a new affordable house around the area, they will have to shell out at least Rs.10,000 to Rs.15,000 more per sq. mtr. And that will be really costly.
Moreover, with this price hike, the concept of affordable housing in NCR will be over soon. The purpose behind creating NCR was that the necessity to reduce the congestion in Delhi. But with the recent developments, the middle-class population in Delhi, mostly living in rented properties, will not shift out of the main capital region as they see no benefit in terms of cost savings. At the same time, with the NCR outburst and high real estate prices in Delhi, the common man now cannot even dream to own a house in his entire life.
As the scenario suggests, it’s a loss-loss situation for all parties. In fact, it’s a loss for the Indian real estate sector too for the simple fact that all we get to see here is an artificial escalation of home prices, which will definitely add a lot more to the already burgeoning real estate bubble.
Certainly, the farmers deserve a fair price for their land. But, at the same time builders need to carry on for the betterment of thousands of middle-class home buyers and for the industry as a whole. So a more logical way to solve the issue is that in stead of dealing with GNIDA (which actually created the whole mess by its illegal acquisition of the land and then by selling it to the builders) as the neutral party, farmers and builders should talk directly and negotiate to bring an end to this issue once and for all. Else, the issue will keep getting delayed escalating losses for all parties.
Well, in order to find out the biggest gainer, we first need to find out the future impact on the three parties who are at stake; namely the farmers, builders and home buyers.
Farmers: Considering the verdict assumed above, the farmers get their land back. But the only problem is that construction work had already started on most part of this land, and thus the fertility of the land is a big question.
Builders: As per this verdict, they will be at a double loss. First they will lose their investment on the land and the construction activities they have carried on so far. Second, they have to pay back to the home buyers, and most probably with interest. This will not only trouble them in funding them their other ongoing projects, but will also obstruct in getting funded by banks or other sources. Home buyer: Well, they may look like the safest lot as they will get back their money with interest. But the problem is that by the time they get back their money (assuming that the process of refund will take three to six months to complete), their affordable home will not remain affordable anymore. The prices of affordable housing around the same region (where these home buyers are likely to move) have already gone up by Rs.1,500 to Rs.2,000 per sq. mtr. Considering such escalation in price and adding up the very fact that builders will soon raise this price to make for their losses at Greater Noida, when the home buyers will book a new affordable house around the area, they will have to shell out at least Rs.10,000 to Rs.15,000 more per sq. mtr. And that will be really costly.
Moreover, with this price hike, the concept of affordable housing in NCR will be over soon. The purpose behind creating NCR was that the necessity to reduce the congestion in Delhi. But with the recent developments, the middle-class population in Delhi, mostly living in rented properties, will not shift out of the main capital region as they see no benefit in terms of cost savings. At the same time, with the NCR outburst and high real estate prices in Delhi, the common man now cannot even dream to own a house in his entire life.
As the scenario suggests, it’s a loss-loss situation for all parties. In fact, it’s a loss for the Indian real estate sector too for the simple fact that all we get to see here is an artificial escalation of home prices, which will definitely add a lot more to the already burgeoning real estate bubble.
Certainly, the farmers deserve a fair price for their land. But, at the same time builders need to carry on for the betterment of thousands of middle-class home buyers and for the industry as a whole. So a more logical way to solve the issue is that in stead of dealing with GNIDA (which actually created the whole mess by its illegal acquisition of the land and then by selling it to the builders) as the neutral party, farmers and builders should talk directly and negotiate to bring an end to this issue once and for all. Else, the issue will keep getting delayed escalating losses for all parties.
