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Trendsetter: Jupiter Mill was the
first to be put on the block
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On
March 7, a two-judge bench of the Supreme Court passed a judgment
that essentially allowed mill land to be sold in Mumbai. The ruling
pertains to the sale of 51 acres of land belonging to five NTC
mills (see Recent Mega Mill Land Deals...), and sets aside an
October 2005 ruling of the Bombay High Court that declared the
sales illegal in response to a public interest litigation (PIL)
filed by the Bombay Environmental Action Group, BEAG (see The
Mill Land Controversy). In one stroke, the court has allowed those
developers who acquired land from NTC to go ahead with their projects.
It has also given the go-ahead to other mill owners and developers
to jump into the fray. And, in the process, the Supreme Court
may have just unlocked some 600 acres of land for development.
Not too long in the future, Central Mumbai,
where all mills are housed, will wear a different look. There
will be malls. There will be multiplexes. There will be high-rise
residential and office buildings. There will be it parks. And
there will be luxury hotels. Pranay Vakil, Chairman, Knight Frank,
a real estate firm, believes that this couldn't have come at a
better time. "The madness of rising prices over the past
six months will now give way to a scenario where prices could
stabilise," he says, referring to real estate prices that
are nothing short of the stratospheric: Rs 10,000-12,000 per sq.
ft for commercial properties and Rs 8,000-12,000 for residential
ones.
The Supreme Court judgment validates the
2001 amendment to Development Control Regulation-58 (dcr-58; see
The Mill Land Controversy) and allows mill owners to carry out
developmental activity on the land that houses the mill structure.
For instance, if a mill has 10 acres of land at its disposal and
occupies seven of these acres, the owner can develop these seven
acres. Not surprisingly then, developers and mill owners are thrilled
with the ruling, and are just stopping short of displaying their
glee by carefully couching their happiness in 'it's-good-for-the-city'
kind of statements. And those of them who have projects up and
running are looking to complete them soon. "Three of our
projects were delayed and we should be in a position to finish
these over the next 24 months," says Rajeev Piramal, Executive
Vice Chairman, Morarjee Realities. One of these, Ashok Towers
in Parel is among the most high-profile developments in the city.
| THE MILL LAND CONTROVERSY |
| The story begins
with several government agencies leasing or selling land to
mill owners at concessional rates (more land was leased out
than sold). The mills, the reasoning went, would generate
employment and help the city's economy grow. That they did.
By the early 1980s however, the mills were in trouble. Some
blame the mill owners' reluctance to invest in technology
for this; others point a finger at a militant labour movement;
and still others hint darkly about the mill owners realising
that the land their mills sat on was worth its weight in gold
in a city as strapped for land as Mumbai is. Whatever the
reason, the mills approached the government with a proposal
to sell their land. In 1991, the government decided to allow
them to do so under DCR-58 provided the land was carved up
three ways with only a third going to the mill owners and
the remainder to BMC (Brihanmumbai Municipal Corporation)
and MHADA (Maharashtra Housing and Development Authority).
Not too many mill owners were keen to sell land under this
formula. In 2001, DCR-58 was amended with the equal-third
ratio now being applicable only to free mill land (not the
land on which structures existed). In 2005, NTC set the ball
rolling by auctioning five mills; the BEAG, filed a public
interest litigation in February 2005. |
North Or South?
If there is one question everyone in Mumbai
would like answered, it is this: will prices fall to more reasonable
levels? The answer is simple: No. However, the real estate market
is unlikely to witness the kind of exuberance it did in 2005 when
every auction featuring mill land set a new record in terms of
price. "Releasing more land for development is a good thing
and could keep prices under check," says Anshuman Magazine,
Managing Director, CB Richard Ellis (South Asia), a real estate
firm.
If all goes well, a school of thought popular
with developers hypothesises, more land will be developed, prices
will stabilise and Central Mumbai could become a residential hub.
NTC, for instance, is now waiting for a clearance from the government
to put up another 18 mills on the block. That would translate
into some 100 acres of land that can be developed, says K. Ramachandran
Pillai, Chairman & Managing Director, NTC, who expects the
sale to generate at least Rs 3,000 crore (for the record, the
over-heated first phase of auctions saw the sale of 51 acres generating
over Rs 2,000 crore). "Today, things look healthy from the
supply side," says Akshaya Kumar, CEO, Colliers Jardine,
a real estate firm.
Not everyone, however, is happy with the
judgment. "The city is already in the midst of a crisis and
it will only get worse now," says BEAG's Debi Goenka. "Look
at the conditions of roads and the water supply situation for
instance." And the larger issue of 'public good' remains
unanswered. The government leased or sold land to mills at concessional
rates on the premise that they would create employment and serve
as engines of economic growth (much like governments across the
country are selling or leasing land at concessional rates to it
firms). Land wasn't part of the equation.
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