Land is the basic raw material for any real estate developer. Real estate developers create land banks to enhance their asset base and to create sufficient raw material in the pipeline to ensure that their businesses continue. Land value never depreciates. In fact, with every infrastructural or real estate development around a piece of land, its value only increases.

Mumbai is a highly urbanised area. Land for development in Mumbai is a rare commodity. Even rarer is open vacant land with no legal issues and which is not reserved by the  Municipal Corporation. As a result, any vacant parcel of land with a clear title, whether small or big, commands a huge premium and builders line up to grab such pieces of land. Even land with an acceptable degree of legal issues commands some premium. The unsaid yet clear diktat while searching for developable land in Mumbai is ‘location is never a worry.’ Dwelling spaces, especially, are lapped up by buyers and investors.

In Short Supply
The first challenge to overcome while acquiring land is the rarity of the commodity. The second challenge is to overcome competition. There will be a bevy of developers, small, medium or big, lining up to cajole the landlord to sell the land to them. Landlords use price quoted by one developer to increase the price of the other. More often than not, landlords are unable to close the transaction quickly as some or the other developer raises the price every day. Another challenge is to overcome the mental setup of the landowner. In urban areas like Mumbai, the landowner decides what a developer must develop on the land parcel prior to making the sale. He decides that a retail outlet, commercial or IT space must be developed on his land, often without understanding the demand–supply dynamics of the location for such a development.

Redevelopments
Another avenue developers can explore is redevelopment. Developers have the advantage of incentive FSI for redeveloping old cessed tenanted buildings and for slum redevelopment. Another option is the redevelopment of old Co-operative Housing Societies (CHS) in suburban Mumbai where Transferable Development Rights (TDR) can be loaded in addition to the base FSI of the land. Although there are many such options available, both in the Island City and in suburban Mumbai, there are fresh challenges to face.

The Slum Redevelopment Scheme is the most challenging option a developer has. It requires a special type of skill and connectivity with the slum lords. Hence, few developers want to venture into such options as developers are required to deal with individual slum dwellers, as well as with slumlords and landlords.

When developing a CHS, the task is all the tougher, as a developer has to deal with individual members of the societies. They are all co-owners of the land and hence a developer has to face the task of dealing with many owners. Typically, in CHS redevelopment, every member thinks like a landlord and hence has a mental setup like that of a landlord. Here too, one faces competition from fellow developers. The members negotiate offers from one developer to other in a bid to achieve maximum commercial benefit. Eventually, when a developer is successful in being awarded the redevelopment rights of the CHS, he faces the task of relocating the members till the time the building is ready. In cases of redevelopment, the construction period typically comprises around three years from the very beginning.



The Tenant-Landlord Rift
For tenanted properties, apart from dealing with the landlords, who have mainly inherited the property from their forefathers, developers must deal with 50 or more tenants who have been living there for 40–50 years. Here too, one has to deal with people who have inherited the property rights from their forefathers. More often than not, the landlords are not on good terms with the tenants and hence the developer has to deal with landlords and tenants separately and ensure that everybody signs on the dotted line for redevelopment. Then, he will have to ensure that everybody obtains alternative accommodation till the time their building is ready. This is a task in itself, as almost every tenant wants alternative accommodation in the same locality.

Apart from all these options for land acquisition for undertaking a project in urban regions such as Mumbai, a developer must still deal with issues regarding the title of the property. Quite often, he has to make do with one or more defects in the title, some of which fall within the developer’s acceptable limits. Many times, landlords themselves have entered into some legal muddles with miscellaneous parties for small amounts and a developer has to tackle these parties separately. 

Despite these challenges, the real estate business in Mumbai and other cities is so lucrative that buyers are almost certain to profit from any deal, however difficult to achieve. 

The author is Chairman and Managing Director, Sunil Mantri Realty Limited