Room with a view

Thirty years ago, home owners paid sizeable black components when it came to buying houses. Little wonder then that real estate developers were targets of underworld dons. "I had gunmen travelling with me," remembers Niranjan Hiranandani. Being in the real estate profession was not considered honourable. Not many know that Shapoorji Pallonji re-entered the real estate business only 12 years back as cheque payments became the norm.

In the country's commercial capital, south Mumbai was the only preferred location. The suburbs were "godforsaken places", with no water, no electricity, no roads or communication facilities. Apartments were few and far between. Mofatraj Munot, chairman, Kalpataru group, points out that most people preferred rented or leased accommodation those days. Getting cement for construction was a problem, as it was a controlled item.

All that has changed beyond recognition. Much of the credit for the change goes to the vision of H T Parekh, who started the company's first housing finance company "" Housing Development Finance Company (HDFC). With interest rates coming down and intense competition among banks to finance mortgages, home loan interest rates have plunged to 7-8 per cent. Tax benefits have further enticed borrowers with deduction from tax of interest payments for housing rising from Rs 10,000 in 1996 to Rs 1.5 lakh today.

Higher incomes, lower taxes and access to cheap finance have led to young executives in their early 20s buying their first homes almost as soon as they start earning.

Another trigger for change has been the advent of nuclear families. Infrastructure has come to the suburbs, giving rise to the expansion of cities. City development organisations like Cidco have set up satellite towns. The quality of buildings has improved. The classy architecture that adorns the latest projects done by Hafeez Contractor for global corporates like Infosys seems out of a sci-fi movie.

Of course, some things have become worse "" the high cost of land being one of them. Restrictive legislation like the Urban Land Ceiling Act has led to less land being available for development. The rent control laws also hinder the development of the property market. Says Munot, "Fifty-two permissions are required and any property being developed and valued at over Rs 50 crore requires approval from the Centre."

Thirty years back land prices in Malabar Hills, south Mumbai would have been around Rs 150 per square foot. Now they are above Rs 15,000 per square foot. With high costs, apartment houses have shrunk. People just cannot afford large-sized homes, says Munot. Today Mumbai is among the 10 most expensive cities in the world.

The extent of black money may have come down, but real estate remains an asset for stashing unaccounted wealth. Much of the construction business is still in the unorganised sector, attracting the underworld and politicians like flies to honey.

A peek into the future shows that with the opening up of foreign direct investment in the real estate segment, more money is expected to come into the business. This will see the advent of joint ventures and best global practices.

A word of caution, however. Unless the government repeals the Urban Land Ceiling Act and frees the supply of land, property prices will continue to surge as more money chases limited projects.

(Inputs by Freny Patel, Arti Sharma, Bhupesh Bhandari and Barkha Shah)