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Supreme Court ruling may help revive stalled real estate projects

MUMBAI: Shares of Mumbai-based realty firms rose on Friday after the Supreme Court on Thursday allowed builders to develop several land parcels in the city's suburbs that were listed as forest land and were barred from encroachment. The apex court's ruling is expected to revive stalled projects, adding several thousand apartments to the city where home sales are down due to high prices. 

n addition to overturning the earlier Bombay High Court ruling in 2008, the apex court also quashed all notices issued by the state government under the Indian Forest Act of 1927 to residents of housing societies built on such plots. In 2008, the high court had dismissed petitions filed by developers and residents against the forest land status for their plots. 

Godrej Properties, Oberoi Realty, Runwal Group and Nirmal Lifestyle along with several developers with projects in Mulund, Bhandup, Thane, Nahur, Kandivali and Borivali are likely to gain following this order. Shares of Oberoi RealtyBSE -6.41 % rose 14.8% in early trade then eased, closing 2% higher, while shares of Godrej PropertiesBSE -1.54 % rose 6.2% before closing up 4.7%. 

"Godrej & Boyce owns approximately 133 acres of land in Vikhroli that will be unlocked for potential development in partnership with Godrej Properties. We already have exciting plans for development in Vikhroli and this will further enhance the scale of development ," said Adi Godrej, Godrej Group chairman. Oberoi Realty has 18 acres in Mulund. 

The Runwal Group and Nirmal Lifestyle have two separate 10-acre projects in Mulund. Property consultants are of the view that more launches can be expected in three-four months following fresh approvals for these projects. Interest from both developers and consumers will improve given this clarity on forest land status, they said. 

"There will be additional supply in the eastern suburbs of Mumbai. Developers that were contemplating increasing prices in future may not be able to do so, as prices will be under slight pressure. We can expect more land deals and apartment sales in these pockets now that there is clarity on this matter," said Anuj Puri, chairman of property consultancy firm Jones Lang LaSalle India. The ruling is also likely to rationalise land prices in this belt as some plots were being traded at a discount, while many were held back pending clarity on the issue. 

"More than 100 residential projects are expected to be launched in this region in the next two-three years owing to the Supreme Court judgment (on private forest land). Land prices have already skyrocketed and this scenario, a chunk of land getting released, will generate the much-needed supply to check the price rise," said Sunil Mantri, president, National Real Estate Development Council. However, he also added that the supply will be generated over an eight-ten year period.