NGT Buffer Zone order set to add-on more misery for Property Developers.

 The recent order from the National Green Tribunal has put property developers in a tough situation; with the NGT increasing the buffer-zone for construction of buildings which are situated close to lakes. Initially the buffer-zone between the lake and the building was 50 metres and with the recent order it has changed to 75 metres which has created a sense of panic in the real-estate community in Bangalore.

This order has not only made the lives of property builders hard, but it has also created a lot of implications. We could see an increase in project cost of roughly around 30%, which would mean more cost to be incurred by the property builders and they would have to re-design their already existing project which would create delays as they would also have to seek re-approval from the government for their new project plans and will end up paying the government necessary fees for those approval plans.

A few head honchos in the property development sector have voiced their concern against the recent order. With one Mr Koshy Varghese, Managing Director of Value Designbuild claiming that most builders have already purchased land or have agreed for joint development venture based on the city’s current by-laws, and with this new order they stand a lose roughly around thirty percent of their existing land and this will lower the morale of the builders to venture into new development projects.

With the Bengaluru government getting their hands onto archaic maps of the city’s planning, it has made everyone in the real-estate sector including homeowners panic. And the property developers are left with no option but to transfer the additional cost to potential home seekers.

Bengaluru city has always had exceptional real-estate market success in India, but in recent years it has seen a dip in sale of residential units. One of the reasons for a slump in sale of buildings is being slow job creation and very few salary hikes in software companies which have increased largely the burden on property developers who have taken huge loans from private equity funds and non-banking financial institutions.

With Bengaluru already showing signs of decrease in sales of residential units, this recent order will pile on more misery for property developers. According to LJ Hooker one of the top real estate agency total residential units sold in Bengaluru in the First quarter of 2016 was around 1,25,738 units.