Land Parcels in High Demand: Prices Soar by Up to 200%

The demand for land parcels has skyrocketed, resulting in a significant surge in prices, with some markets experiencing an increase of up to 200%.

According to research conducted by Anarock Property Consultants, the previous fiscal year witnessed the sealing of approximately 87 deals covering 1,862 acres. In contrast, there were only 44 deals accounting for about 1,649 acres across various cities in FY22.

Consultants involved in these transactions have reported that land parcel deals are now being closed within a week, compared to the previous timeline of six to seven months. Mayank Saksena, the MD (land services) at Anarock Property Consultants, noted that while builders showed little urgency to acquire land before the pandemic, they are now closing land deals within a week.

Abhishek Kapoor, the CEO of Puravankara, a Bengaluru-based company, emphasized the need to replenish land inventory, especially for organized players, due to increased sales. Kapoor explained that since sales have surged, a quicker replenishment of land inventory is inevitable.

With land becoming scarcer amid a real estate development boom, leading players in the industry are aggressively vying for the best land parcels in key locations, as highlighted by Anuj Puri, Chairman of Anarock Property Consultants.

Although the number of land deals significantly increased last year, the increase in terms of area was only 13%, indicating the sale of several smaller plots. Puri stated that builders are strategically investing in land across prominent micro-markets as land is a key input for real estate development. Consequently, numerous smaller deals have taken place.

FY23 witnessed record-high residential sales in the top seven cities, totaling approximately 380,000 units. Large and listed developers have capitalized on this unrelenting housing boom. Comparatively, the number of units sold in FY22 was 263,708, a substantial increase from the 148,866 units sold in FY21.

According to Dolat Capital, land prices in tier 1 cities have surged between 20% and 200% compared to the pre-pandemic period. The report highlighted Gurugram and Hyderabad as cities experiencing the highest increases of over 200%.

Consultants have noted that the time taken to develop the final product has reduced to six to seven months from one-and-a-half years due to streamlined processes and systems.

While acknowledging the overall improvement, Abhishek Kapoor of Puravankara pointed out that obtaining approvals still takes longer in many markets. Kapoor explained that although the time required for sanctions has decreased to 8-12 months from 1.5 years, it has not reached the anticipated 6-7 month timeframe.

Vivek Rathi, Director of Research at Knight Frank India, emphasized the close correlation between land market activity and consumer demand and pricing prospects. He stated that residential product segments, where land use is not restricted, typically determine the strength of the market. Currently, positive consumer sentiment toward real estate enables moderate price increases in end product prices, offering developers a level of downside protection. Consequently, developers considering land parcel purchases for development purposes find this expectation appealing.

The municipal corporation development plan approvals and RERA registrations now take less time, thereby enabling a quicker go to market milestone.

“What is crucial in terms of a land parcel under consideration is not just the availability but other important considerations of clear title, free of encroachment or tenancy, etc. Land parcels with these parameters in place are witnessing healthy demand,” Rathi said.

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