The real estate industry said it’s being punished for state inaction over solid waste management. “It will choke supply, and impact home seekers. Effectively, home buyers will suffer just because some state governments have not formally notified the policy,” said Niranjan Hiranandani, national president of lobby group National Real Estate Development Council (Naredco).
“The intention behind the order is good from a long-term perspective, but a blanket ban stopping all construction will have a negative impact on housing.”
The SC has banned construction in several states and union territories because they haven’t put in place rules on solid waste management.
The biggest impact is seen on Maharashtra, home to the high-value property markets of Mumbai and Pune, although the state has prepared a policy on the matter and may therefore be able to get relief on this score, developers said.
“The overall annual real estate industry size in India is close to Rs 10 lakh crore, of which close to Rs 1.5 lakh crore to Rs 2 lakh crore is contributed by Maharashtra,” said Pankaj Kapoor, MD, Liases Foras Real Estate Rating & Research. “Over 1,000 allied industries across major sectors such as banking, cement, steel, sanitary, tiles and electrical equipment will be impacted severely if the states do not manage to get this stay vacated soon.”
The decision will also have a bearing on the recovering economy and the job market, he said.
Investors seemed to be optimistic, however, as real estate companies mostly shrugged off the news on Monday. Godrej Properties ended up 1.7% at Rs 698.10, HDIL gained 5.5% to Rs 34.55, and Oberoi Realty ended up 3% at Rs 454.95. Indiabulls Real Estate’s shares ended down 3.1% at Rs 149.25.
“The policy for solid waste management is already in place in Maharashtra, even though the same had not been submitted to the concerned authorities,” said Kotak Institutional Equities in a report. If a stay is given in the coming weeks, the impact of the ban won’t be material, analysts said.
“They (Maharashtra) are going to apply for a stay of this order as they are saying they already have a solid waste management policy in place,” said an analyst at a Mumbai-based brokerage. “If Supreme Court gives a stay, there will be no impact. If they don’t get a stay, then they will have to wait for the October 9 hearing.”