Construction Ban in Bangalore – A Steep Price for Negligence

By,Anuj Puri, Chairman – ANAROCK Property Consultants

The Karnataka government has proposed to ban construction of new apartments in Bangalore for 5 years. This is a harsh scenario to ponder, considering that the reasons that led to its need are haphazard over-construction and negligence to implement proper water management. While these were certainly preventable reasons, let us examine this in the light of possible implementation.

At the onset, the government needs to give more clarity on whether the ban applies to new projects or also includes those under construction. Assuming that the ban would apply to new construction within the city, this move could have a severe negative impact on the real estate market simply because demand for homes in Bangalore is massive . With reduced new supply in the market, there could be a negative repercussion by way of increased property prices. As is, the city’s residential market – backed by realistic property prices – is leading in real estate revival across the country, and such a move will only dampen its future real estate prospects.

Also, with limited new supply entering the market, demand for ready properties will go up significantly. Builders sitting on ready inventory will immediately increase the property prices of these homes by at least 10-15%. This will keep inflating over the years of the ban. However, homebuyers with new ready properties whose prices remained stagnant over the last 2-3 years may have a reason to cheer this move, as finally the values of their property will rise.

Additionally, builders sitting on ample land banks – or even those who were waiting to launch their projects in the near future and were almost ready with all their project planning and designing – would face issues with this move. The cost incurred on project designing and planning and seeking necessary approvals will all go in vain.

Subsequently, the ban on construction activity would also lead to severe job losses for lakhs of construction workers who migrated from other states purely on the basis of better job opportunities in the construction sector. With the city witnessing massive construction activity in the past and present, lakhs of construction labourers came in from states like Uttar Pradesh, Bihar, West Bengal, etc. This move will not just directly hit them but also further aggravate the job crisis in the country.

Besides, if we assume that the ban is implemented, it is very unlikely that the city’s water woes will subside any further unless there is a sound water storage or water management system in place.

Instead of opting for such an extreme move to quell the water crisis, the government could take adequate alternate measures to conserve water, manage its sources and ensure that concepts like rainwater harvesting are strictly imbibed by housing societies and builders. It can also work to rejuvenate hundreds of lakes in the city for which Bangalore has been rightly famous for. As another probable step, the government must penalize builders (of both existing and new projects) heavily for not implementing water-conserving techniques, including rainwater harvesting.