Akrama Sakrama in Bangalore – Impact on Real Estate

What is the impact of Akrama-Sakrama on Bangalore’s Real Estate market?

The impact of Akrama-Sakrama on Bangalore’s Real Estate market can be analysed by looking at two time-frames:

a. Short-term Impact
b. Long-term Impact

What is the Short-term impact of Akrama-Sakrama on Buyers and Sellers in Bangalore’s Real Estate Market?

Akrama Sakrama seeks to regularise about 2.5 lakhs (2,50,000) properties that currently either do not have the necessary approval from the appropriate municipal authority or deviate significantly from the plan that was approved/sanctioned by the municipal authority. These properties are currently considered illegal and dangerous to occupy because of their disregard for the municipal authority’s bye-laws. Therefore, they do not have an A Khata – they currently only have a B Khata.

Regularisation of these sites will mean that the B Khata these properties have can be converted to an A Khata.

Many buyers in the market today cannot and do not want to purchase properties which only have a B Khata. Property owners cannot purchase properties which only have a B Khata because Banks do not give loans on such properties. Even if a buyer is able to come up with the money to purchase such a property himself/herself, there are not many buyers who wish to purchase such properties. This is because B Khata properties are not able to apply to the government for any sort of trade license on the property.

An A Khata becoming available for these sites due to regularisation will lead to an increase in the supply of “suitable” houses in the market. The increasing of supply in the market will put a downward pressure on the prices of properties in general in Bangalore in the short-term.

What is the Short-term impact of Akrama-Sakrama on the Karnataka government?

The regularisation of 2.5 lakh (2,50,000) properties stands to bring in up to 5000 crores to the Karnataka government (through Betterment Charges, Stamp Duty and Registration charges).

The government currently believes that it will be in a better position to provide amenities like better roads, street lights, garbage pickup, water connections etc based on the huge amount of money this scheme will bring in. However, we will have to wait in order to determine how much of these amenities are actually provided. If the amenities are provided as promised, in the short-term Bangalore might seem more attractive a place to live in to potential buyers who are looking to invest in the city.

What is the Long-term impact of Akrama-Sakrama on Bangalore and its Real Estate Market?

One of the big concerns about Akrama-Sakrama is that it regularises those same violations which the government had passed laws to prevent. The question to be asked here is “The laws were passed to ensure safe buildings and a better quality of life – what happens now that these violations are considered regularised by the government?”. Just because the government has now regularised these properties, it does not mean that the safety issues and quality of life issues magically go away.

This could mean that in the long run, buyers do not consider Bangalore’s buildings and Bangalore city as an attractive investment or purchase. And image of Bangalore as a city full of unsafe buildings and a city whose citizens’ quality of life is mediocre, could come about. This can put downward pressure on the Real Estate market in the long-term and decrease the prices of Bangalore’s buildings in general.

Comments

  1. Raajesh says

    Well said and very good analysis. Yes, now builders compromise on quality with a thought that they can pay penalty and make it A-Khata later.Or he will compromise on quality and get benefitted. Later again collect from buyers only to pay the penalty (unless buyers are wise enough to say no) and overload them….

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