The land prices soar: India Inc. expansion plans are badly hit
The cost of land has soared in the last few years and this has totally altered the economics of the greenfield projects in India. Till the early 2000s, land was available in many parts of the country at Rs 50,000 or less an acre. Today, that base figure is probably Rs 5 lakh.
Even the tier 2 and 3 cities are suffering. It would be two-three times more for land in not too remote locations, while crossing Rs 1 crore closer to towns and Rs 4 to 5 crore in metro suburbs.
In the US the land prices soared more steeply. There the farm real estate values averaged at $2,900 (Rs 1.75 lakh) an acre in 2013 and now it has risen to $12,700 (Rs 7.6 lakh) in New Jersey. Simply put, land can no longer be taken for granted. It now accounts for up to a quarter of the total project cost.
India Inc. expansion plans are badly hit as the land prices soar. It also means that of the four ‘factors of production’ that ultimately determine the cost of any commodity- labour, land, capital and energy – India’s competitive advantage is limited to only the first. The country needs to find ways to lower down the costs for the other three, or else the growth will be sluggish.
Source- The Hindu Business Line
Capital, Energy, greenfield projects in India, India Inc, labour, Land, Land prices
