Maharashtra realty sags under sand mining ban

The real estate sector in Maharashtra foresees a loss of Rs 2,000 crore (Rs 20 billion) due to the ban on extraction of sand by the Bombay High Court. The realty industry has sought the intervention of the state government to tackle the crisis.

The state government is also likely to lose a royalty of Rs 1,000 crore (Rs 10 billion) per year if the ban continues, according to a senior official from the revenue department. Maharashtra needs nearly 600 million tonnes sand a year for realty development.

Sunil Mantri, president of the Maharashtra Chamber of Housing Industry (MCHI), told Business Standard the ban would affect not only project costs but also labourers.

He said projects, in many instances, had been stalled due to the lack of construction-grade sand. According to him, the realty sector is likely to face a loss of Rs 2,000 crore (Rs 20 billion), as projects have been delayed and in some cases, stopped due to the ban.

"The industry will be incurring a huge amount in lost time and in locating alternative sources of supply. Even here, there seems to be a ban on importing sand from outside Maharashtra," Mantri said.

"We appreciate the high court's environmental concerns, but a total ban on sand mining across all of Maharashtra is perhaps too strong a measure."

The revenue department official, who did not want to be quoted, admitted that the ban had completely halted the extraction of sand.

"In certain cases, the respective district collectors are taking actions against illegal extraction. Recently, a high-level committee looked into various alternatives and submitted its report to the revenue department. It is under consideration."

"The prices of natural sand are already two-three times of crushed sand. Now, post-ban, these will rise even more dramatically. So, the prices of construction will rise by about two-three per cent in the short-term, as sand constitutes around 8-11 per cent of our costs," said Ranjit Naiknavare, member of national executive committee of Confederation of Real Estate Developers' Association.

He said the sector would have to go in for artificial sand and combine it with crushed sand for various activities. According to him, artificial sand is around four to five times costlier and this will drive up prices even more.

"This may increase prices marginally, but if it's in the interest of environment, there's no dispute on this issue. We are completely with the state and the high court on this issue," Naiknavare said.

Nainesh K Shah, MCHI office bearer and executive director at Everest Developers, said due to the ban, costs were going to rise as imports from Gujarat and other states, if allowed, would lead to huge transportation cost.

"We hope costs do not rise to such an extent where project costs are impacted. We can only hope that the state government will intervene," Shah said.

Mantri said the real estate sector was looking at alternative sources of supply and substitutes.

The realty sector had met with similar situation in February when the Maharashtra government had banned dredging activities.