Taking to the streets to drum up business for suburban developments Vishwanathan/Bloomberg

By Pooja Thakur and Abhay Singh

B.N. Mishra aspired to become a suburbanite. In 2009 the New Delhi resident plunked down 2.2 million rupees ($45,800) for a three-bedroom unit in a new residential complex going up in Greater Noida, a bedroom community east of the Indian capital. Three years later, Mishra, 36, who runs a software business, is close to giving up hope that his family will ever move in. The development he bought into is caught in a legal dispute that pits builders against the villagers who once owned the land. “It has been a huge roller coaster ride,” says the first-time home buyer. “If there is no solution, I’ll have to continue with renting or buy a house that is ready.”

Elsewhere in India, protests by villagers who have been forced to sell their land to the government—usually at below-market rates—have stalled billions of dollars worth of projects, including steel mills, auto assembly plants, and highways. “The issue is a critical component of the overall investment climate,” says Dharmakirti Joshi, an economist at Crisil, the local unit of Standard & Poor’s. “I believe it will get sorted out, but if it doesn’t it will have repercussions.”

A four-story height restriction in most parts of New Delhi has made land for new residential projects scarce and expensive, driving members of India’s burgeoning middle class to more affordable areas to the south and east of the capital. In the suburbs of Greater Noida, Noida, and Gurgaon, developers are expected to deliver 439 million square feet of new housing stock over the next three years, enough for 340,000 families, according to real estate research firm P.E. Analytics. Prices for these new homes range from about $20,000 to $4 million, according to Jones Lang LaSalle India. In contrast, colonial-style bungalows along central Delhi’s tree-lined avenues can cost more than $10 million.

In Greater Noida, farmers claim they were swindled by officials in Uttar Pradesh state, who expropriated their land for industrial purposes and promised them jobs. Instead, the government sold the acreage to residential developers. In July, India’s highest court ruled that the land should be returned to the villagers. Local authorities hope to reach a compromise with the farmers that safeguards some $10 billion worth of investments.

The controversy has “shaken the developer community, because if you don’t get good title land from the government, who do you go to?” says Getamber Anand, vice-president of the Confederation of Real Estate Developers’ Associations of India and managing director of Noida-based developer ATS Infrastructure.

To tamp down resentment in the countryside, the government of Prime Minister Manmohan Singh has drafted legislation to revamp a century-old land acquisition law. Parliament is expected to vote on the bill, which defines protections for those facing government expropriation, before year-end.

Real estate broker Rohit Saxena used to spend weekends on a hot dusty road, darting between cars to distribute brochures for residential developments in Noida. Saxena says that in his best month last year he earned 1.05 million rupees, or 29 times India’s per-capita annual national income. These days, Saxena is having to make do largely on his monthly salary of 30,000 rupees, as the deals have petered out. Says Samir Jasuja, chief executive officer of P.E. Analytics: “Sales have come to a standstill because the customer doesn’t know what he is buying, whether the land belongs to the developer or not.”

The bottom line: The development of housing for 340,000 families has been slowed by disputes over land in the suburbs of New Delhi.

Thakur is a reporter for Bloomberg News. Singh is an editor for Bloomberg News.

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