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 The question of price differentials

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Bethany
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Join date : 2011-06-07

PostSubject: The question of price differentials   Tue Jun 07, 2011 3:04 am

In Kerala Property developments are mainly sustained through the inflow of investments into the state from all parts of the globe.  The huge expatriate population from the state residing in prominent parts of the globe is the major contributor of money and other funds that has led to a boom in property development.  However in the local property market, the price of a piece of real estate is determined mainly by the quality of land and the proximity of the land to certain hot property markets.  Moreover, price differentials used to take place due to the vagaries in the property market as well.
 
Such price differentials would have had certain results:
(i)             It would favor the building of local authority’s housing amenities when compared with the owner-occupied lands and other private housing facilities
(ii)           It would favor those local authorities who had agricultural land at low current-use value compared with those authorities whose land was almost completely built on and who therefore could only carry out future development on land with a comparatively high current-use value.
(iii)          Since local authorities could buy land at a relatively lower price, their development is likely to witness the use of land more extensively than if it had to be bought at the current market price, as with the private developers
(iv)          Because of the lower capital cost, the penalty to the local authority of holding undeveloped land over time would have been reduced.
(v)          If the local authority were to carry out a commercial development, it would have obtained the land at a much lower price than that had to be paid by the private developer.  Indeed, the price differential could have been so large that it would have virtually eliminated competition from the private developers.  Where the latter still managed to compete, the only reason would have been the relative inefficiency of the local authority.  Thus, in practice, the land-price differential would tend to mask any inefficiency of the local authorities in carrying out development works.
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