Within hours of the Indian government’s announcement on August 5 that it was revoking the special status of Jammu and Kashmir, a text message went viral. Purporting to be from real estate firm in Kolkata, it offered to secure land deals in the region at a throwaway price. Along with removing the state’s special status, the government had also dismantled the provision that barred outsiders from owning land in Jammu and Kashmir.

Eventually, the text message proved to be a hoax. But it was a sign of things to come.

Real-estate firms have been inundated with queries from customers, eager to know how they could buy land in the state that now stands bifurcated into two Union Territories – Jammu and Kashmir, and Ladakh.

What are the kind of queries they have received and what is their assessment of the future? Scroll.in spoke to three real-estate firms and investors. But they all said that they were still unclear about investing in the territory.

Hotels in Ladakh, homes in Kashmir

Strikingly, said two real-estate analysts, most of the queries were focused on Ladakh. A high-altitude, semi-arid region, Ladakh has become a popular tourist destination in recent years. “It could attract investment from the hospitality sector,” said Anuj Puri, chairman of Anarock Property Consultants.

The other area of interest has been residential properties in the Kashmir region. The property analysts attributed this interest to buyers who think it would be a good investment, and to migrants like Kashmiri Pandits, who fled from the Valley in the 1990s as militant activity peaked.

But some real-estate analysts also said that there may be very few residential projects to start with. “The development of residential projects in hilly areas is very low,” said Pankaj Kapoor, managing director at Liases Foras, a real-estate data analytics company. Still, he thought that some many start residential projects to attract migrants who want to move back to the Valley.

The value proposition

Real-estate firms view the government’s decision to strike down Article 35A, which restricted land ownership to Jammu and Kashmir residents, as a business opportunity. “The real-estate market in Kashmir is highly undervalued,” said Kapoor.

Puri agreed with Kapoor’s assessment, pointing out that property prices in Srinagar were between Rs 2,200 and Rs 4,000 per square foot. “This is significantly lower than rates in tier two and tier three cities,” Puri said.

Some argued that the low prices are an incentive for those who want to invest. “The real-estate sector across India is going through a recessionary phase,” Kapoor said. “There is potential here [in Jammu and Kashmir]. But investors will wait for some time as they are prudent.”

Regulatory obstacles

But these opportunities also come with major obstacles.

For one, the regulatory framework is unclear. In December 2018, the Jammu and Kashmir Real Estate (Regulation and Development) Act had been approved by the State Administration Council. This Act also entailed setting up of a Real Estate Regulatory Authority, which was not formed.

Besides, after the Centre divided the state into two Union Territories, this regulatory law stands repealed under the Jammu and Kashmir Reorganisation Act, 2019.

The regulatory gap is a cause for worry. “If rules are in place from the very beginning then there will be little scope for manipulations later on,” said Puri. “Moreover, transparent transactions will help build confidence of investors and buyers.”

But regulations will only help, Puri said, “when real-estate activity picks up and people come forward to deal in property”.

The markets are not promising either. “The exuberance phase of real estate has gone and there is potential in Kashmir only if there is certainty in growth prospects,” Kapoor explained.

Analysts pointed to the lack of certainty after August 5. “The government has made broad references to making the region attractive for investment in general,” said Puri. “But no further announcements have been made on this front.”

To add to the confusion among investors, several leaders of the Bharatiya Janata Party in Jammu have demanded a domicile status for the region. Domicile policies in certain other states reserve the rights of property ownership for residents who have lived there for a certain period of time or are defined as indigenous to the state.

Lack of security

But the biggest concern is the security environment. “Without that, no real-estate venture will really work because it is a sentiment driven industry,” said Puri.

The government’s decision has sparked anger in Kashmir, where most people remain steadfastly opposed to the removal of special status, which many believe was a foundational assurance given to the territory when it acceded to the India Union in 1947. The region remains flooded with military and paramilitary forces.

For more than a month, mobile and internet services have been suspended. Mainstream political leaders, including three former chief ministers, continue to be detained.

An executive at a real-estate investment firm, who did not want to be identified, said that most investors wanted “political stability” in Jammu and Kashmir. “It is not a very lucrative market otherwise,” said the executive. “It just has novelty value.”

He explained: “It is not as if Jammu and Kashmir is the only place where you can buy a house in the hills. It is just that the option was unavailable before and now it is. Commercial and residential real estate firms will not want to invest till there is political stability in the state.”

Other said that the rise of militancy activities in the Valley was also another key concern. “Businesses cannot grow if there are curfews,” said Kapoor. “This does not make it a conducive environment.”