Track2Realty Exclusive: The redevelopment of a city depends on many local factors and cannot be replicated ad hoc. Mumbai has its own character and flavour and has to be developed according to local needs and infrastructure availability. The government in consultation with developers should work in redeveloping the city of Mumbai by improvising on infrastructure.

Diipesh Bhagtani, Executive Director, Jaycee Homes has a different take when he says Mumbai has a distinct identity of its own, and therefore, it is wise not to ape any other global city for redevelopment.

“Yes, Mumbai lags way behind in the redevelopment space when compared to other cities globally. A developer faces a lot of hurdles while undertaking redevelopment projects. Apart from the investments involved, many other issues tend to crop up during the course of redevelopment. A developer in Mumbai has to take the consent of at least 75% of members for the redevelopment of a building. Getting the consent of all the tenants is a cumbersome process but it is important; inevitably, there are many tenants who oppose redevelopment and take a legal route. This ultimately stalls the process for a very long time. Also, getting timely approvals is a major issue in Mumbai. a developer has to obtain about 50 odd permissions to get approval for the project. Nowhere across the world do developers face such issues. Therefore, Mumbai lags behind other global cities in terms of redevelopment,” says Bhagtani.

There is a general consensus that what Mumbai needs is a strong commitment to planning. Many of the case studies globally show that successful projects had well thought-out plans at their bases. The case studies reveal that one very successful strategy is the creation of strong economic development agency that has independence, power and financial resources necessary to move difficult projects through the development process.

Some key initiatives by the state government would go a long way in revitalizing the urban renewal challenge, particularly in context of Mumbai. This includes granting incentive FSI to developers for construction of  LIG/MIG housing in lieu of their free-sale component;  single-window and time bound disposal of  Annexure-11  for slum redevelopment schemes;  premium for fungible FSI under SRA projects should be lower compared to non-SRA projects and higher delegation of authority for fast track clearances to key authorities.

Ends…

Track2Realty: Omkar Realtors & Developers, one of the leading players in making the slum redevelopment a success story in Mumbai believes slum projects are generally feasible in Metro Cities and more particularly in Mumbai. Shifting focus on Slum Rehabilitation for ECB will really help the sector.

Manoj Paliwal, CFO of Omkar Realtors & Developers says that since land parcels with large number of tenants are available in Mumbai, requirement of capital is also more.

“We are taking up the matter with concerned authorities. Slum redevelopment projects are state level issues, guidelines are meant for the entire country. Therefore, some delays are logical. But ECB in SRA would be a game changer for Mumbai redevelopment as a new window for financing will be available to the developers at reasonable rates,” says Paliwal.

The moot point is why is the move to slum ECB stuck up in policy logjam? Requesting anonymity a Housing Ministry official says Reserve Bank of India has already come out with the guidelines. You have to understand that Government of India and NHB are also working towards issuance of their part of the policy guidelines. I expect that soon these guidelines should be made available.”

Diipesh Bhagtani, Executive Director, Jaycee Homes says the Government has to be proactive with regards to ECB in SRA projects. The lack of a clearly defined policy is the main reason for this logjam. The eligibility levels and related fundamentals need to be established clearly for this policy to take off.

“ECB in SRA would eventually be a boon for the real estate market in Mumbai. The cost of funding through ECB would be cheaper than private funding through normal schemes. Additionally, ECB in SRA will help the poorer sections of the society to benefit as loans will be far more accessible and cheaper. ECB for SRA has the potential to lift the slum dwelling population from slums to live in respectable and affordable houses. Thus, ECB in SRA has the potential to make ‘housing for all’ a reality in a congested city like Mumbai and other metro cities. So, yes, it will definitely be a game changer for Mumbai redevelopment,” says Bhagtani.

It is true that ECB in affordable or low cost housing has not taken off in metropolitan cities of India. The high cost of land, raw materials, labour and inordinate delays in granting approvals act as a deterrent to affordable housing in cities like Mumbai and Delhi. Due to high cost factor, affordable housing as defined by the government is not possible in metro cities.

So, as an alternative, it is better to have developers to access funds from external sources and channel it towards slum rehabilitation projects. But there is a need for a clearly defined policy with regards to slum rehabilitation projects also. Though the Housing Ministry is preparing guidelines for slum rehabilitation projects that can raise funds via the ECB route, but the delay may defeat the purpose for which the proposed guidelines are being framed.

Track2Realty Exclusive: The Umeda Exit of the Ikeda Route of the Hanshin Expressway system passes through this building. The expressway is the tenant of these floors. The elevator doesn’t stop on floor 5th-7^th; floor 4 being followed by floor 8. These floors consist of elevators, stairways, machinery and other stuff.

The highway passes through the building as a bridge, held up by supports next to the building, making no contact with the building itself. The building has a double core construction, with a circular cross section and special care is taken by providing surrounded structure to the highway to protect the building from noise and vibration.

Babulal Varma, MD of Omkar Realtors & Developers believes if policy incentives are granted, Mumbai is quite capable of replicating global standards, while providing its own unique solutions. According to him, the Urban Renewal Authority’s 4Rs strategy is now well established and gaining recognition in the community. The 4Rs are Redevelopment, Rehabilitation, Reservation and Revitalisation which, when applied together, enables a holistic approach to unlock the full potential of urban renewal.

“Today, Hong Kong has emerged as a world class city with tall vertical structures, sector-by-sector massive development, open spaces and greenery and most prominently, Floor Space Index (FSI) of 5–35. Similarly for urban revitalization, there are several policies and programmes in American cities. The pursuit of growth through economic development has become the key strategy in efforts to revitalize older American cities. All levels of government have come to play roles in the complex inter-governmental process of designing, funding and implementing economic development programmes,” Varma narrates as an example.

Pranay Vakil, former Chairman of Knight Frank, asserts holistic solution is needed for reaching global benchmark as urban infrastructure has not kept pace with the massive influx of people. Roads in a constant state of disrepair, perpetual traffic congestion and an overstressed rail network are characteristics of our transportation system. One only has to look global at leading western cities like Manhattan and London which have multiple efficient lines of commute into the CBD.

“Manhattan faces much of the same land constraints of Mumbai as well as the fact that it is a peninsular city. However, efficient and farsighted planning has ensured its evolution over and under the ground with skyscrapers and underground metros which maximize land-use. Its local railways connect locations up to 132 kms away and ferries provide connectivity to dense residential hubs like New Jersey. Using this example as a model, existing FSI norms for frontline city like Mumbai must be relaxed to maximize land-use,” says Vakil.

…..to be continued

Track2Realty Exclusive:

From buyers’ perspective the cost of units in these townships is not always lower than the suburban areas of the city. This is because the land cost may be low but cost of creating entire infrastructure in the remote areas is very high which is also passed on to the buyer.

Analysts argue the most viable roadmap would be to develop the project on a public-private partnership with select developers who will be responsible for infrastructure development, construction, marketing, operations and maintenance of the proposed township. Integrated townships would then only hold the key to urban solution.

 Track2Realty ranking of the top 10 integrated township destination cities of India:

1. Bangalore
2. Delhi-NCR
3. Mumbai
4. Lucknow
5. Kolkata
6. Jaipur
7. Chandigarh
8. Chennai
9. Pune
10. 10. Panipat

Many realtors developing township across the country feel the boost given on development of infrastructure and improving connectivity by constructing highways will open new opportunities to develop both commercial and residential townships. However, they believe that the government needs to adopt a multifold strategy for revival in the real estate sector. Their expectations are:

• The government must incentivize developers by waiving off development charges and reducing stamp duty and registration costs
• Explore Public-Private-Partnerships which should be scaled up rapidly so as to match the demand for affordable and integrated townships
• The developers should get infrastructure subsidies on developing townships as it leads to an overall infrastructure development of the area leading to an increased cost for the developer
• Clarity in policy and more FDI infusion in township projects

Track2Realty Exclusive:

The difference between a city and such a township is that it is a venture entirely conceptualised and executed by the developer. “Integrated townships provide residents with the tranquillity of a home in the countryside, equipped with comforts and amenities of a bustling metro. These self sustained townships are mini cities,” says Ravi Saund, COO, CHD Developers who is building a 250 acre township at Karnal in Haryana.

“There seems to be a good amount of demand for integrated township development as long as there is a right mix of various elements as part of the development,” says Brotin Banerjee, MD & CEO of Tata Housing.

According to Madhav Pai, Director, EMBARQ India, townships should aim to retain urban characteristics, prioritize pedestrian and bicycling accessibility and promote mixed-use developments that accommodate the needs of all including children, the elderly and differently-abled.

“This will result in improved accessibility, reduced carbon emissions, enhanced quality of life and economic development. It is important to influence the way we imagine, plan and build our cities and make mobility – especially non-motorized modes and linkages to public transport – an active indicator that consumers, builders and policy makers insist upon in new developments,” he says.

While encouraging sustainable mobility principles in real estate, Kishor Pate, CMD, Amit Enterprises Housing and Hon. Secretary, CREDAI (Maharashtra) says, “From a residential real estate point of view, the solution clearly lies in providing residents with as many facilities of daily living as possible within residential projects. The developers should focus on project designs that incorporate such facilities and designating no-vehicle zones. The location of the project is also a critical factor. If space constraints within the project do not permit the provision of these facilities, the project can still be located close enough to them to minimise vehicle use.”

Seconds Ashok Kumar, Principal and MD, Cresa Partners, “The new residential developments and townships should inhibit the growth and use of motorized mobility options. This will result in improved accessibility, reduced carbon emissions, enhanced quality of life and economic development.”

Many corporates nowadays take up huge spaces for their offices along with residential premises for their employees. This enables the employees to walk down to the work place, which is nearby. This avoids commuting and the ordeal of parking and gives extra time on hand to spend at sports or recreational activity or with family members. This saves time, hence energy and cost.

…..to be continued

Track2Realty:

The residents, many of whom are senior citizens or have young children, have lived there for more than 25- years. They bought the apartments legally and duly registered, while the cooperative housing societies have paid property taxes in full to the government, to date.

The apartments were constructed on land leased to Pure Drinks Ltd in 1955, which was permitted by B.M.C in 1980 to develop it for residential purposes. Without getting the plans approved, Pure Drinks along with unscrupulous builders, Yusuf Patel, B.K. Gupta and P.S.B Construction Co erected seven buildings, two of which were high-rise buildings of 17 and 20 stories.

During the construction period, the authorities issued notices to the builders to stop work. The builders were fined and they paid the penalty and resumed work. After the construction was completed nobody prevented the buyers from occupying their apartments or the buildings from forming co-operative housing societies.

Unaware of these violations, the residents bought the apartments believing that they would get the occupation certificates in due course, as was the norm 25 years ago. Since 2005 the residents have been in litigation with B.M.C. trying to defend their homes and save their families from being thrown on the streets.

Strangely the SC verdict delivered on the 27^th of February, 2013, has instructed the BMC to pursue the demolition notices issued to all flats above the fifth floor. In the verdict the SC has even condemned those portions of the structures that are within permissible limits for regularization. The area threatened with demolition is far in excess that is beyond the permissible FSI. They have also included the water tanks and the lift rooms. While the demolition will destroy the homes of all the families with flats above the 5^th floor, those below it will have to suffer without water and lifts besides tolerating dust and noise pollution created by the demolition.

The litigation was necessitated as Pure Drinks Ltd who by manipulating the syste, misguided the courts as well as the BMC, sold the balance smaller portion of the land, on which stands the now defunct Campa Cola factory, to Krishna Developers. The perpetrators of the crime have a double advantage. The additional FSI that shall accrue as a result of the unreasonable demolition of area that is within the permissible limits, in the 7 residential buildings, de-housing the ignorant flat purchasers, will eventually go back to Pure Drinks Ltd and they will be able to once again encash the same by redeveloping that much area.

Interestingly the demolition order contrasts sharply with the laws applied to the Ulhasnagar buildings or the Mumbai slum dwellers and forest land encroachers who were permitted regularization if they could prove occupancy from 1995.

Track2Realty Exclusive:

In addition, with the sector going through a downturn, developers are facing challenges in acquiring funds to develop the high cost project. Furthermore, R&R issues such as inadequate compensation for land have resulted in inordinate delays for integrated township developers.

Owing to the execution delays, a number of PE funds are looking to exit their investments in large township projects as time and cost overruns have had an impact on the expected returns for the PE funds.

Due to the potential offered by large integrated townships in alleviating the problems associated with increased urbanisation and shortage of housing, it would be in the overall interest if the government proactively promotes development of integrated townships.

The government needs to be a facilitator, providing support to prospective developers for creating external infrastructure (power, roads, water), relaxation of stamp duty and development charges, green channel/single window clearing procedures and monitoring mechanisms.

“There is a dire need for planned suburban development which should aim at sustainability. In the course of suburb development, infrastructure and commercial development precede residential development. Governments must aim at encouraging infrastructural and commercial developments in an identified suburb which would spur residential catchment development. This ensures that the suburb becomes self sufficient for all needs at short distances,” says Surendra Hiranandani, Founder and Managing Director of Hiranandani Upscale.

Integrated township also needs a certain level of good urban governance and services in terms of water, sewerage, waste management, road network, transport and power. At present states like Gujarat, Maharashtra, Rajasthan and Karnataka have attempted to come up with their own township policies which have regulations in place for the multiple proposed townships.

…..to be continued

Track2Realty Exclusive:

Real estate does not have any such capital which replenishes except for the internal accruals for flats which is put into the next project immediately because developers want to build a brand and snowball effect. A realty project has some receivables, some outgoings, and some projects lagging in sales, and hence cash flow deficit.

“The problem starts when this so-called cash flow crunch or deficit culminated because you moved the receivable that you got from your flats and the construction loan into inventory of land which will develop in 5-6 years of time. The basic philosophy of funding is short term and long term which even I as a real estate developer understood very late. It is a standard practice in other industries because they actually have designated vehicles through which they can take long term and short term loans,” says Kruti.

Sunil Dahiya, Senior Vice President of industry body NAREDCO feels that around 2000 when the industry was just starting to emerge and there was a pent up emotion within the demography to pick up residential needs and invest, the banking could not synchronize itself with the sector. So banking did not see real estate as a lucrative investment. But around 2000-05, they realized that the consumption of loans was the maximum in the housing industry.

“We saw a lot of exposure from the bankers in the housing sector between 2000-05. All the private bankers started taking exposure in the projects at the customer level. It was at this time that the developers probably made the mistake of raising too much money through the IPO route. Why I say it was a mistake is because that exposed the developers’ balance sheet to say-I am in need of money to take the business forward to the next level,” says Dahiya.

Atul Modak, Head of Kohinoor City does not agree that IPO was a mistake, but believes to raise the capital the kind of land bank everyone has to create and for that again the kind of vulture fund that one has to explore and later the question is raised how the money is spent, that is very critical. In case of IPO, he feels people have gone berserk and then they created the problem. Other than that, he doesn’t think the IPO route is wrong to raise money.

“The problem is in copying what is happening abroad but what has happened to real estate in the US is because of the kind of funding they did. In India, whatever requirements are there, most of the developers are selling instead of leasing the properties because of the funding issues. At the same time most MNC’s are looking for commercial property on lease. If at all government or RBI has been stringent, it has been good in the recession period. Today, other industries are being funded for inventory, and if the banks start funding for the land, they will have some control over where that money is going,” says Modak.

…..to be continued

Track2Realty Exclusive:

Jaypee Greens not only stands up as a case study but also throws challenge for the future integrated townships in terms of size, value and overall holistic development of self-contained township. After all, how many townships can afford to be spread over 1162 acres of lush green land, the way Jaypee Greens Wish Town is positioned.

The township in Sector 128 includes five sectors. The mega golf view integrated township has Jaypee Greens Klassic in Sector 129, Jaypee Greens Kosmos in Sector 128, Jaypee Greens Garden Isles, and Jaypee Greens Kensington Park in Sector 133, Kalypso and Pavilion Court in Sector 128.

Mahindra World City in Chennai also stands out as a successful integrated township developed far away from the then existing commercial hubs in the city. It is extremely large, spread over 1500 acres, with multiproduct SEZs managing to attract prominent anchor firms across a number of industry verticals.

Magarpatta City spread over 430 acres near Pune needs a special mention as a model integrated township. It is an internationally appreciated model of self-sustainability. The township has solar water heating system, garbage segregation at source, bio gas, vermi-culture, bio-compost, tree plantations, cold storage in addition to the usual facilities.

All these amenities are managed by the developer through its property management services (PMS) arm. The Pune Municipal Corporation even reduced the property tax for Magarpatta City residents by 10 per cent in appreciation and in support of their efforts.

Another success story has been the Hiranandani Group’s Powai project. There are dozens of township projects across India at various stages and the average price range is between Rs 5,000-8,000 per sq ft. For Example, Vedanta City near Surat in Gujarat offers 2BHK flat at around Rs 15 lakh while Nanded City at Pune by Magarpatta Township is in the range about Rs 40-44 lakh. The 2 BHK flat would cost more than Rs 1 crore in Kohinoor City at Kurla, Mumbai. Villas will cost Rs 2-3 crore near tier-II cities while it will cost about Rs 5-6 crore in the suburbs of these cities. For example, Amanora Sweet Water Villas are quoted at Rs 4 crore and above at Amanora Park Town at Kharadi near Pune.

…to be continued

Moderator—Pranay Vakil—Chairman Praron Consultancy

Atul Modak—Head-Kohinoor City

Gaurav Gupta—Director, Omkar Realtors & Developers

Jhumur Ghosh— National Feature Editor, Times of India

Ravi Sinha—CEO & Managing Editor, Track2Realty 

Pranay Vakil: No but the same developer used to rent out commercial office space, but he won’t rent out the residence because of the return. So, according to Gaurav funding is the issue and according to Atul return on investment is the issue.

Gaurav Gupta: What I meant to say is that the total cost is more important but we are so far away from it. We are thinking of return that is stretched and that kind of capital is not there to support because when you look at the opportunity cost, then it has to be incentivized.

Pranay Vakil: I want to add one more dimension to this and that is the legal dimension. If you do make a place for renting, and you don’t have laws in the country that is strong enough to give you re-possession, not after five years or 15 years but now if the tenant misbehaves or defaults.

Ravi Sinha: There is a social angle as well, since we Indians have emotional connect with the property and want to own and inherit it. So, that is also a disconnect.

Pranay Vakil: It is a disconnect except for the floating population who is not interested in buying. But the three aspects that we are talking about—funding the project, ROI and the legal aspect of getting re-possession are all issues which can be resolved. If leasing model can work successfully in office and retail space, why can’t it work successfully in housing?

Thank you very much all the panelists. It has indeed been a very productive discussion and we got an opportunity to understand cross section of views.

Ends…..