COVER STORY
generally above 100 acre in size,” responds Rajeev Talwar, Managing Director, DLF Universal. “What we do is Integrated townships will much larger than that.” be the future drivers of That said, there is absolutely no clear definition on the size of integrated townships. “Each state has its own policy real estate growth.” defining the size of a township; we have defined it as 100 acre - Routhu Nagaraju, Vice President and above in our draft integrated township policy of Andhra (Corporate Planning), UNITECH GROUP Pradesh,” says Devendar Reddy, Additional DirectorTown Planning, Municipal Administration and Urban Development strategies Development Department, Secretariat, Hyderabad. For their part, developers would love to work on “In my opinion, you cannot have a blanket rule for the size integrated projects on an ownership model. “I mean who of townships across the country. Land is a state subject, so would not love to?” asks Nagaraju. “It gives a lot of freedom, state governments should decide the size of these projects. scope to experiment and resize, re-plan and reschedule the But there is a need for unified guidelines from the Centre, project development according to my wish.” which is lacking.” But the reality is different. “Land rates are so The Andhra Pradesh Government is yet to prohibitive that it makes it impossible for a introduce an integrated township policy. But states such as Gujarat, Uttar Pradesh, Maharashtra, MANDATORY CRITERIA FOR GUJARAT'S Haryana and many others have already introduced INTEGRATED TOWNSHIP POLICY their policies. In fact, Uttar Pradesh and Haryana have witnessed great progress in integrated township projects. Category Minimum Minimum Minimum land area (acre)
The benefits For developers, the advantages of taking on such projects are not far to seek. As most of these projects are governed by state policies, there are a host of financial incentives in terms of long-term tax breaks and rebates. In some cases, as state governments promote these projects, land acquisition costs are subsidised and land conversion charges are often exempted. Also, states with integrated township policies have created a single-window clearance system to obtain permission and clearances, hastening the entire process. “The biggest benefit I see from a developer’s perspective is that we obtain a huge piece of land to develop,” says Talwar. “This helps us carry out a better plan, achieve economies of scale and offer end consumers walk-to-work options.” “When it comes to integrated townships, everything is planned on the table,” says Naresh Kumar Patel, Deputy General Manager-Urban Planning, REPL, a leading urban planning and real-estate consulting firm. “This offers a holistic approach for better housing, with enough scope for amenities and social infrastructure. The additional advantage of integrated townships is that they are planned for the long term, giving developers the chance to plan their investments better. There is a lot of branding and increased visibility.”
investment (`cr)
Technology parks
100
80
7,000
Education-based townships
200
160
2,800
Medical or healthcare townships
150
120
2,100
25
20
350
100
80
NA
Tourism-related infrastructure Residential
developer to own the entire land parcel,” says Patel. So a joint development strategy is adopted, where the developer enters into an agreement with the landowner and offers him a stake in the project. Another option is the public-private partnership (PPP) model, widely prevalent in Uttar Pradesh. Then, as mentioned earlier, there is the unique model of Magarpatta City, where the developer joined hands with the landowners. “It is very difficult to point out the best model,” observes Nagaraju. “In some cases, ownership works; in some it does not.”
FINANCE OPTIONS FOR INTEGRATED TOWNSHIPS • The financing of such a large-scale project can be divided into two parts: land acquisition and construction. • There are no financing options available for land acquisition; it has to be done through the company’s internal accruals or private equity. • Construction costs can be divided into two types: residential and non-residential. • Funding residential construction is a simple and straightforward method. Customer advances and sale of units can bring in funds. Also, financial institutions do offer loans. • Excess funds from residential units can be used as bridge funds to finance commercial buildings. • When it comes to retail, it is very important to finalise the anchor tenant. This helps raise funds from banks.
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Construction World May 2014
assured employment generation by completion
