Here are some misnomers, for the consumption of the common man, which seeks correction.

 1. If Delhi has to plan for an additional population of 10 million over the next 10 years, growing vertical is essential, to accommodate more dwelling units per acre.

 2. Detractors cite the siesmic zone, facilities & amenities, height restrictions, infrastructure, water & power and all such arguments against the motion. The counter argument is, Delhi has to factor in the incremental population while planning the urban infrastructure for the next decade & beyond, you can’t wish away the migration.

 3. Most migrants aren’t looking for tall buildings, which are 20storeys & above. We have to pragmatically plan ground + 3 structures OR  Stilts + four structures which can accommodate more DUs per acre, than what it is now. (the benchmark cannot always remain the Luytens Delhi).

 4. When talking of new areas like zone N & L, surely infrastructure can be planned in advance, to suit the amended higher density.

5. Let this be noted that higher density, relaxation in FAR and height norms does effectively bring down the cost of project acquisition. Why not allow higher ground coverage to create projects which are not super tall structures, but a mushroom development of well planned low rise buildings?

6. MPD 2021 allows high density developments alongside the new infrastructure, like the UER I & II. The licenses can be allowed with caveats for housing for the poor too, who deserve modern infrastructure.

The basic tenet of going vertical should be to generate higher supply, which would wean away the buying public from the unauthorized settlements, which are nothing but a ruse of the unscrupulous to work the rules in their favour.

What do the planners chose? Pretend unpreparedness & do an “ostrich act”? Maybe, no. Some quarters of the planners and intellectuals decide to act, and work on the Delhi Master plan MPD 2021. The MPD 2021 document was notified by the government way back on Feb. 2007 vide the S.O No. 141. The government of India gazette notification is available for the public on the official websites of DDA and other agencies. It is no longer a mystery document. The MPD details are available online too. Lo & behold, the political class did not change the stance, and continue to drag it’s feet on three critical components of management – RESEARCH, RESPOND, REFORM, REGULATE & REGISTER.

Some sense seems to be returning back. Work on the ground is visible again with multiple agencies putting together their resources to make the change, before the change becomes the mess.

Now specifically to the BRT corridors under proposal – Are they required, or aren’t they? The Delhi government think tank seems to find merit that the BRT is the way forward. If I have to add a rider, it would be a caution flag not to repeat the mistakes of the Ambedkar stretch till Moolchand, and to factor in the gargantuan nature of the problem, growing on a daily basis.

RITES carried out the need & feasibility analysis, and seems to deduce that Delhi would require another 375 kms of BRT. Holy cow !!! 375 similar to 6.5 would be suicidal. Nevertheless, as facts stand, 5.6 kms would be added to the existing BRT corridor, and 16 new corridors totaling almost 369 kms would be added over the next 11 years. No one is yet questioning on the funding mechanism for these. Remember, these are internal city roads, and not toll expressways.

Most identified stretches, per estimates, would carry a vehicular traffic of more than 5000 units per hour, in either direction.

The longest of the recommended stretches would be from Khera – Najafgarh – Ibrahimpur whereas the fastest and shortest BRT corridor would be from Rohini sector 21 to Kanjhawala. Now, that seems to be some integrated development, since the government is already planning a couple of Large Hospitals, government housing projects and other social infrastructure in Kanjhawla. Besides, kanjhawala has one of the most sought after, and neat extended abadi Lal Dora areas in Delhi. It augurs well for the region that infrastructure & housing would be developed simultaneously.

Fingers crossed, but my bet seems to be in favour of the Government. Soon, dreams might be reality.

It may be recalled that many an evictees had been issued ration cards and voter ID cards whilst they were accommodating (encroaching) themselves on government land.

“The decision of the respondents (government and civic agencies) holding that the petitioners are on the right of way and are, therefore, not entitled to relocation, is hereby declared as illegal and unconstitutional,” the bench said, adding all those eligible for rehabilitation should be granted an alternative site as per the Master Plan-Delhi 2021 within four months.

Now, therein lies the big challenge. The Masterplan for Delhi MPD 2021 was notified in Feb’ 2007, and since then many a committees have debated and finally the recommendations have been lying with the Ministry of Urban development. When would the Master plan of Delhi be released for the public? How would the private sector play a role in that? Which are the areas where government and private sector would complement each other with investments?

To understand these, I met Mr. Ramesh Menon of the online initiative, www.delhi-masterplan.com. This is what he had to say.

“How would these plans be implemented before releasing the zonal plans and LAP (local area plans) into the public domain? The recent supreme court judgement of 8th Feb 201 whereby almost 12000 acres of land qualify for acquisition by the DDA also would face stiff resistance in the absence of the zonal plans. It would be in the interest of the public to release the zonal plans so that the investors, sellers and buyers are clear on where to invest”.

As per Menon, the ideal location wherein investment would flow into would be zone ‘N’ of the MPD 2021 which has the ideal mix of clear land, Industrial, PSP corridors and residential areas. It may be recalled that zone N has almost 14000 Ha of land with the ideal mix of green belt, two mega industrial areas, PSP of almost 800 Ha and the Mini India project of about 150 acres.

Though the judgements are landmark in nature, it would place additional stress on the civic agencies and the government, esp. the MuD to act faster in the larger interest of the Delhi-ites.

The master plan of Delhi, in 2007, had given three years time for the polluting industries under 99 categories to either shift, or close down their units within three years. To revisit the Delhi Master plan MPD 2021 which was released in Feb 2007, the notification issued then said – “Industries listed under prohibited category shall not be permitted to be set up in Delhi. The existing industrial units under prohibited category need to relocate themselves outside the Capital within a period of three years.”

Most of these units are located within 22 different Industrial hubs spread across Delhi.  The deadline is getting over in the matter of a few days. Would almost 5000 Industries be disallowed to operate? Shut-down?

Ruchika Bhardwaj, an analyst with the leading consulting firm Certes Realty Ltd avers that “most Industrial consumers aren’t aware of the deadline. They might fall prey to the sudden awakening of the govt. machinery after the deadline elapses”.

It is understood that the Ministry of Urban development and other agencies have had several rounds of meetings to put together a plan. The unfortunate part being “too little, too late”. “It isn’t uncommon knowledge that these polluting industries is not likely to get protection from the courts too, in view of the pollution, the recent judgements and provisions under the MPD 2021″ says Mahipal Jain, an Industrialist with a unit within Delhi.

“Delays in the implementation of the zonal plans under MPD 2021 is the only factor responsible” says Ajay Dabas of Certes. He mentioned that the government had moved the provisions to acquire almost 945 acres of land under three villages in North West Delhi, almost 5 years back. Had the Industrial area been ready, these Industries could have found solace. The MPD 2021 itself mentions that the zone ‘N’ under MPD 2021 is the most suitable for high density developments owing to the topography, as well as the cheaper availability of the lands.

Ruchika avers that “an amendment or Ordinance by the government, to amend or delay to the notification issued by the MuD could be the only factor to buy time for these Industries”. It may be recalled that the Delhi state government might not be the regulator in these matters. The DDA is the implementing agency for the decisions released by the Ministry of Urban development.

The categories of Industries which are likely to be affected by the closure orders, if and when they are released soon include gas compressors, acids, alkalis, animal and fish oils, abattoirs and animal blood processing, bitumen blowing, bone grist, bone meal stainless steel pricking, dry cell batteries, electric wires and cables, fatty acids, fungicides, cranes, hoists and lifts (excluding assembly), flexographic ink, fuel oils, illuminating oils and other oils such as synthetic oil, lubricants, foundries, glass furnace (more than 1 ton/day capacity), gases-carbon-disulphide, ultramarine blue, chlorine, hydrogen, sulphur dioxide, acetylene (other than LPG, medical, CNG and oxygen), limekilns, leather tanning and dyeing (raw hides/skins to semi finish), methanol, methylated spirit, mineral salts which involves, use of acids, manufacturing of diesel engines, generators except assembly, potteries/ refractories (using coal or furnace oil), pyridines, plasticisers manufacturing, polythene polymers including resins, phenol, rubber solution and thinner, saccharine, secondary zinc industry, smelting, sugar, khandsari and vegetable oil hydrogenated.

The moot question however remains – Why is the MuD delaying the zonal plans, and what more time would it take for Delhi to implement the provisions of the MPD 2021. Three years hence, time runneth over.

Myth 1 – Land is a scarce commodity  

Most hoarding or reckless buying of land happens on the presumption that land is a scarce commodity and that it should be bought yesterday. In the Indian context, it is pertinent for the buyer to understand on “why” a certain land is attractive. Our recommendation always hinges on two factors – “demand for finished products on a 5 year horizon” and “Intent & ability for infrastructure development”.

Myth 2 – You need to have Deep pockets

Many an investors misunderstand that land investments entail a whole lot of capital, whereas fact remain that one can invest at varying ticket sizes. The same amount of capital can buy more land, if one can get expert assistance and identify opportunities for growing the money in well researched places.

Myth 3 – land is Land. What’s so specialized?

Anything, and everything related to real estate has a land connect. People generalize land as one asset class. However, there are @ least 20 kinds of land, which can be put to varying uses, and varying yield/ returns. For example, anything from race course, amusement parks, warehouses, commercial, residential, gold courses, resorts, exotic farming etc. can be created on land, but the price of each one of them would be different.

Myth 4 – Price of Land increases gradually.

Limited short terms returns In our opinion, since there aren’t many organized advisory firms specializing in the land business, the one eyed end up criticizing the product, rather than expose their limited abilities. Hence, the myth that land doesn’t yield desired returns in the short term. If invested into the right land, at the right time, at the right price, Land yields are the highest within the Real estate products.

Myth 5 – Instinct and hearsay is enough expertise for land

It is indeed the most misunderstood concept where investors, builders etc. use their common sense approach to identify land assets, rather than engage experts at the ground level to assist them in the endeavour. In the process, there are not enough success stories, especially for the small investor. Land should be bought through someone who understands the local level nuances like area, topography, social and physical infrastructure etc.

Myth 6 – Land is always sold, not bought

 The common practice is to have a “reactive”, rather than “Proactive” approach towards buying land. Most investors look at land assets when someone proposes, rather than make it an ongoing exercise to continually identify assets which would yield the highest returns. Our advice remain not to be restrictive, and choose from 3 options, but to widen the search from macro to micro analysis of opportunities.

We compare land and the other realty assets on three key parameters of Risk exposure, Liquidity terms and ROI terms.

It would be a good idea to share the seven reasons why we feel that investing in land is the best option within real estate compared to the much more “touted & publicised options” of built up spaces in buildings.

Reason # 01       Land is an evergreen, ever-growing asset. Brick & mortar assets like buildings (mall space / office blocks) deteriorate with time, whereas LAND DOES APPRECIATE, with time. Remember, some studies confirm that the value of any commercial building becomes ‘Zero’ in 27 years. Even when the building is useless & demolished, what is left behind is LAND.

 Reason # 02       Land is an asset from day one. It has very little lead time to mature from purchase to progress. For e.g. If you are an early bird buyer for a residential or commercial property, it typically takes 3-5 years for your asset to be registered in your name, and to draw returns from them. One keeps investing money & time for 3-5 years, without returns. Land can be put to interim use to deliver returns.

Reason # 03        Land is one asset which affords the most flexible options, within the real estate products. You can choose to buy any size & dimension, any value, anytime. Besides, land can be put to multiple uses during the period of ownership. Let me elaborate. Agricultural land if invested into; can be used for farming. Post zoning, land use can be changed and commercially used. Anything build on it can be redeveloped, for e.g. the same piece of land could end up being used as warehouse premise, commercial, residential, etc. etc.

Reason # 04       Land affords simple investment management. Once bought, it doesn’t incur high costs compared to built-up products. It is most likely that the land bought is self sufficient in deriving the maintenance cost, whereas, the other products attract a continually incremental maintenance.

Reason # 05      If we analyze the supply Vs demand for real estate products in our country, land as a commodity would remain in demand for the next couple of decades. There is an acute demand for finished products, which would have to be constructed on LAND. Hence, investments in LAND are bound to grow, provided the buying strategy is right. For e.g: Delhi as a city state is forecasted to grow from 136 lakhs to 240 lakhs of population in the next decade. That necessitates almost another few thousands of hectares to be brought under development. Hence, invest in land today, rather than wait for appreciation at a much later date; at much lower returns.

Reason # 06       With the economy projected to grow at a fast rate, and with disposable incomes being higher, aspiration of green living, bigger houses, better amenities, affordable luxuries etc. would take over. Those can be achieved on bigger land chunks being brought under development. Hence, invest in land today.

Reason # 07        Land affords the “right balance in your real estate portfolio”. While investing in real estate, one needs to have a right product mix to hedge the risk, with one or two products which are low on risk and high on returns. That is what land promises to be. Having said the above, we also advise our clients to exercise the right amount of caution and source expertise while buying land. Seek out experts rather than take the ‘gut-feel-approach’. Analyze-understand-replicate success stories in land as a portfolio rather than try to re-write a success story. Remember, all leading developers in our country grew at this scorching pace on valuations, using land as the growth engine.

HAPPY LAND-ing!!!!!!!!!!

The author is the founding Partner of CERTES REALTY LIMITED, a Delhi NCR based Real estate advisory and land consolidation organization and can be contacted on menon@certesrealty.com

In the last few months that I have started attending seminars and conferences on real estate,  I am further more amazed at the consistency of Ignorance about one of the largest investment opportunities ever – The Delhi Master Plan MPD 2021.

 Being considered as someone with expertise on land & projects under the MPD 2021, I am inevitably posed the following three questions

 a)    WHY & WHERE Delhi?

b)    Why and when should I invest in Delhi?

c)    Size of the opportunity and how to go about?

 Inadvertent or deliberate, it is our firm conviction that the Delhi opportunity is not well publicised amongst the masses. Besides, there are a lot of myths concerning Delhi opportunity which I intend to dispel through this article.

 Without getting into detailing, here are some quick reasons why the serious investor should not & cannot ignore the Delhi MPD 2021 opportunity.

 è Political – Strong “Intent & Ability” to develop Delhi into a modern megapolis

è Demographic – Population expected to increase by 80 lakhs in 10 years

è Demand – 2 million dwelling units is the forecasted demand for housing

è Economic – Growth driver for the investments into India. Hub for business activity in Northern India, with multi billion dollars investments in the next 5 years.

 è Policy – New favourable policies on investment climate – Proposed enhancement of ground coverage and FSI norms

 è Events – Delhi is already investing more than a few billion dollars for the commonwealth games 2010, and might be a bidder for the Olympics in 2020 or 2024

 Let me try and address some myths on the Delhi Master plan 2021 along with the answers to the above questions. A pictorial representation produced here below would be helpful to the readers too.

 Myth 1 – Land is scarce in Delhi.

 “Delhi has more land than the entire Gurgaon City – ready to be developed, and infrastructure in place, and available to be brought under development over the next 10 years”. I use this sentence to shock people who are under the myth.

 Delhi city state is a total of 1483 sq. Kms out of which the current urbanized area is approx. 702 sq. Kms. There is a WHOPPING 700 sq. Kms yet to be developed. Look at both the illustrations below for your own understanding.

 Illustration A – Map of Delhi with New urbanizable areas marked with surrounding cities

 Illustration B – Total area in the Opportunity zones which to be developed through PPP, private and DDA initiatives.

The above two illustrations surely would have helped dispel the first Myth.

 Myth 2 – Delhi is costly

 I would not be misplaced in saying this with reasonable authority that “Land is still cheaper in Delhi than in surrounding cities”. Lack of knowledge and vested interests has compelled investors to be fed the information that land is scarce, and out of reach in Delhi, CONTRARY TO THE PREVAILING TRUTH. Even today, the landed cost of FSI within Delhi can be managed below Rs. 300 per sq. Ft if well transacted.

 Myth 3 – Private sector can’t participate in Delhi

Yes, historically, the major developments in Delhi were undertaken by the DDA, which would find itself severely constrained with the scale of development that Delhi envisages over the next 10-15 years. Hence, the townships, residential and commercial segments would either be developed on the PPP model, or by the private developers. Relevant directions have already been set in motion towards the same, till now.

 Myth 4 – Surrounding markets are more attractive today

 I would rather express my own investment rationale & sentiment to this myth. “I would rather invest in the capital of the country, with a pent up demand for 2 million homes with the prices being lower than the surrounding cities, where whatever I may decide to develop would sell faster than anyplace else.” What else reasoning do I give to the queries?

 Myth 5 – Delhi would have limited development potential

 My good friend Ashok Jain always counters my queries with his favourite quip –“Where in India do you find a city which requires everything from low cost housing units to the top end farm houses, office space to malls, race courses to golf courses, amusement parks to Industrial parks, guest houses to warehouses, all willing to be developed yesterday”. To top it all, the Delhi master plan MPD 2021 has identified most of these needs and encourages the private participation in all these segments. Do I close my eyes to this piece of the pie?

 As for opportunity zones, one can seek participation both in the New 05 cities being developed under Delhi or for the redevelopment of the existing habitation areas. The five new cities that Delhi would create like Dwarka & Rohini, spread over more than 10,000 hectares each, would be self sustaining economic cells which would offer everything for “walk to work” to “quantum increment in the QUALITY of life”. These are essentially spread over the three primary zones of P-II, N and L zone of Delhi MPD (see chart above)

 My mother always says this – “If you have and well intentioned and capable friend, you won’t need a mirror”. The same logic applies to the business environs where we work, sometimes as the MIRROR, and sometimes as the impression.

 Our solemn advice is for the investors to seek out a consultant who has deep rooted insight into the opportunity zones, someone who understand both ends of the spectrum, bird’s eye view of policy & future resonance as well as the Ground reality of MPD 2021.

 This article is to express our conviction drawn over years of research, diligence and investments which have yielded more than expectations. I would only be willing to paint every critic and cynic with our optimism. I am just one phone call away.

The author, AJAY DABAS, is part of the Founding team of  www.delhi-masterplan.com  and can be contactedon help@delhi-masterplan.com

The title of this article is not supposed to scare, but to point out the objectivity with which the highest courts are tackling the many relevant, as well as frivolous cases filed in the Supreme court, related to the Delhi Master Plan MPD 2021.

During last week, a three Judge bench of Justice B Sudershan Reddy, P Sathasivam & G S Singhvi declined to have an early hearing to many a petitions and applications moved before it on the properties which were sealed OR related to unauthorized constructions in Delhi. The Apex court reasoned that the principal issue which they would consider first is the challenge to the validity of the Delhi master plan 2021. It also gave heed to the more than 400 odd applications which are in some way connected with the principal issue of the validity of MPD 2021. Several NGOs and vested interest parties had challenged the validity of the MPD 2021 on grounds that many of the decisions taken under the draft master plan 2021 would lead to chaos in the capital as it is already reeling under shortages of power, water, civic infrastructure, motorable roads etc.

While some counsel were pushing & pleading that the Apex court take up individual applications relating to sealing, at an earlier date than September 2009, the bench issued a cryptic rejoinder – “Never mind, suffer for some more time. It is just a question of a few days more”. Very rightly so. It has decided to address the core issue of the validity of the MPD 2021, rather than the individual applications.

One would recall that the court had said last year that the relief sought by many applicants claiming relief under the latest amendments to the master plan, as well as the various regularization of unauthorized colonies would be subject to the outcome of the matter already under the courts’ scrutiny. Moreover, a high powered committee assisting the courts in assessing the feasibility of de-congesting the city had expressed reservations on the rapidly growing population without a corresponding development of infrastructure.

Senior counsel Ranjit Kumar pointed out during the hearing last week that since most of the arguments & pleadings have been concluded, the court can fix the matter for final hearing.

We are likely to hear more about this around the 15th of September’ 09.

Like they say – “Inshallah, let brevity be injected so that we decisively move forward, rather than sway sideways”.

a) Are we headed to a hung parliament? b) If a government is formed with majority, would the agenda be any different for the incoming urban development & housing ministries? c) Would it impact the real estate prices in Delhi NCR? d) How soon do we expect changes, if any?

The first question was answered by the resounding win by the congress. We finally had a stable government which “promised to deliver differently”.

Mr. Jaipal Reddy being sworn in as the urban development minister was an indication towards the government’s intent of continuity and speed. Ms. Selja’s appointment as the minister for Housing & poverty alleviation was another ‘leg-up’ for the change in positive attitude.

Everyone was keen to know on the constitution / functioning of the ministry, the agenda and the foreseeable results. We too have been anxious to know the logical direction of the Delhi master plan 2021, as we believe that would be the singular factor to drive down the already increased and unsustainable pricing prevalent in the NCR region.

We huddled together in the first week of July’09 to analyze the prevalent & likely trends, price points, ground level realities, administration – political & bureaucratic, and most of all, the first 100 days agenda of the ministry of urban development, as well as the Ministry of Housing & Poverty alleviation, which would be a key indicator for the strategic direction of the MPD 2021 (Delhi master plan).

We rummaged through a lot of reference materials, including transcripts of debates in the Parliament & Assembly, various notifications, draft master plans, the expert committees constituted for Lal Dora / others.

Here is the good news. The first 100 day agenda of the Ministry or Urban development. Let me re-produce relevant portions of it, before we get down to the analysis of the same.

Press release – Monday, June 29th, 2009 18:52 Hrs

100 day agenda for action of Ministry of Urban development unveiled

Point # 15           Matters relating to the Delhi Master Plan 2021

“The Delhi Master Plan 2021 envisages involvement of private sector in the development of land and provision of infrastructure services as an improvement over the current scheme of large-scale development and acquisition of land entrusted to the Delhi Development Agency (DDA). Focused efforts will be made to finalize the policy. Every effort will be made to finalize the Zonal Development Plans of Delhi”.

Our Observation: The draft master plan of Delhi 2021 was notified vide S.O no. 141 dated 07.02.2007 and published in the Gazette of India. Post that, there wasn’t much action on the ground level. Many an investors, developers and home buyers are waiting in the wings, money ready, to grab land parcels when the zonal & ward plans would be notified. This clear indication would definitely motivate them. On the other hand, this news would be a major dampener for the real estate investment scenario of Gurgaon, Noida, Faridabad, Sonepat, Bhiwadi etc. Let us not forget that these markets (excepting Gurgaon to some extent) mushroomed since Delhi (read DDA) did not ensure that the supply was in any way commensurate to the demand. Delhi’s projected housing demand is in excess of 1 million homes.

Point # 16                  Real Estate Regulator for Delhi

Real Estate Management (Regulation & Control) Bill for NCT of Delhi will be taken up for decision.

Our observation: A right step in the right direction, however, one needs to be too big an optimist to see this implemented in a hurry. Also, let’s not forget that real estate being a state subject; we won’t really see uniformity a la other sectors like Telecom (TRAI) etc.

However, we also referred to office order # o-17034/18/2009-H dated 19th Feb’ 09 with the subject –“setting up of a committee to give a final shape to the model bill for regulation in real estate”.

Point # 17                    Building up 65, 000 houses by the DDA in next four years

In order to meet acute shortage of houses for urban poor, economically weaker sections and lower income groups of city of Delhi, construction of about 40,000 houses will be taken up. Tender documents for construction of such houses have already been made ready with fast mode of construction adopting pre-fabricated technology. Here, about 10, 000 houses are phased to be completed every year from the year 2010 onwards.

In addition to above, about 10,000 houses for middle-income group will be taken up on the same technology of pre-fabricated construction in four years’ time in phases.

Apart from the above, about 15, 000 houses will be completed (ongoing projects) in various phases. These houses will be constructed on conventional technology and these will be available from the year 2009 to 2011.

Our observation: There seems to be a positive movement on the ground, with some projects already underway, esp. towards Bakkarwala etc. DDA already is in possession of land parcels which can reduce the timelines. That is another point of consideration when we deduce that the current pricing levels of NCR markets would see another round of correction, when the Delhi supplies are unveiled. Our deduction is that the entry level product pricing, for mid-end housing would be reduced to < 20 lakhs, compared to the 30+ today.

The notification of the Delhi master plan 2021 would be a precursor to many a systemic changes that we are likely to see in the India real estate industry. The draft policy of “land assembly……” vide order No.F.3 (53) 2003/MP and published on the DDA website vide letter no. CEO/EL.G/102 (14) / 2009 date 11.04.09 is a departure from earlier times. Let me refer to a couple of them to highlight the attitudinal shift.

- MPD 2021 acknowledges that with the necessity for creation of infrastructure to support growth of the city at this scale, the present policy of large scale development and acquisition and its relevance in the present context needs a thorough relook. Also to involve the private sector in the assembly and development of land and provisions of infrastructure services.
- It is necessary to review and reconsider the current scheme of large scale land acquisition, development and disposal by DDA.
- Guiding principles 4.1 page 03 – Govt. / DDA to act as a facilitator with minimum intervention to facilitate integrated planned development.
- Page 07 – clause 9.1 – FAR permissible on the gross residential use in the assembled pockets – 200 ( higher than Gurgaon which is @ 175)
- FAR to be earmarked for the EWS component over & above the FAR of 200: 30 (15%)
The notification of Delhi master plan 2021, and its integration with the other agencies & watchdogs of culture, heritage etc. is extremely critical owing to the many national & international events and schedules in Delhi, over the next few years.

The intentions expressed by the various arms of the government over the past few months are indeed encouraging, and, we feel vindicated over our stand and effort invested over the past few years.

“We wait, to involve, and develop, aspirations of Delhi-ites”.

Impact of the May 2009 Elections on Indian Real estate Industry

Often, I am asked about the Delhi master plan 2021, its connotations, fine print etc. In the last few weeks, most questions seemed to be centred around the “Indian Elections and the impact on the Real estate, especially on the Delhi master plan”.

Instead of putting together a structured flow chart type of a report, I thought I could share some of the inputs in a more conversational manner. (Not to mention that our research division also has the reasons documented in a very scientific manner. Institutional investors, large investors etc. can surely subscribe to it by sending a mail to us).

After many years, we have an extremely conducive and favourable eco-system for the real estate in Delhi NCR. The draft master plans for Delhi master plan 2021 are under review. The same should get approved in the next 6-9 months (if not earlier), for the following reasons:

Political Eco-system: Delhi state is governed by the Congress. The central government also is led by the Congress party. The congress has won 7/7 MP seats in these elections. Most stakeholders within governance have an interest to see through the same, and roll out the master plan.

The Political will and players: The last one week has displayed specific Intent and purpose from the stakeholders in the government to hasten the pace of development within India. If one looks at the cabinet formation and ministers in charge of the growth in the next 5 years, it indeed is a cause for rejoice. Mr. Jaipal Reddy, in his second term as the urban development minister would provide continuity and pace. Most other ministers who would have a say on the Delhi master plan also are in key portfolios, and intend to hasten development.

Demand: The demand shortfall / Demand projection for Delhi state, till the year 2021 is estimated as follows:

Residential 1 million Units

Commercial 38 million sq. ft

Warehousing* 16 million sq.ft

*Includes wholesale markets

The recent DDA allotment of approx. 5500 apartment saw a response from more than 1.2 million investors and home-seekers. Isn’t that proof enough of the captive demand for housing in Delhi?

Administration: Delhi has many civic agencies like DDA, MCD, Delhi Police etc. which do currently have a dotted line reporting to the government. Hopefully things would change and a more accountable system is likely to be put in place. Positive noises and actions are already visible since the last few days.

PPP - The whole essence of the Delhi master plan is on the Public-Private-Participation model, and we would see tremendous amounts of private capital being infused into the development of Delhi. Let us also not ignore the fact that multiple agencies like the Central govt, State govt, private enterprise, World bank and other aiding agencies, individual investors etc.would be investing into the infrastructure and other growth in Delhi.

Events – Commonwealth games, the bid for other games by 2020 etc. would bring in infrastructure investments into Delhi in the short & mid term. Besides, Delhi would always play host the visiting state heads, dignitaries, seminars, conventions etc. wherein the who is who of the global policy heads would be participants.

There are a deluge of reasons why one must invest into Delhi, including reasons for shifting investments from the NCR area into Delhi.

As an organization, we have invested more than 5 years into the Delhi master plan, and can be helpful for other members/readers of this content. I can be connected with on menon@certesrealty.com

Our research findings (only a miniscule portion of the same) are already posted on www.delhi-masterplan.com

I thought it prudent to share my opinion, and encourage debate, irrespective of the story which might get featured in the business newspaper. This is how it went. (my answers are in red, against the questions from the business paper.

——————————————————————————–

Hi Sir,

I am writing a story on the significance of having escrow accounts for a real estate project.

Please share your views on the following:

1. Do you think the realty developers should have an escrow account for their projects (especially residential) ? – In the best interest of the consumers, each developer should have a project specific escrow account, to ensure that the payments made by the buyers against their specific property is utilized towards the development of the said project. However, since the operation of the account is solely undertaken by the developer, there are no checks & balances on the pay-outs. For e.g.: The developer can pay the bills incurred for the project “A” from the escrow account of project “B”, since the payouts are towards vendors, contractors and suppliers, who might be common.

The consumers invest into projects with an escrow account since they feel confident that they are funding their own acquisition, and their purchase / investment would not be slowed down by the overall financial condition / Wrong investment strategy of the developer in multiple projects, elsewhere.

2. If a developer does have an escrow account can a customer rest assured about the timely completion of the project, such that the funds will not siphoned off for construction of other projects or for purchasing land? – Not always. Currently, the announcement of the Escrow account is only a confidence building tool to communicate to the buyers that the payments made against a certain project is not being diverted. However, the reality defies the promise. The buyer(s) have no direct access to the operation of the account, and have absolutely no say, control or even information about the flow of funds. Contrarily, in a group housing society, the society members can seek information about the details of receipts & expenditure, and can raise objections / views on the same. Many developers did communicate the escrow accounts almost a couple of years back, and the ground realities do not really point to the restrictive use of funds in the said accounts. (The projects are not moving at the same pace as it should have).

Escrow accounts are not the solution to the problems anticipated in many projects. The consumers should be wary of developers who have announced a large number of projects, and do not have the wherewithal to complete them. There is no current mechanism to govern the cash flow of the accounts, since the management teams, suppliers, contractors, vendors, employees etc. of multiple teams remain the same, and that the buyer has no window of periodic interaction / review of his own funds.

2. With a large number of developers announcing less-than-Rs 20 lakh houses, is it legally possible for them to siphon off the funds collected from the customers to other project of theirs? - I cannot comment on the legal possibilities. Operationally, it is possible to pay-out vendors of project “A” from the collections of project “B”. The management team operating either accounts remain the same. As for the many “low cost housing projects” under announcement, I would watch it with a lot of scepticism. There are two things I would microscopically view amongst the developers announcing such projects – “INTENT & ABILITY”. Had they had the right combination of both, the earlier projects would not have been stuck, and new projects cannot be used as a ‘bail-out’ or avenue for collection of funds.

Low income or low cost housing Projects which are stand alone, and would not be burdened by earlier projects are the ones which I would bank & invest in. The consumers have to ensure that they don’t get carried away by the million dollar announcement of “Budget homes” from the larger developers, but depend on credible, cash positive local developers who can complete the projects in the shortest possible time. Also, consumers better invest in smaller projects, rather than large projects, since the chances of problems are always larger bigger projects.

3. The realty sector got into the current crisis after a majority of the developers diverted large chunks of money into building land banks; how do you see the present hysteria over building “affordable” houses by the same set of builders. – The land banks which many developers announced were not always valued at the announced value. Many a developers did not really have the physical possession of what they announced. Many investors were the first ones targeted by the developers to get them a start in projects, and then the end users used to filter in. Currently, the investors or speculators are staying away from the “affordable housing” as their investment would not grow at the same pace as it would have on a mid-high end housing. Hence, the lack of start up capital. End users as such are awaiting competition to hot up in the segment for better deals, as well as to assuage themselves of their continual cash flow status over the next few years, before committing themselves to pay for an asset.

I view many a recent announcements with scepticism and am not convinced about the “Intent & ability” of the promoters in completing and handing over the housing units to buyers. If you analyze, the markets flocked to the private developers since the govt. Agencies like DDA, HUDA etc. weren’t producing enough, OR, delivering on time, in spite of the payments being made on time. The time delays by the private developers, on account of their own management follies are not really building the consumer confidence, in spite of the big ticker announcements. I would still bank on smaller projects, which operate on a strict delivery schedule and don’t carry a debt burden. On a smaller project, the buyer can easily track the progress of the project on a periodic basis, to assess on the proper utilization of the funds.