Real estate developers are keenly looking to exploit property around major infrastructural projects. The move has the potential to change the country’s landscape
The Delhi western peripheral expressway, also known as Kundli-Manesar-Palwal expressway (KMP), is turning out to be a cash cow for real estate developers. Real estate prices around the 135.6 km long expressway, which is expected to be operational next year, has already shot up two to three times.
The expressway is located in Haryana and would connect Sonepat (Kundli), Gurgaon, Mewat and Palwal. Even before the expressway becomes a reality, the areas around it have become most sought out locations, thanks to the development of Noida and Gurgaon – the two pillars of Delhi’s national capital region (NCR).
According to people in the know, the region is being developed as a modern city should: a trauma centre, helipad, parking lots, refuelling stations, police stations and the works.
The Uttar Pradesh government is also trying to develop this area as an education hub, which means, more commercial activities and a sound business opportunity for real estate developers to cash in on.
According to dealers, land prices for an acre in Kundli, have touched the Rs 2 crore to Rs 3 crore per acre mark after the KMP work began. Property rates in Manesar too have shot up from Rs 20 lakh toRs 25 lakh per acre to Rs 1.10 crore to Rs 1.40 crore per acre.
Similarly, real estate companies are trying to make maximum out of the proposed railways’ eastern dedicted freight corridor that would connect six states, Uttar Pradesh, Delhi, Haryana, Punjab, Rajasthan. Even though, the corridor is dedicated to freight traffic carrying coal, food grains, cement, fertilisers and lime stones, it offers tremendeous business potential for real estate developers in both commercial and residential spaces in and around the corridor.
Says RS Ramasubramaniam, vice-chairman Feedback Ventures, “Anticipating a major infrastructural project — a highway, port or airport — is key to profitable real estate development. In some cases, infrastructure projects and developers are dependent on real estate development to make infrastructure projects viable and coopt real estate developers for this purpose. In recognition of the fact that real estate developers are keen to exploit property around major infrastructure projects, governments are actively looking at ways to levy taxes on the increasing property values through participation of real estate developers around infrastructure projects, in order to collect their share of higher property values.’’
Not unnaturally, real estate developers have already started constructing townships and offices around these areas and have started bookings as well. “We have launched a new hi-tech township adjacent to Greater Noida around the dedicated freight corridor (DFC) route. There are other developers. The township has verstaile offerings, such as villas, affordable housing and floors. With the DFC in place, there is bound to be a surge of commercial activities. It will be a hub for freight traffic, which would bring a lot of people as well. It makes good business sense to have properties around DFC,” an official of Ansal API told FC Build on the condition of anonymity.
Call it the complementary affect. The government’s increasing focus on transport infrastructure is indirectly creating big business for real estate players. In case of national highways, the road ministry had expressed its intention to work on a plan that would allow real estate developers to tie up with road construction companies to bid for expressways.
While, road companies would focus on highway construction, real estate firms would develop the area around highways. “The participation of real estate developers would bring down viability gap funding (VGF) of National Highways Authority of India (NHAI) for these projects and state governments’ cooperation would offer easier land acquisition for expressways and real estate development,” said an NHAI official.
Even Brahm Dutt, the then secretary road transport had confirmed a similar plan earlier. “Developing real estate around expressways is one of the options being considered to exploit the commercial potential of expressways. Real estate companies would be given a choice to identify locations for residential, commercial or any other establishments on a particular stretch,” Dutt had said sometime ago.
The plan has, however, been put on the backburner. Even the expressways projects have not made much progress since last year. There remains a big question mark whether the new road minister would consider a similar option or not.
At present, there are only 200 km expressways in the country. The ministry proposes to build around 18,637 km expressways by the end of thirteenth five-year plan. These projects would be taken up in three phases – 3,140 km by 2012, 3,690 km by 2017 km and 6,031 km by 2022.
The projects would be on built-operate and transfer basis. The remaining over 5,300 km would be taken on annuity in the third phase. While a four-lane expressway is estimated to cost Rs 14 crore per km, a six-lane expressway may cost Rs 20 crore a km. This requires vast funding both from the government and private parties.
The proposition remains expensive. It would require a lot of money from both concessionaires and the government to be put in these projects. The former road minister Kamal Nath had proposed setting up of a separate Expressway Authority to take up these projects with an initial corpus of Rs 10,000 crore.
NHAI is in the process of finalising plans to initiate the bidding process for five access-controlled expressways with a total length of about 1,000 km. Included in this axis are the Chennai-Bangalore stretch, Vadodara–Ahmedabad, Dhanbad-Kolkata and a small stretch between Delhi and Meerut.
The idea was generated from the UP government. It has awarded the 165-km, six-lane expressway connecting Noida and Agra to Jaypee Infratech. The project is expected to cost over Rs 9,700 crore. To make the project more viable, the state government has given Jaypee the right to develop 6,175 acres along the expressway at five locations, for residential, commercial, amusement, industrial and institutional purposes. It also acquired land for Jaypee’s real estate development and transferred it to the company at the acquisition cost.
out Samantak Das, national head, research, Knight Frank India, “I think it is fantastic opportunity as it will ease the burden on cities and make scarce land available. Since the focus of the government is on developing infrastucture, these corridors of development provide opportunities to develop land and reality.’’
In the aviation sector, both private airport developers and the Airports Authority of India (AAI) have realised the benefits of such ventures. At two major private airports in the country, Delhi and Mumbai international airports, the developers have already got real estate companies to come forward for setting hotels, retail shops and other commercial activities. AAI has also been working on model to rope in private companies for expansion and modernisation of 35 non-metro airports expansion. The authority is going to remove irritants in the partnership that had earlier kept private bidders at bay. The proposal is with the civil aviation ministry for its approval.
AAI will join hands with private companies for the city-side development, including, hotels, restaurants and shopping complexes at various airports.
The railways — which probably own the biggest stretches of land in the country — have been surprisingly slow to explore tie-ups with real estate companies. The world’s second largest rail network under a single management has a land bank of 43,000 hectares.
The railways have set up a subsidiary called Rail Land Development Authority (RLDA) for development of vacant railway land for commercial use for the purpose of generating revenue by non-tariff measures.
The RLDA has identified 17 sites for bidding. While most sites have attracted bidders, a couple of them in Maharashtra and Tamil Nadu did not. Overall, the RLDA has 124 sites that would be taken up for commercial development.
The land authority has also identified 139 sites for multi-functional complexes (MFCs). In West Bengal alone, there are 29 sites for MFCs while Maharashtra and Bihar have as many as eight and four sites for MFCs. In Karnataka, Orissa and Madhya Pradesh, the RLDA has identified eight and seven such sites, respectively. Most of these sites are under inspection and study.
RLDA has also invited tenders for commercial development on around 35,100 sq km of railway land off Jalna Road, Aurangabad, This is a part of authority’s plan to lease out some of its real estate assets to earn Rs 600 crore in rentals. The authority plans to lease 15 plots in different metros and Tier 11 cities on long lease this fiscal and has identified a land bank of 1,900 hectares for development. This would be leased out in phases.
Transport experts believe that there is still a huge potential. “The two sectors (real estate and transportation), if brought together with proper planning can create big business for each other. While, in India the airports have already started such ventures, in case of highways and railways, the sectors have made no progress in this regard,” says Vishwas Udgirkar, partner at Deloitte Consulting (India). Looks like things could be changing.
