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Pooling land, unlocking value

Move likely to free up about 20,000-25,000 hectares of land, which will boost affordable housing supply

Written by Shalini Narayan , Sandeep Singh | New Delhi |
Updated: May 30, 2015 3:09:12 am
Land pooling, MoUD, NCR, Ministry of Urban Development, EWS, Delhi news The DDA land pooling policy is set to expand the urban limits of Delhi and the developer community across NCR is also looking to make the most of this opportunity.

The much-awaited land pooling policy notified by the Ministry of Urban Development (MoUD) earlier this week seeks to address the housing woes especially in the affordable category in the National Capital Region.

While the government’s notified operational guidelines for land pooling schemes will unlock 20,000-25,000 hectares of land across Delhi, it will be utilised for construction of more than 20 lakh homes in the urban villages and smaller towns across the city’s peripheries. The policy has many firsts, including participation of private players and a self-imposed penalty clause on the land-owning agency — the Delhi Development Authority — which looks to ensure delivery of projects in a time-bound manner. It also looks to provide housing for the economically weaker section as developers will have to retain 15 per cent of the units for EWS.

The DDA land pooling policy that was  framed in 2013 and got MoUD’s approval with a few changes earlier this week is set to expand the urban limits of Delhi and the developer community across NCR is also looking to make the most of this opportunity. Insiders say that a number of developers have been busy buying land from farmers across the 95 villages that fall under the purview of the policy. They also point out that this has resulted into a sharp rise of land prices across these villages.

A few important aspects that the policy provides for are — increased floor area ratio (FAR) of 400 that will promote vertical growth; private participation that may put an end to encroachments on vast expanse of land; better infrastructure in the form of roads and sewage treatment plants at every housing complex and benefit to farmers.

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How the policy works

Under the land pooling policy, a group of owners with small parcels of land will come together and give their pooled land to the DDA for the development of basic infrastructure. Anyone with more than two hectares of land can avail the benefits of the policy and become a ‘developer entity’ (DE). After the DE firsts gives his land to the DDA, the agency will develop it by providing the necessary infrastructure in the form of roads, parks, power supply and sewage treatment plants and return 48-60 per cent of the land to the owners. As per the policy, two categories of land pooling exist: category I, which includes land owners with land above 20 hectares and category II, those with land between two and 20 hectares. Once the authority develops the infrastructure on the land, the developer entity falling in category I would get 60 per cent of the land pooled and the remaining will be retained by DDA.

Those falling in category 2 will get 48 percent of developed land. The DDA would use the retained portion of the pooled land for creating the associated infrastructure as well as for public and semi-public areas.

Additionally, once the land is returned to the DE for construction of housing units, the developer will be allowed to avail increased FAR of 400. FAR determines the total built-up area allowed on a certain plot area. This, an official said, would contribute to vertical growth and in turn, reduce congestion.

A government official said that buildings of up to 20 storey may be constructed and will act as an added incentive to the developer. But developers will also have to provide a portion of the development for the EWS and at least 15 per cent of the units will have to be retained for EWS category.

“Until now, the DDA had to seek land through the Land and Building Department. The department would seek the land, construct projects, allot houses and put in its own infrastructure. This policy ends this and allows developers to construct according to their own choice with an increased FAR while getting other infrastructure developed by the DDA in a time-bound manner” said the official.

The policy also has a self-imposed penalty clause that looks to enhance efficiency. Under the policy, if there is any delay in completion of the development by the land pooling agency — DDA, the authority will have to pay a penalty of 2 per cent of external development charges (EDC) per year for the first two years and 3 per cent of EDC per year thereafter to the DE (farmers/land owners) for delay beyond the date of completion of the construction by DE or five years, whichever is later, till the external development works are completed.

Impact of the policy

With high land prices across Delhi, the affordable real estate market has been pushed towards Gurgaon and Noida over the last few years.

However, with the huge land parcel being unlocked in Delhi, the policy may provide affordable housing options within Delhi. While it is likely to open up housing options for at least 2 million families over a period of time in Delhi, it has already resulted into hectic activity in the villages that fall under it. Developers say that they have been in the process of buying land from the farmers over the last couple of years.

“We have been waiting for the policy to be notified by the MoUD. We have bought land in those areas and are ready to go ahead with our plans. We ideally want to pool more than 50 acres as in that case we will get 60 per cent of the developed land from the authority,” said Abhay Kumar CMD, Griha Pravesh Buildteck.

While there was limitation to Delhi’s ability to provide housing, industry experts feel that the policy will see the city unlock its potential for real estate development and infrastructure formation across almost 20,000 hectare of land concentrated across peripheral zones.

“This is expected to expand Delhi’s urban limits, while re-directing realty development from other NCR towns into the Capital. This is also expected to mitigate Delhi’s housing gap, especially in the affordable segment. If implemented successfully, it has the potential to emerge as a prototype for other state and municipal development authorities for pooling land and encouraging private participation in urban development,” said Anshuman Magazine, chairman and MD, CBRE South Asia. There are others who also agree that Delhi’s potential in providing housing to more people will witness a jump.

“This policy is likely to result in residential development projects across the prime city, which has an acute shortage of housing and where most of the housing needs are fulfilled by the DDA. It is likely to lead to an increase in private participation in housing development across the city,” said Rohan Sharma, associate director-Research, JLL India. While there is enthusiasm around the policy and the potential it opens for developers who have been reeling under pressure for several years now, there are some who are seeking greater facilitation from the government when it comes to execution.

“Execution challenges would still remain till the government does not form a single-window clearance mechanism to grant approval of layouts and development licenses. Also, there is no clarity on reduction / exemption of stamp duty for developers who surrender their land to DDA.

Though it is a much-desirable development as far as consumers are concerned, government needs to fix the issues to make it lucrative for developers as well,” said Pradeep Jain, chairman, Parsvnath Group.

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