Author
Gurbir Singh is an award-winning senior journalist with over 30 years experience. He has worked for BW Businessworld since 2008, and is currently its Executive Editor. His experience ranges from covering 'Operation Bluestar' in 1984 to pioneering coverage of the business of Media & Entertainment and Real Estate for The Economic Times.
We are in the throes of an urban crisis. A McKinsey Global Institute study released in 2011 predicted that India’s population in cities will balloon from 340 million in 2008 to 590 million by 2030. In other words, in another 15 years, 40 percent of India’s population will be resident in cities and towns. More important, India’s cities will generate 70 per cent of the jobs available by 2030. However, civic infrastructure is not keeping pace. According to the Union ministry for housing and urban poverty alleviation, the shortage of homes in the country is 24.7 million units; and the ministry estimates the number of people living in slums has grown from 52 million in 2001 to 66 million in 2011, accounting for nearly 25 percent of Urban India. How do we meet the civic demands of such rapid and unplanned growth? How do we transport millions of people over these huge urban sprawls? Trying to meet the huge backlog of urban deficit and disarray, the Narendra Modi government at the Centre has identified ‘Urbanization’ and ‘Housing’ as its focus areas. The 2014 Union budget speech by Union Finance Minister Arun Jaitley declared the building of 100 ‘smart’ cities as its long-term goal; and an allocation of Rs 7,060 crore was announced for the planning and development process. Simultaneously, ‘Homes for All by 2022’ is now a target slogan.To discuss these significant challenges, BW/Businessworld convened a conclave: ‘Building Urban India the Smart Way’ bringing the best minds in government and the private sector, as well as experts in planning, transportation, housing, and civic infrastructure on one platform at New Delhi’s Hyatt Regency on 6 February. Holistic Smart CitiesIn her inaugural address at the packed session, Isher Judge Ahluwalia, Chairman, Board of Governors, the Indian Council for Research on International Economic Relations (ICRIER), said that the discussion and mobilisation around building greenfield ‘smart cities’ will give a positive push to creating a more sustainable Urban India. The promise of the new government to build 100 smart cities will require not only new technology but also drastic reforms in the political and institutional environment in which our cities function. The focus needs to be on connectivity, integrated land use and transport planning, and environmental sustainability.Urban planning has always been in silos, but for smart cities we should open a new account, Ahluwalia said. For example, within the framework of master plans, there is a sanitation policy, an urban transport policy, and so on; but what is required is to bring these together and see how to make it all work within our federal framework. This is required as cities have to play a very important role as engines of growth as our economy goes through significant structural transformation. There is going to be more migration from rural to urban India; urban GDP accounts for about two-thirds of the total GDP at present, and by 2031 it is expected to constitute three-fourths of the total, she said. On the existing cities that need refurbishment, Ms Ahluwalia said that even within the confines of the current policies, it is possible to do far better. The Government of India and the state governments will also have to play a major role in building the capacity of local governments for urban planning and city management. With political empowerment and greater devolution of functions, finances and functionaries, city governments can rise to the occasion by responding to the growing challenges of urbanisation – and be held accountable.Drawing attention to her book ‘Transforming our Cities’, Ahluwalia said she had attempted to capture the success stories of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) including town planning schemes for urban expansion in Gujarat, how Nagpur has worked towards a 24x7 water supply system, and how Navi Mumbai has taken to treating of wastewater for reuse. These smart but scattered initiatives need to be brought under one comprehensive plan. Housing For AllIn the module ‘Housing for All By 2022’, vice-chairman of Delhi Development Authority (DDA), Balwinder Kumar, said public bodies such as DDA need to intervene to provide the necessary push to affordable housing. DDA will bring in 62,000 homes in the ‘affordable’, under-Rs 20 lakh category in the next few years, he revealed. Kumar also said to provide more services and to generate more revenue, the government had decided to increase the Floor Area Ration (FAR) along 500 meters on either side of the Metro corridor in the national capital. He also said a mixed-use policy would be implemented for this corridor. P.K.Das, town planner and architect, giving the example of Mumbai, said in the guise of redevelopment schemes, builders were taking away slum lands to create a stock of upper and middle-class housing. To ensure wider equity and supply of homes for the poor, he suggested reserving all slum land in the master plan for small, economical units. “Housing for the poor cannot be provided by beating around the bush and providing schemes of fringe benefits. Adequate land reservation is a must in Development Plans. We should also declare slum-occupied lands as reservations for affordable housing without trading these for high cost development,” he said. Replying to the moderator Yatish Rajawat, Ashish Karamchandani, Managing Director of FSG Group, said it was myth that affordable and low budget homes were not commercially viable. Pointing to atleast a dozen developers in this category like Vastushodh Developers of Pune, he said there is a strong role the private sector can play in meeting the goal ‘Housing for All’ and compliment government efforts. There is a need for housing across income segments – from the really poor, who need significant support, to lower income families with household incomes of around Rs 10 a year. “There are 10 housing finance companies that have given over Rs 2,500 cr in loans to informal sector customers to help buy these homes. But the need is millions and we need policy changes and government support to scale this,” he said. In another session on urban laws, Colin Gonsalves, a public interest lawyer, pleaded for a more humane approach to giving titles and rights to the urban poor. “The current maze of laws are heavily loaded against slum-dwellers, and allow for summary evictions,” he said. Rapid Transport SystemsIn the panel discussion on: ‘Building Rapid Transport Networks’, Mangu Singh, Managing Director of Delhi Metro Rail Corporation (DMRC), said that the country had lagged in adding urban infrastructure in the past years. This was mainly because we lived under that impression that India is a country that lives in rural areas and both policy and decision makers had, for years, worked with a rural mindset. The answer to the people’s woes was to build efficient public transport systems. This does not mean only a rail metro. “It has to be a well-thought-out, well-integrated mix of all possible means of public transport,” he said. “Unfortunately, the availability of easy finance and the prestige attached to owning a car in our country has led to a large number of cars on the road, which was adding to the congestion,” he added. Talking of the success of the Delhi Metro, Mangu Singh said a CRRI study that had looked at benefits like saving time, saving greenhouse gas emissions, and improving safety and quality of life, had revealed that the return is as high as 23 percent annually. This means the entire investment comes back to society in just 4.5 years. He however pointed out that a city like Delhi cannot have an efficient transportation system unless all other modes of transport are integrated. People also talk of extending the Metro to Sonepat, Meerut, and Aligarh. “Metro means ‘metro’. Talking of connecting villages and rural areas is not possible as the Metro focuses on providing intra-city transport. Sanjay Ubale, MD & CEO of Tata Realty and Infrastructure, said that though Mumbai had an efficient rail network with a huge carrying capacity, people continue to use cars as the overcrowding and heat in the non-airconditioned railway rakes is a real deterrent. Shreya Gadepalli, Regional Director of the Institute for Transportation and Development Policy (ITDP), a think tank that is helping many cities improve public transportation, pointed out that though less than 5 percent of the people use cars, these vehicles hogged more than 80 percent of the road areas due to the lack of mass public transportation. Pitching Bus Rapid Transport (BRT) Systems as an alternative to expensive metro systems, Gadepalli gave the example of Ahmedabad’s BRTS called ‘Janmarg’. It started in 2009 on a 12.5 kilometre corridor, and has since expanded to provide fast, air-conditioned and efficient services on a 88-km network today. Concluding the session, moderator of the session Preeti Singh quoted Enrique Penalosa, former Mayor of Bogota and the pioneer of BRT systems. “An advanced city is not one where even the poor use cars but rather, one where even the wealthy use public transport.”Defining Smart CitiesDefining smart cities as modern, efficient habitats which are supported by technology to make the quality of life for its citizens smooth and hassle-free, M K Singh, CEO of Delhi-based Umang Realtech, said as much as $ one trillion was estimated to be the cost of setting up the targeted 100 smart cities. In planning these cities, Ranjit Sabhiki, a town planner and architect who has worked on Delhi’s master plans said, “Housing for the economically weaker section (EWS) will form a major component of these new urban centres, as 70-75 percent of the population will consist of villagers who will need cheap rental accommodation.” Currently, urban planning is dominated by the providing homes and spaces for the rich and upper classes, leaving the poor to fend for themselves. “For the proposed new smart cities a completely different planning approach is called for. More detailed urban design is required, along with careful planning of the EWS residential areas. Complete sectors of affordable housing on areas of 25 to 50 acres need to be planned around shared communal facilities which include hospitals, schools, police station, fire brigade, electric sub-stations, and open space for recreation,” he said.Rajeev Talwar, executive director, DLF, came down heavily on the government for creating bottlenecks, and regulatory speed breakers. He pooh-poohed ‘affordable’ proposals for housing the poor as attempts to push these sections ‘down under’ instead of raising them to the level of the middle class. On the other hand, Ashok Bajpai, MD of international security firm GS4, said good governance in the coming smart cities must aim at cutting down on large numbers of government staff that currently are expensive and inefficient. Giving the example of the western societies, Bajpai said: “GS4 as a private security firm today runs prisons and police operations in several world cities. There is no reason why we can’t replicate it in India.” In another session on financing Smart Cities and the new Urbanisation programme, panellists pointed out that the government had no idea on how this would be raised and what would be the cost of funding these projects. So far, just Rs 7,060 crore had been sanctioned, and that too presumably to set up the planning process. Deloitte partner Arindam Guha had suggested a figure of Rs 6 lakh crore or around $100 billion. Another estimate puts it at $ one trillion. Union Minister for Urban Development K Venkiah Naidu estimated the cost to be “lakhs of crores” and he suggested putting together a public-private partnership (PPP) model which would be aided by viability gap funding through involvement of local bodies and state governments. Pointing to this maze of imponderables, Sunil Rohokale, MD & CEO of ASK Investment Holdings, said that the absence of concrete projects, and specific investment opportunities so far had failed to enthuse international investors for the smart cities programme. Anshuman Magazine, CEO of realty broking house CBRE, said the legalization of the Real Estate Investment Trusts (REITS) however would bring in private capital into the property market and help kick start city infrastructure projects. Investing in property through REITs will allow even small investors to buy property assets through ownership of REIT shares, he said. However, in the discussion that followed, it was pointed out by participants that REITs had been in the pipeline for over 5-7 years, and there was still no sign on an enabling notification. Further, delegates were also critical of the government not defining or notifying the ‘100 smart cities’ it had spoken about. The closing address was delivered by Union Minister for Railways, Suresh Prabhu. The proposals thrown up at the conclave have been documented and can well become drivers for the new Union Budget and beyond.
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The Narendra Modi government is going to face its first big showdown with the Opposition over its recently promulgated land acquisition ordinance. Bowing to the demands of industry to ease the process of acquiring land for projects, the NDA government pushed the measure through the executive route after it realised that parliamentary passage was no going to be possible with the Opposition enjoying majority in the Rajya Sabha. On the flip side, the decimated Congress and its allies, spoiling for a fight, intend to use the land ordinance to ‘expose’ the government’s ‘anti-farmer’ intent.
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The Vladimir Putin - Narendra Modi summit in New Delhi has re-established Russia as India’s largest arms supplier. As part of the several deals that were signed, 400 Russian multi-role helicopters will be assembled in India every year, Russia’s state-owned Rosatom will build 12 nuclear reactors over 20 years in India, with the option of increasing it to 20 and Rosneft committed to a 10-year supply of crude with Essar Oil. “Even if India’s options have increased, Russia remains our most important defence partner,” Modi told mediapersons after the signing summit. But the deal that hogged the limelight pertained to diamond trading, as it was announced at the imposing Vigyan Bhavan before a 1,000-strong cheering audience that included gems and jewelry traders and representatives of diamond mining companies. As part of the deal, Russian mining giant Alrosa will supply diamond roughs to 12 Indian manufacturers including Rosy Blue, Asian Star and Demexion for the next three years. Alrosa produces 25 per cent of the world’s roughs. Modi also announced a major concession for the diamond industry — that of permitting special notified zones (SNZs) for auction of roughs and for viewing by buyers in India. These special zones, to be set up in Mumbai’s Bharat Diamond Bourse and perhaps in Surat too, will allow rough diamonds to be brought in and unsold ones to exit without being registered as ‘imports’ on the books. Modi also made a major pitch on behalf of the diamond jewelry exporters asking President Putin to waive or lower duty to increase sales in Russia. Putin’s India visit came on the heels of crashing prices for Russian oil, and Europe and the US closing their doors to Russian products in retaliation to Putin’s Ukraine policy. India’s bilateral trade with Russia stood at a paltry $10 billion in 2013, but with looming sanctions in the West, the Indian side is hoping to cash in and has made a list of 24 non-traditional goods and services that it will target to sell to Russian markets. “We are pitching for free trade between India and Russia. These are difficult times, with oil down, sanctions taking effect and the rouble becoming weak,” admitted Maxim Shkadov, the Russian president of the International Diamond Manufacturers Association. The US is not very happy at the turn of events and has expressed its displeasure over India doing business with Russia at a time like this. Reports of Crimean leader Sergey Aksyonov accompanying the Russian delegation has only queered the pitch further. However, Modi is clear that while leaning westwards, he wants to keep some options open; and use his Russian chips on the bargaining counter with Obama and Europe. (This story was published in BW | Businessworld Issue Dated 26-01-2015)
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India, a hub for cutting and polishing diamonds, must take the proposition ahead by adding value through better retailing of diamonds and diamond studded jewellery. The way ahead for adding value by Indian diamond manufacturers is through sharper branding and marketing, Union Commerce Secretary Rajeev Kher told delegates of the first World Diamond Conference in New Delhi on Friday. "India should take the story ahead by active retailing, rather than just being a supplier of cut and polished diamonds," Kher said. "We should drive the preferences in the world market, rather than just respond to demand. We should build skills and capacities in designing in that direction, so we influence preferences and shape demand," he added. Underlying the importance of the diamond trade for India, Kher pointed out that of the $314 billion annual export basket, gems and jewellery exports contributes 15 per cent, and is at second place only to oil and petroleum products which accounts for 37 per cent of the export pie. In terms of employment, India had the largest number of skilled craftsmen, while the gem and jewellery industry as a whole provided employment to as many as 3.5 million people directly, he said. "Competitiveness for the industry will come from leveraging opportunities for new products and tastes through good marketing, and this will generate more employment for the future," he told the gathering of Indian diamond manufacturers, bankers and representatives from big mining companies such as De Beers, Rio Tinto, Alrosa and the Angolan Endiama. Discussing the challenges of the future, Chaim Even Zohar, chairman of the consultancy firm Tacy Ltd, pointed out that in 2013, diamond rough purchases accounted for $15.5 billion, while total sales of cut and polished diamonds generated $21.6 billion. In other words, Zohar said, value addition accounted for just $7.1 billion, and the balance sheet of the industry as a whole showed a meagre net profit of $400 million. "This is not sustainable, and the industry had to find ways for greater value addition," he said. Stephen Lussier, MD of the South African giant De Beers also emphasized there had been growth, but "growth without margins is of no use." Explaining his position, Lussier said a De Beers study had shown that while just 2 per cent of the people had acquired a diamond unit in 2002, this had swelled to 9 per cent by 2011. "Despite competition, diamonds continue to captivate consumers, and it is still the repository of elegant emotion," he said. Outlining the strategy of the future, the De Beers chief said a McKenzie study had shown that the two most important consumers of diamond jewellery would continue to be US with 40 per cent of the market, while India and China would emerge as the fastest growth areas with 25 per cent of world consumption. Emphasizing the role of marketing, he said: "Young people in the US wanted to know more about the products they spend on. Therefore, they must be made to feel good about the luxury product they buy." Tracing De Beers' journey from the generic marketing of diamonds with the famous "Diamonds-are-forever" tag, to the company's new branded "Forevermark" diamonds, Lussier said branding "added that value, and will make the margin." He said the campaign was succeeding as data showed that from 2002, when 7 per cent of the consumers had bought a branded diamond, by 2014 as many as 25 per cent of the buyers had purchased a branded diamond. Jean Marc Lieberherr, MD of Rio Tinto Diamonds, also emphasized the success of the company's branding campaign with the "Nazrana" series, which he said was a "partnership" brand which was marketed by Rio Tinto in alliance with local manufacturers. The Rio Tinto chief said his company has sold 8 million carats of diamonds over 30 years to Indian manufacturers and had sunk $90 million over 10 years in developing the Bunder diamond mines in Chattarpur district of Madhya Pradesh. "We hope to produce diamonds one day," Lieberherr said in an obviously wry reference to the slow speed of business permissions in India. Giving a realistic picture of the future, acting president of the Russian mining giant Alrosa, Ilya Ryashchin, said the industry had emerged from the demand crisis of 2009 and a growth rate of around 5 per cent had been restored. He said by 2019, with a global consumption of 165 million carats, the roughs production will peak, and then begin to taper off. He said Alrosa, which accounted for 25 per cent of the world's production of roughs, had invested heavily in the development of underground mines in Mir and Dycal, and a quarter of the company's production will now come from its 3 underground mines, he said. "Though US consumption was stable, we expect the main jewellery consumption to come from India and China, in the future," he said. Presenting the Indian picture, Demexion chairman Rajeev Mehta said India was not only a production hub for cut and polished diamonds, accounting for 70 per cent of the world's production by value, but with the inauguration of the Bharat Diamond Bourse (BDB), the country had also become a trading hub. "The BDB in Mumbai's Bandra Kurla Complex (BKC) is the world's largest bourse with 2,500 offices and 2 million sq ft of office space. With a special notified zone, the BDB can become an auction centre and viewing area for diamonds," he said. India was also a huge consumption market for diamond jewellery, Mehta added, with sales of $8.21 billion in FY 2014 amounting to 11 per cent of the total world's retail trade.
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As India applauded PM Narendra Modi’s debut on the world stage at the G-20 nations’ conclave in Brisbane, we at home missed all the signals of a looming crisis. Underlying the bonhomie at the G20 summit was a sombre note that much of the Indian media failed to pick up. In a widely quoted signed article in The Guardian, British premier David Cameron said with cutting candour: “Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.” “As I met world leaders at the G20 in Brisbane, the problems were plain to see. The euro zone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too. Emerging markets, which were the drivers of growth in the early stages of the recovery, are now slowing down.” Cameron also put forward his prescription for protecting Britain from a possible euro zone collapse. Dumping the approach that “we could spend, borrow and tax our way to prosperity”, he made it clear he would opt for a more protectionist regime — keeping debt, deficit and borrowing low, while attracting investment. Whether this line will succeed or not is yet to be seen. But, clearly, the ‘warning lights’ that Cameron speaks of will translate into falling exports from emerging markets like India to the euro zone, and very little investment flowing out of Britain and Europe into India. The news from the East wasn’t good either. Japan, the world’s third-largest economy that economists thought would grow 2 per cent in the July-September quarter, actually shrank 1.6 per cent due to sustained weakness among consumers and in manufacturing. Housing investment plunged 24 per cent this quarter, compared to last year. With two consecutive quarters of contraction, Japan has slipped into technical recession. The ‘Abenomics’ of PM Shinzo Abe, which was intended to give a spurt to manufacturing, growth and consumer spending through a lax monetary policy, fiscal spending and structural economic reforms, has not paid off. Wages and savings have continued to fall, and the Japanese refuse to spend unless they have to. However, Abe is expected to stay the course and has said that he will call snap elections in December when he still has the public ear and can gain a mandate to push through his policies. The signs of an uncertain future are all over. China’s growth is slowing, and euro zone is just a whisker away from ‘recession’, notching a dismal growth of just 0.2 per cent in the July-September quarter. This spells trouble for India as it looks to welcoming investments and enhancing exports. An increasing ‘fortress’ approach in the developed world will mean less of both; and India, increasingly linked to the umbilical cord of the world oil economy and ‘globalisation’, will need more than the Modi magic to come out unscathed. (This story was published in BW | Businessworld Issue Dated 15-12-2014)
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Mumbai has seen a revolution in urban infrastructure and transportation in the past two years. In quick succession, the Scomi-built 9-km first phase of the monorail project was commissioned in February this year, followed in June by the city’s first 11.4-km Metro line connecting Oshiwara with Ghatkopar on an east-west axis. Simultaneously, the 17-km Eastern Freeway that provides an easy exit from the city has made life easier for long-distance motorists. These three projects alone involve an outlay of Rs 10,000 crore, and there is more to come. The Mumbai Metropolitan Region Development Authority (MMRDA) is the nodal agency driving Mumbai’s infrastructure revolution. Keeping a hawk eye on the execution is metropolitan commissioner U.P.S. Madan. “Never before have we seen so many infrastructure projects come to fruition in such quick succession. It has substantially decongested traffic and made life easier,” he told BW in an exclusive interview. He gives credit to MMRDA’s concept plan drawn up in the mid-1990s, which studied Shanghai and Singapore’s development and evolved a ‘holistic’ plan, that took into account Mumbai’s needs for the next 40 years. Work on the Rs 23,000-crore Metro Line 3, largely underground, which will provide a central transport spine from Colaba in the south to Seepz in the north-west suburb of Andheri, has already begun. Two other Metro lines are on the anvil, he revealed, and will require another Rs 50,000 crore to be raised. Mumbai’s projects will get an infusion from the Japan International Cooperation Agency (JICA), which has extended a line of credit to the tune of Rs 13,250 crore for the Metro Line 3 project. Similarly, the 22-km Trans Harbour link that will connect Mumbai to the south-west, and which has been floundering for funds, has also been offered a lifeline by JICA. Surf’s Up Mumbai has a lot happening on the transport and connectivity frontWhere Mumbai has failed though is in providing mass, affordable housing to its citizens. A recent central government survey indicated that of all the metros, Mumbai’s slum density is the worst, with about 43 per cent of the population continuing to eke out an existence in shanties on encroached land and other informal housing. The Slum Rehabilitation Scheme, a brainchild of late Shiv Sena chief Bal Thackeray, was in 1995 touted as the answer to the city’s slums, by providing homes to 40 lakh people. Builders were roped in to build rehab housing on encroached plots in lieu of saleable development rights. But the Slum Rehabilitation Authority, which oversees the scheme, instead gained notoriety for offering sweet deals to builders, and nothing to slum-dwellers. Its ‘achievement’ on its website comprises allotting just 1.5 lakh units over two decades. To make amends, the state government is experimenting with ‘reservation’ of 20 per cent of housing stock for economically weaker sections in projects on plots of one acre and above. The scheme has been notified, but it remains to be seen whether it will make headway. Some success at decongestion of the Island City has also been achieved by the development of satellite cities. However, this has made travel time and distances increasingly burdensome. The difficulty and high cost of land acquisition have been exemplified in the state government’s inability to develop an alternative airport. This has hampered connectivity and business growth. In developing a long-term ‘Mumbai Transformation’ plan, an interesting proposal came from the Singapore-based planning consultant, Surbana International. Taking a leaf out of Hong Kong, Singapore and other island cities, Surbana proposed a massive land reclamation effort. Countering sceptics who said it would be too expensive a proposal, Surbana demonstrated how land reclamation would provide premium locations to businesses and generate over $300 billion for Mumbai’s development. Ultimately, environmental and other regulatory issues pushed the proposal to the back burner. But it is high time Mumbai revives such plans to ensure the city’s growth trajectory does not flag. gurbir@businessworld.in (This story was published in BW | Businessworld Issue Dated 01-12-2014)
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Building happy, futuristic cities is the flavour of the season. Earlier, polluted, over-crowded cities were seen as India’s ugly face; something nobody was doing anything about. Now, cities are ‘in’; urban India is where people are moving to. Call it the Modi-effect or a realisation that has come late, but governments at the Centre and the states are now tripping over themselves to announce new initiatives and reforms. It cannot be otherwise. Today, 35 per cent of the country’s 1.2 billion people live in urban agglomerations. By 2050, half of India will be living in cities and towns. Meanwhile, neglect and lack of comprehensive civic programmes have made existing cities cesspools of deprivation. Nearly 45 per cent of Mumbai lives in slums, while for Kolkata and Chennai the figure is close to 30 per cent. So when the Narendra Modi government unveiled its first budget proposals in July this year, it grabbed the bull by the horns. Finance minister (FM) Arun Jaitley put building homes and cities at the top of the development agenda, while Prime Minister Modi said ‘housing for all’ was not just a slogan but an achievable target by the year 2022. Simultaneously, the FM announced that the government was committed to building 100 ‘smart’ cities, and allocated Rs 7,060 crore for initiating the process. Everybody knew this was not enough to even set up the drawing boards for planning the new cities. So where is the money going to come from? THE TOP 10 CITIES IN 2014DELHIMUMBAIGURGAONNOIDACHENNAIHYDERABADBANGALOREKOLKATAPUNEAHMEDABADOverseas investment is part of the answer. To attract money to construction and realty, the Union Cabinet has now approved dropping the minimum 10-hectare requirement for serviced housing plots and reducing the minimum floor area for FDI-compliant projects from 50,000 sq. metres to 20,000 sq. metres. The new norms also halved the minimum FDI requirement to $5 million from $10 million earlier. Further, the condition of a three-year lock-in period for developers of FDI-compliant projects has been dropped, making exits for foreign investors easier. Beyond the hype though, little is known about ‘smart’ cities and where they are to come up. ‘Smart’ cities is a term used by European urban planners to define technologically advanced urban communities that use gadgetry to make life comfortable and transportation seamless and easy. Metropolitan commissioner for Mumbai, U.P.S. Madan, says for him turning the posh corporate enclave of Bandra-Kurla Complex (BKC) into a ‘smart’ city meant complete wi-fi coverage, electronic display of parking, intelligent signalling systems and a hi-tech security network with CCTV coverage to protect the community. Others have defined ‘smart’ cities more comprehensively based on international experience stretching from Copenhagen to Cape Town and from San Francisco to Singapore. Anshuman Magazine, chairman and managing director of realty broker CBRE South Asia, flags a few important pointers: scientific governance at the municipal level; holistic urban planning; involving the urban citizen; smart technology; integrating green technology with human development; and addressing challenges of informal urban settlements. What is also becoming clear is that the ‘smart’ cities the government has in mind will be new, greenfield creations, probably satellite towns of larger cities rather than re-engineered versions of decrepit metropolises. The government has announced a few — Ponneri in Tamil Nadu, Krishnapatnam in Seemandhra, Tumkur in Karnataka, Varanasi in UP, and the Gujarat International Finance Tec-City (GIFT). An initial concept note prepared by the Union Ministry of Urban Development has estimated the project development cost over 20 years to be around Rs 6.86 lakh crore, of which it proposes to earn Rs 39,000 crore from a slew of environmental and green taxes. break-page-breakMeanwhile, the focus on planning and investing in ‘smart’ cities should not be at the neglect of refurbishing and remodelling old metros. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM), an initiative of the former UPA government, was directed at precisely that. It pumped in more than Rs 50,000 crore over a few years into rebuilding water distribution and transport systems in neglected tier II cities; and investing in sewer lines and drains. With a new government in place, however, JNNURM faces an uncertain future. Among the biggest challenges to the creation of ‘smart’ or new cities is land acquisition. It has stalled the development of Naya Raipur as Chhattisgarh’s new capital by over a decade. Jharkhand is unable to find land to set up Indian Institute of Management and Indian Institute of Technology campuses. Earlier, the archaic Land Acquisition Act of 1894 that allowed for ‘forced’ takeover and payment of peanuts as compensation created widespread social and class conflicts. This was replaced last year with a more equitable law — the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. This has been dismissed by industry for allowing ‘outrageous’ compensation. It is in the context of a revived interest in urban India that the city competitiveness survey assumes greater importance. The survey shows both strengths and weaknesses of big metropolises like Delhi and Mumbai. While the top two rankings remain unchanged, the leading city Delhi emerged stronger in ‘Innovation’ and ‘Human Capacity’, while the No. 2 city Mumbai performed better in ‘financial’ and ‘administrative’ parameters. More importantly, what the survey proves is that it is the ‘satellite’ cities that are the way of the future. Gurgaon and Noida, that were lower down the rankings, have clawed their way up in this year’s survey to No. 3 and No. 4 positions, respectively. They have scored high on ‘business incentives’ and Noida particularly performed well on the ‘communication’ parameter. The rise of Gurgaon and Noida has been at the expense of Chennai and Hyderabad, which are to No. 5 and 6 positions, respectively. Then there are those who are reinventing themselves. Kochi, for example, has gone up from No. 16 last year to No. 11 this year. Vadodara and Kanpur have risen too. As a whole new crop of ‘smart’ cities comes into being in coming years, the competition will only become sharper; and these rankings more important. (This story was published in BW | Businessworld Issue Dated 01-12-2014)
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There is a growing concern about the volume of ‘black’ or unaccounted money circulating in the system. Real estate has been a favourite parking ground for unaccounted income because the large ticket size of assets allows for hefty lots of ‘black’ funds to be absorbed in each transaction. Again, real estate and construction have only lately opened up to institutional and bank funding. Large realtors even today continue to run opaque financial systems that are not open to due diligence. It is thus only natural that ‘hot’ money will gravitate towards opportunities that do not leave a trail. What is the volume of black money in real estate? Purely because of the sector’s size and informal structure, it is difficult to quantify. However, a realistic estimate — born from the experiences of most property buyers — indicates that, on average, 30-40 per cent of the transaction amount is paid in ‘black’. The larger the ticket size of the property, the bigger this component. But, that is only the tip of the iceberg. The real estate sector runs a well-oiled, layered black money system beginning from land transactions to the final stage of sale of apartments. Since consumers pay in cash at the construction stage, vendors too are paid in cash. This helps them hide their real income. As land is the most expensive and difficult component of a realty project — accounting for 50-80 per cent of a project’s cost — politicians and large investors routinely fund these transactions. Mumbai started this notorious trend; several well known politicians became benami shareholders in builders’ projects. The irony cannot be missed: earlier builders paid small change to politicians and bureaucrats for services rendered; now, politicians and bureaucrats are bailing out builders by emerging as ‘financiers’!The central government is understandably worried at the growth of black money in realty. Finance minister Arun Jaitley has suggested that Aadhar cards be used for tracking real estate transactions. “We should not lose track of domestic black money. Every taxman should know where it is operating — in mining, land, jewellery, luxury items and real estate. If you increase the tax base, you have to reach more areas. If the black money component can be brought back into the national mainstream, our gross domestic product (GDP) growth rates would be much higher,” he told a conclave of income-tax officers recently. THE ARTHAKRANTI PROPOSAL: AN UTOPIAN SOLUTION TO THE BLACK MONEY PROBLEM?Pune-based NGO, Arthakranti Pratishthan (AKP), claims to have a solution to completely eliminate the problem of the “black” or “parallel” economy in India. The Arthakranti proposal is very simple. It calls for the withdrawal of all the 32-odd taxes levied across the country (except import duty). In their place, it calls for a standard 2 per cent banking transaction tax (BTT) on every banking activity. Further, it wants all high-denomination currencies to be taken out of the system. Also, it wants to strip off legal protection given to cash transactions above a certain value to encourage transactions through traceable banking channels. BTT, combined with other steps, can potentially double the central government’s tax earnings from the current Rs 12 lakh crore and make generation of black money “technically impossible”, it claims.AKP says the problems affecting the Indian economy are all related to the flawed taxation system, irrationally high currency denomination and distribution and under-developed banking practices. It argues that once all transactions are routed through banks, and high-denomination notes (Rs 500 and Rs 1,000) are withdrawn, there will be no scope of malpractices in financial transactions.Anil Shashikant Bokil, one of the office-bearers of AKP, says their programme identifies the cause and effect of corruption and attempts to correct the situation. AKP also recommends a series of measures to aid accountability in micro-level money transactions. “Every bank account could be linked to a unique identification number (read Aadhar). Every bank should conduct transaction audits of all accounts in each branch; every individual could be required to disclose the source of receipts above a pre-determined limit once a year to the government,” suggests AKP. Implementation of the Arthakranti Proposal will lead to a complete merger of the ‘white’ and ‘black’ economies and eliminate the root causes of black money. It will be impossible to conduct high-value cash transactions thereafter, and equally impossible to hide shady transactions passing through the banking system, it explains. Interestingly, the Arthakranti document cites instances of similar taxation in at least 17 other countries. However, nowhere was it tried as an alternative to other taxes, but as an additional tax along with the existing taxation system. There are also examples of how tax relief on bank transactions helped cough up more revenues. For instance, in South Korea, merchants got tax breaks for e-payments leading to the e-payments industry adding $1.75 billion to its economy in 2002. “If we are to do the same as South Korea , it immediately becomes an assault on black money,” Bokil points out. —Joe C.MathewIt is not that tracking mechanisms are not in place. Currently, it is mandatory to furnish the tax identification number of an immovable property if the value exceeds Rs 5 lakh. Also, every registrar of property is required to annually furnish information on transactions in immovable property if the value exceeds Rs 30 lakh. However, the returns by registrars’ offices are shoddy and rarely tracked by income-tax authorities. To check under-valuation, the Central Board of Direct Taxes had earlier made it compulsory for buyers/sellers to file details of all property transactions above Rs 75 lakh in Delhi and Rs 1 crore in Mumbai, with the proviso that the income-tax department had the right to buy the property at the declared value. However, this was repealed under pressure about a decade ago. What is lost in this maze of government-speak is that real estate continues to be a preferred destination for investments. Though not as liquid as other asset classes such as stocks and gold, it is fairly safe against volatile price fluctuation and has shown consistent appreciation over the last decade. This is unfortunately what is also keeping home prices high, despite the lack of buying demand. Builders with large inventories continue to hold on to their price line because of the constant cash flow of unaccounted money from investors. Interestingly, a well-known economist has argued that the high volume of black money circulating in property was one of the reasons why India’s financial system did not crumble post the Lehman Brothers’ crash in 2008. His case was simple: since 40-50 per cent of the payment for property was made from ‘unaccounted’ sources, when the downswing began, these owners could not walk away from the loan or home; they continued to pay their EMIs to save their ‘black’ assets from vanishing.As of now, the monitoring mechanisms in the property sector are near-zero. Despite all the lip service to transparency by the previous UPA government, the Real Estate Regulation Bill is yet to be promulgated. It is a telling tale of the state of the nation considering 11 per cent of GDP is generated from real estate and construction. It is to be seen whether Jaitley does better. (This story was published in BW | Businessworld Issue Dated 01-12-2014)
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Introducing the first phase of the much-awaited labour reforms on Thursday (16 October), Prime Minister Narendra Modi launched portability for Employees Provident Fund (EPF) accounts by linking them with bank accounts. To make it seamless, the Prime Minister suggested that EPFs accounts be linked through a Universal Account Number (UAN) with bank accounts, Aadhaar cards and other KYC details. This will ensure that the EPF account remains the same even when employees shift to another job with a new employer. These labour reforms are seen as part of the BJP government’s new ‘Make in India’ push and are aimed at easing controls over business. Industry too has been demanding simplification of labour laws in addition to the disinvestment and land acquisition that the government has promised. The PM had also faced criticism during his recent US visit from investors and multinationals that red tape and labour laws were proving to be deterrents to doing business in India.The other legs of the slew of changes include a unified labour portal and a transparent and accountable labour inspection scheme to facilitate compliance to labour regulations. As part of the new system, a unique Labour Identification Number (LIN) will be allotted to factories or industrial units for online registration. Instead of 16 separate returns, companies will have to file just one consolidated, self-certified online return. Under the programme, the labour ministry is setting up a 'Shram Suvidha', or labour facilitation, portal. The portal will be operated by four central organisations: Chief Labour Commissioner, Directorate General of Mines Safety, Employees' Provident Fund, and the Employees' State Insurance Corporation. "Satyamev Jayate (truth triumphs) has the same power as Shramev Jayate (labour triumphs) for the development of our nation," Modi said at an event at Vigyan Bhavan. "We have to ensure 'Make-in-India' becomes a success; for that, ease of business is a must," he added. He promised the new system would end the ‘terror’ of ‘Inspector Raj’.About 1,800 labour inspectors across the country will get text messages from the Prime Minister apprising them of the new rules that will also include wages and pensions for workers. Inspection lists would now be made centrally and will be generated randomly by computer. Every inspection will have objective criteria and the report will have to be uploaded on the unified portal within 72 hours.The wage ceiling has been raised from Rs 6,500 to Rs 15,000 per month to ensure vulnerable groups are covered under the EPF scheme. A minimum pension will also be introduced for the first time, so after retirement, a person gets at least Rs 1,000 per month. While labour unions are still studying the slew of announcements, these basically do not touch the vast array of labour laws like the Industrial Disputes Act, Factories Act and Payment of Wages Act which facilitate a high degree of government control over companies. The Prime Minister’s strategy may also be guided by a ‘soft’ first phase of pronouncements that do not create direct contradictions with trade unions. These can later be followed up with more meaty reforms that will dismantle the controls industry has been agitating against.Commenting on the slew of announcements made by the Prime Minister on Labour Reforms, Chandrajit Banerjee, Director General, CII, said “CII welcomes the Ministry of Labour’s initiative of launching the “Shram Suvidha Portal” to facilitate a single window for compliance of labour Laws. Simplification of procedures has been a long standing concern for Industry and this initiative by the Ministry will considerably ease the burden of compliances especially for SME Sector”.Modi Reaches Out To 4.2 Lakh ITI StudentsAgencies Add: Inaugurating the 'Pandit Deendayal Upadhyay Shramev Jayate Karyakram' organised by the Labour Ministry, Modi also reached out to 4.2 lakh ITI students through SMS as he greeted the achievers with ITI degrees in various fields, hailing the undergraduate technical course.Besides the ITI students, about one crore EPFO subscribers also got SMSes regarding portability through UAN and about 6.50 lakh establishments and 1,800 inspectors got SMSes about Unified Labour Portal which, the government believes will make for a transparent and accountable Labour Inspection Scheme.The Prime Minister said that this event is different from other launches as the message has reached to the stakeholders at the same time.Laying emphasis on skill development in Apprenticeship Protsahan Yojana that he launched, the Prime Minister said that the country has huge potential to provide manpower to the world, which will require this by 2020.Presently there are 2.82 lakh apprentices undergoing training against 4.9 lakh seats.An initiative to revamp the apprenticeship scheme has been undertaken and the particular scheme will support one lakh apprentices during the period up to March 2017.Reaching out to the working class, he said that he is keen that Rs 27 thousand crore lying unclaimed in PF accounts are given back to their claimants arguing that if mobile subscribers get connectivity everywhere they go, why cannot migrating labour force can continue to get PF benefits."I have to give back this money to the poor. This Rs 27,000 crore belongs to the poor," he said even as he took a dig at this critics for questioning his vision."Those who ask what is Modi's vision won't be able to see this because the power of their spectacles has gone up just looking for a vision," he said. gurbir@gmail.comgurbir1@gmail.com
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For housing realty in Mumbai, it is bad news again with the property broking house Knight Frank reporting that demand within the Mumbai Metropolitan Region (MMR) had dropped by a whopping 25 per cent in the first half of calendar 2014 in comparison with the same period last year. The unsold inventory will take almost three years to sell. "Buyers continued to sit on the fence for the most part of H1 2014 in anticipation that the new and stable leadership at the Centre would revive the ailing economy," the report said. The half yearly report of Knight Frank called 'India Real Estate Outlook' released on 26 August, however sees an uptick in the Mumbai market with four important transit infrastructure projects coming up in Mumbai including the commissioning of the Metro Rail, the part-opening of a monorail system and the Eastern Freeway. "These may redefine the property market dynamics of the entire metropolitan region," the report said. Although 2014 would witness a decline of 15 percent in new launches to 92,845 housing units, it would be a trend reversal year for absorption, which will increase by 8% to 80,022 units.The office segment too has been slow with the absorption at 2.5 million square feet, a decline of 34 percent in the first half of the year, as compared to H1 of 2014. "Owing to the general elections, corporates adopted a noncommittal attitude towards taking up office space during the first half." With developers deferring fresh launches to adjust to the changed market conditions, new project completions dropped by 25 percent in H1 2014 in comparison with the same period last year.On an all-India basis though, the report is bullish about future prospects. Mumbai and Bangalore are expected to lead the recovery in sales volume, with 49 percent and 26 percent growth, respectively from H2 2013 to H2 2014. The election results and incentives announced for the housing sector in the Union Budget have improved home buyer sentiments in the last three months.However, Knight Frank's own data showed that the recessionary conditions were continuing with as the number of new launches showed a subdued growth of 5 per cent in the next 6 months owing to high unsold inventory and poor response to new launches.Some cities however bucked the trend and had shown quick price appreciation. Bangalore appreciated at the fastest pace of 11 per cent in H1 2014 compared to H1 2013. This was followed by Hyderabad, at 9 per cent during the same period.
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