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.
It was once called Srinivas Mills. In the central Mumbai area of Parel, associated with smoke stacks and textile production, it has been rechristened ‘Upper Worli’ by its buyers, the Lodha Group. The 18-acre sprawl will soon boast of the tallest luxury apartments in India, the 117-storey World Towers and the 60-floor World Crest.A Lodha salesman, standing before a giant model of the skyscrapers, drops big names for impact. Pei Cobb Freed & Partners, who have also designed the Pyramid at the Louvre in Paris, and the Bank of China Tower, Hong Kong, have conceived the World Towers. Luxury apartments of three and four bedrooms go up to the 43rd floor. Beyond that, till the 82nd floor, it is ‘World Villas’ — 7,000 sq. ft grand apartments spread over an entire floor. And finally the grandiose ‘Mansions in the Air’ — the 15,000 sq. ft duplex palaces.But what’s different about these high-end homes is the branding. From the high-ceiling reception area, our guide steers the party into the ‘show villa’. The atmosphere changes with the soft lights, and the rich and mellow gold leaf walls and furniture. The interiors have Armani written all over. Everything is designed in clean, straight lines. Nothing juts out. There are no switches, lights turn on automatically; the television unit recedes into the wall. Beyond the spacious living room is a balcony running around the apartment. This is where one can soak in the plunge pool and watch the Mumbai skyline. Georgio Armani has his stamp on the interiors with his Armani/Casa brand. In the Armani Roca bathrooms, everything, including the toilet paper, disappears into the wall. The kitchen has the Dada branding. A New Trend“We wanted to create an iconic product, and by branding it, we add value,” says R. Karthik, the chief marketing officer of the Lodha Group. “The additional value is because of the exclusivity defined by how desirable we can make the product, and how selectively it is traded.” Branding interiors, developers like Lodha hope, will not only create a superior product but also add a 30-60 per cent premium over similar products in the market. The two World towers have only 400 homes, and the cheapest of them comes at Rs 12.5 crore. The villas cost about Rs 40 crore each. The sky mansions are not yet on the block, but when they do come into the market, they will be close to Rs 100 crore; that is, Rs 50,000-60,000 per sq. ft. Branding homes and hotels in developed markets is not new. The Trump Towers in New York and Chicago or the Armani-branded hotels in Milan and Burj Khalifa in Dubai have added premium to real estate. In India, it is a new trend though. In Pune, Panchshil Realty has teamed up with Donald Trump to brand their two 22-storey towers in Kalyani Nagar as ‘Trump Towers’. The project, flagged off last month by Trump himself, offers 6,000 sq. ft apartments with embellishments like a special home theatre room. Another ambitious branded luxury project by Panchshil Realty, ‘yoopune’, is offering 228 apartments in six towers spread over 17 acres in the posh Koregaon Park area. The ‘Yoo’ branding, owned by designer Philippe Starck and realtor-entrepreneur John Hitchcox, kicked off in Manhattan nearly two decades ago, and quickly spread to other low-rise cities like London, which began embracing classy, skyscraper-styled homes. In Pune, the buyer also gets to indulge in the branded Sixth Sense Spa, a tea lounge and even a cigar room as part of the common offerings. The pre-sale bookings for the apartments were done at Rs 15,000 a sq. ft, a 50 per cent premium on the luxury Pune market. The Four Seasons branded CityView apartment owners in Bangalore will also get to use all the hotel’s serviceIn Bangalore, the CityView project, promoted by a joint venture between UK-based Westcourt, Goldman Sachs and Bangalore-based Century Real Estate, is being marketed with Four Seasons branding. The Four Seasons Hotel will extend to the 21st floor of the South Tower, the residences will be in the North Tower and in the higher floors of the South Tower. The Four Seasons apartment owners will also get to use all the services offered by the hotel. break-page-breakAnother unique branding exercise is by Sunteck Realty. It has teamed up with the Walt Disney Company to create branded children’s bedrooms and play areas in its 23-acre residential project ‘Sunteck City’ in Goregaon, Mumbai. “We have licensed as many as 100 Disney characters, including the Avengers, to adorn the children’s rooms. For Disney branding, this is a first,” says Sunteck Group’s CMD Kamal Khetan. “Disney commands a strong recall value, especially in the international markets; and kids are more important today when their parents go shopping.” Sunteck claims the company has opened sales for its three Disney- branded towers at Rs 11,000 a sq. ft, a 20 per cent premium over the local market. Defining ExclusivityThough builders now offer branded interiors and apartments, they still have to prove themselves. In January 2011, Rohan Lifescapes teamed up with Donald Trump, and Mumbai’s Trump Tower was announced with much fanfare as a 42-storey luxury apartment project near South Mumbai’s Girgaum seaface. Eighteen months later, there is no trace of the project. Does branding define luxury for India’s super rich, or is it location and ‘high quality’? Om Ahuja, CEO of property brokerage JLL Residences, says terms like ‘premium luxury’ are much abused concepts. “Yes, branded luxury apartments is a new trend, but in India, the super rich are willing to pay for the address and the pin code and not so much for a brand.” The focus is on specific localities. In Chennai, it is Poes Garden; in Kolkata it could be Alipore and Ballygunge, explains Ahuja. Branding may not work without the right address.Many big builders like Hiranandani, DLF or Unitech consider themselves to be brands that represent premium quality, and would not sell their stock using an Armani tag. Also, if a developer can get premium rates by adding features and quality that people want, he may not see the need to pay a license fee or a 10-15 per cent share of his revenue to the brand owner for his tag. The pre-sale booking rate for yoopune apartments (far left) was Rs 15,000 a sq. ft; (left) the Armani stamp is clearly visible in the Lodha Group's World Tower in Mumbai — clean, straight linesIn Gurgaon, the Ambience Group is promoting Caitriona, abutting the Ambience Mall, with a promise of “seven-star living”. The 240 ultra-luxury homes spread over 10 towers start at 6,400 sq. ft and Rs 14 crore, with the penthouse apartments going up to 11,500 sq. ft. It has all the features of ‘luxury’ that a buyer may want: access to a 9-hole golf course, laundromats at ‘zero’ level, and furnished ready-to-live interiors. Meanwhile, Anshuman Magazine, CEO of broking firm CB Richard Ellis India, feels that some big brands like Trump may not be willing to spend the money and effort on what they may perceive as a risky project in India. Karthik of the Lodha Group is, however, confident that over time, branded luxury homes will be a part of India’s landscape. “Yes, people are willing to pay for an address; but that is what we aim for: to make branded projects like the World Towers a sought-after address.”gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 24-09-2012)
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On a particularly wet day this monsoon, boulders from a hill at Eit Bhatti, in Mumbai’s suburb of Goregaon, came crashing down on a crowded slum below. Three huts were flattened and the families took shelter in a nearby play school till the rain stopped. The displaced families then reconstructed their huts and went home ignoring the danger of another landslide. This year, fortunately no one died. In the past, such landslides have resulted in casualties on a regular basis. But there is no alternative for people living in these slums. This grim reality has been addressed in a recent report released by Kumari Selja, Union minister for housing and urban poverty alleviation, last month. Penned by a committee headed by economics professor Amitabh Kundu from Jawaharlal Nehru University, the report, though, paints a hopeful picture. The urban housing shortage, contrary to popular perception, dropped nearly 25 per cent from 24.7 million units estimated at the beginning of the 11th Five Year Plan in 2007 to 18.9 million units for the 2012–17 Plan. The main reason for this, Selja said, was the addition of 26 million homes over the last decade. The most impressive numbers came from the housing for the economically weaker sections, where the shortage went down to 56 per cent, from 88 per cent in 2007. However, the housing shortage for the lower-income group rose sharply from 11 per cent to 40 per cent during the same period. 56 per cent is the housing shortage among the economically weaker sections. The report highlights ‘housing poverty’ that goes beyond just ‘homelessness’. These numbers reflect not just those who are homeless — estimated at around 530,000 families — but also those who live in unserviceable ‘kutcha’ homes (990,000), and those in decrepit homes (2.27 million). The largest number — nearly 1.5 million families — in fact, are those who live in congested homes, i.e., several generations of families living under one roof because they don’t have the means to move to a new home. Meanwhile, some figures, like the sharp fall in housing shortage, when the housing ministry was expecting a deficit of 26.5 million homes, suggest that there may have been some number jugglery. ‘Housing poverty’, after all, is a difficult number especially when the committee was dealing with subjective issues such as estimating what is housing ‘congestion’, or what constitutes a ‘kutcha’ dwelling. So, considering that a 2010 World Bank (WB) report estimated that India was facing a housing shortage of “20–70 million units”, the report’s official figure of a shortfall of 18.78 million homes should be taken with a pinch of salt. Selja called upon builders and the government to increase low-cost housing stock to reduce the gap between demand and supply. Easier said than done, since builders are disinterested in low-cost housing, as it gives negligible margins and is a marketing nightmare. Both the Union and state governments have wound down their role as a developer, and consider their role more as land aggregators and facilitators. Public sector developers, such as housing boards, are virtually defunct. The WB report had suggested that building 23–28 million low-cost homes would be “commercially viable” considering the huge demand, and making housing finance easy through workable mortgages. But who will bell the cat? (This story was published in Businessworld Issue Dated 15-10-2012)
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The revised Land Acquisition Bill — officially called the Land Acquisition, Rehabilitation and Resettlement (LARR) Bill — has got the nod of the Group of Ministers (GoM). Once the Cabinet approves it, it is likely to be moved during Parliament’s winter session. The GoM was constituted after the original draft of the Bill attracted opposition from several ministers. Among other issues, a provision that required the consent of 80 per cent of affected landowners was considered anti-industry. The new draft, in a bid to please everybody, has raised the hackles of all stakeholders. The reworked Bill has downsized the consent formula for public projects from the earlier requirement of 80 per cent of the landowners to two-thirds of those being ousted. It has also done away with the retrospective application of the law. The date of implementation will be notified later, rural development minister Jairam Ramesh said. For ‘Schedule IV areas’ inhabited by tribal communities, consent of the local self-governing bodies will be mandatory. Compensation too has been brought down for rural land from six times market value in the original draft to four times. Urban land compensation remains at double the market value. The 100-year-old, archaic Land Acquisition Act is truly a stumbling block to industrialisation in India. For instance, Orissa’s Industrial Development Corporation’s (IDCO) CMD, Pradeep Kumar Jena, had admitted to BW that IDCO, charged with acquiring land for industrial development, had only delivered 35,000 acres since 2006 compared to the demand of 150,000 acres for industrial units waiting in the queue. After Tata Motors’ Singur fiasco and steel baron L.N. Mittal having publicly torn up his business plans for India, the government has been under pressure to come up with a workable land acquisition law. 4 times market rate is what has been proposed as compensation for rural landWill the new Bill address these problems? Industry captains are still examining the small print, but most of them are concerned that it will push up project costs. Chandrajit Bannerji, director-general of the Confederation of Indian Industry (CII), says, “The positive note is that the Bill recognises the paramount role of government in acquiring land for industry. Corporates can’t do it themselves. However, if the proposed compensation package, along with the solatium of 30 per cent for relief and rehabilitation (R&R), is implemented, cost of projects is likely to shoot up 3 to 3.5 times.” Similarly, mandatory approval from local bodies for land in tribal areas will also hurt. In most mineral-rich states like Orissa and Jharkhand, 50 per cent of the land is in forest and tribal belts. Pushing past highly-politicised panchayats and zilla parishads will be tough. Meanwhile, the Left parties have already taken a stand against the ‘anti-people’ land Bill. CPM’s Brinda Karat said that by lowering the consent ceiling to 66 per cent, the government had diluted the Bill in favour of corporates. The Bill was introduced last year in September in Parliament. It is unlikely that the new draft will see the light of day in the current form. (This story was published in Businessworld Issue Dated 29-10-2012)
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Four days in and around Bhubaneswar were enough to catch a glimpse of the ongoing war between the state government and a determined green brigade. On 25 June, the Orissa High Court stayed work on a 1,050 MW thermal power plant of the Hyderabad-based KVK Nilachal Power, which had been accorded clearances to operate within the prohibited 10-km zone around a wildlife sanctuary. The company’s defence was that the Kapilesh elephant sanctuary, in Cuttack district, had not been notified when permission was given. But the high court reasoned that the state government was aware of the proposed sanctuary and should have taken it into account while doing its due diligence. The matter has been referred to the Union Ministry of Environment and Forests (MoEF) for its response. On 27 June, screaming headlines in Bhubaneswar’s newspapers announced that displaced families from eight villages in Sunabeda, in Koraput district, had forcibly occupied several acres under the possession of Hindustan Aeronautics (HAL), and had begun tilling and sowing. While HAL insisted the land was legally acquired by the state government and handed over, the farmers claimed they had been displaced without proper compensation. This is but a snapshot of the excruciating logjam Orissa faces. In 2000, Orissa, a state rich in minerals such as bauxite, coal and iron ore, and with a long coastline offering possibilities of port operations, kicked off a flurry of MoUs, with several companies keen to tap the resources. Soon, the who’s who of heavy industry were flocking to the state — South Korea’s Posco, Tata Steel, Vedanta Aluminium, Jindal Steel and Power (JSPL), Sahara Power, to name a few. A decade later, some projects have gone on stream; but most big ones are stuck over land acquisition, raw material linkages or environmental concerns. Are these just teething troubles, or is Orissa now a graveyard of industrial intentions? Click To View Enlarged Image MoUs And AfterOrissa, a state with 85 per cent of its population in rural areas and with Scheduled Tribe and Scheduled Caste groups contributing 38 per cent of its numbers, has always looked to industrialisation as the route to high growth. Biju Patnaik, the father of modern Orissa and a chief minister many times over, sought to set up the private sector, Rs 300-crore Brahmni Valley Steel Project with French collaboration way back in the 1950s. But Nehruvian socialism would have nothing of it. He also shepherded Posco through Paradip in the early 1990s, but the Korean steel giant felt it was too early to make a foray. “Biju Patnaik sought the good things in life, including a modern Orissa. He owned a bungalow in Mumbai’s posh Malabar Hills and in Lutyens’ Delhi. But he also had the vision to build Orissa’s first 100-km expressway to Paradip port in the 1960s to link the rich iron ore blocks to the port city. It also served as a highland rescue point for locals during frequent floods,” recounted Lalitmohan Pattajoshi, a senior Bhubaneswar-based writer.The real push came in the new millennium. Industries were looking to expand and needed raw material. Orissa offered the opportunity with 27 per cent of India’s coal reserves, 33 per cent of its iron ore, 55 per cent of its bauxite and over 90 per cent of its nickel and chromite reserves. The state rolled out the red carpet. In 2000 — the year Naveen Patnaik, Biju Patnaik’s son, and founder of the Biju Janata Dal, became the state’s chief minister — as many as 50 MoUs were signed with those seeking mining linkages. In 2002, Orissa began acquiring 12,000 acres for a steel city, Kalinganagar, in Jajpur district. Central to this was Orissa’s dream of a second mega steel plant after Rourkela — a 6 million tonne per annum (MTPA) facility to be built by Tata Steel. Soon after came the Posco MoU, in 2005, for a 12-MTPA plant at Paradip with a dedicated jetty and an investment of Rs 54,000 crore. GUJARATThe state’s chief minister Narendra Modi may be damned for his ‘communal’ past but there is no denying that he has made Gujarat tick. Investors and industry see the state as the epitome of quick clearances and hassle-free operations. The shifting of Tata Motors’ Nano plant to Sanand from Singur, in West Bengal, was a boost; and the icing on the cake was the recent announcement by Osamu Suzuki that the future of the Japanese auto giant would be in Gujarat.In the showpiece biannual business meets, branded ‘Vibrant Gujarat’, Modi has garnered a record investment commitment of Rs 39.6 lakh crore. The latest initiative has been a textile policy that promises concessions to those who want to set up spinning and weaving units in industrial parks around the state’s cotton-growing regions. With Gujarat growing 35 per cent of the country’s cotton but exporting 90 per cent as raw material, Modi hopes the value-addition will save farmers Rs 14,000 crore. In urban infrastructure, too, cities like Ahmedabad and Surat are being renewed. Success can be measured by the fact that Ahmedabad has been voted ‘the most livable city’ in recent surveys.But the Gujarat success story is not in industrial growth and urban renewal alone. Farm income increased from Rs 14,700 crore in 2001 to Rs 96,000 crore in 2011, growing 11 per cent every year. Milk production ballooned 68 per cent; cotton output went from 2.3 million bales in 2000-01 to 10.5 million bales in 2010-11.To attract investments to the state, Orissa passed the Industrial Facilitation Act creating the Industrial Promotion & Investment Corporation of Orissa (IPICOL) as a single-window clearing point for new industries. “In eight years, we have signed up Rs 16 lakh crore of investment in the state, of which Rs 2 lakh crore has come in so far,” says IPICOL’s CMD, C.J. Venugopal. To provide land and infrastructure, the Orissa Industrial Infrastructure Development Corporation (IDCO) was set up and headed by IAS officer Priyabrata Patnaik, who had the unenviable task of acquiring and handing over a whopping 150,000 acres of land.And herein lay the snarl. After eight years, the state’s acquisition plan is in tatters. Just 36,000 acres, signed up and paid for, have been acquired. Even less has been actually handed over. Police firings and local resistance have given the Naveen Patnaik government a demonic reputation; and many, like ArcelorMittal, have packed their bags and are on their way out.break-page-breakThe ResistanceMost projects falling foul in Orissa have met resistance while acquiring or taking possession of land. On 2 January 2006, police opened fire near Chandia village at Kalinganagar killing 14 protesting tribals. The road blockades and resentment that followed virtually halted the Tata Steel project for over four years. The flashpoint was the acquisition of 3,400 acres for Tata Steel. Ravi Jharika, secretary of the Visthapan Virodhi Jan Manch, said the resistance was the result of earlier acquisition drives in Kalinganagar. “When land was acquired for Nilachal Steel in 1995, our people were cruelly removed and dumped in open plots with polythene sheets to survive the elements. This is what hardened the resistance,” says Jharika. NEW HOME: Gujarat was quick to offer land in Sanand when Tata Motors’ Nano plant ran into trouble in West Bengal (Pic By Mayur Bhatt)The Posco script is on the same lines. Ever since the MoU was signed between the Orissa government and the company on 22 June 2005, there have been waves of ground battles that have reverberated far beyond Orissa’s borders. Initial resistance and skirmishes in November 2007 at Balitutha village, in the acquisition area, transformed into a full-scale police blockade aimed at isolating and driving leaders of Posco Pratirodh Sangram Samiti (PPSS) underground. The tables were turned when, on 1 April 2008, crowds swarmed the police barricades and drove the uniformed men out from schools and panchayat offices that they had occupied. MOST PROJECTS HAVE MET RESISTANCE WHILE TAKING POSSESSION OF LANDInterestingly, it is not the poverty, but the prosperity of the local farmers that has generated the resistance. Apart from a rich crop of paddy and fish, the local villagers own some of the most lucrative betel-growing vineyards in the country that thrive on the area’s sandy soil and fresh water. Seated in a sparse, thatched hut on a sand dune that serves as his office in Govindpur village, Abhay Sahu, president of PPSS, offers his rationale for the unbending resistance: “An average family earns over Rs 15,000 a month from betel-leaf cultivation alone; and they are self-sufficient in food. Why should they give up a good life for Posco’s jobs?”Sahu has been leading the local farmers since 2005 and has spent 18 months behind bars for his efforts. But the government has changed its tactics. The local officials have slowly broken the resistance in some of the poorer villages such as Polang, Bhuiyapal, Nuhasahi and Nuagaon. Many of those who have exited are migrant Bengali fishermen. Having acquired around 2,100 acres of the initial target of 4,004 acres, the government is scaling down Posco’s plant size to 8 MTPA and acquisition target to 2,700 acres. The battle has thus narrowed down to the two villages of Dhinkiya and Govindpur, and the strategy is to exclude those tracts of land where the resistance is most fierce. HUNGRY FOR ORE: Vedanta Aluminium does not have environmental clearance to mine bauxite for its alumina refinery at Lanjigarh (BW Archive)Besides ground resistance, several projects have also hit the environment wall. The best known is the Anil Agarwal-promoted Vedanta Aluminium (VAL) whose $1.7-billion operations in Orissa were questioned by Congress’s Rahul Gandhi. VAL currently operates a 1-MTPA alumina refinery and a 75 MW captive power plant at Lanjigarh, and has plans to hike the refinery’s capacity to 5 MTPA. Key to this expansion is bauxite from the Niyamgiri hills. But environmental groups representing the local Dongriya Kondha tribals have stoutly opposed mining in the hills, which they consider their spiritual property. Rahul Gandhi’s campaign in favour of the tribals climaxed when, in August 2010, the MoEF withdrew the clearances it had given to Agarwal. But with Orissa failing to provide bauxite from any other source, VAL has now given notice to the state government that it will stop operations at the Lanjigarh alumina smelter effective 5 December. TAMIL NADUTamil Nadu, the second most industrialised state after Maharashtra, is banking on its plentiful mineral resources and power. In the mineral-rich north, the towns of Salem and Mettur have emerged as important heavy industry centres with SAIL, Tata Refractories, JSW Steel and aluminium units. Chennai, over the years, has emerged as one of the top 10 global automobile and auto ancillary centres. Over the next decade, the region would have an installed capacity to produce 1.3 million cars and about 360,000 commercial vehicles a year. In recent years, the state has made considerable strides in setting up renewable energy capacity, particularly wind farms, which generated half of India’s 14,000 MW of wind energy last year and 20 per cent of Tamil Nadu’s power requirement.Inheriting strong infrastructure and a healthy investment flow, Chief Minister Jayalalithaa has announced Vision 2023 to bring the state into the top 3 investment destinations in Asia. Targeting Rs 15 lakh crore in investments over the next 11 years, the state is focusing on developing areas such as power (Rs 4.5 lakh crore), transport (Rs 3.7 lakh crore) and urban infrastructure (Rs 2.75 lakh crore). The chief minister expects this to increase Tamil Nadu’s GDP by 11 per cent, taking the state’s per capita income to Rs 4.5 lakh.The four focus areas will be automobiles and auto ancillaries, biotechnology, aerospace and renewable energy. Not just this, Agarwal’s bid to set up a world class university at Puri has also come a cropper. Naveen Patnaik and Vedanta Resources signed an MoU in London in 2006 to set up what would have been the largest international institution of its type — 6,700 acres and billed to accommodate 100,000 students. But, by May 2010, the MoEF reversed earlier clearances and stopped work on the site charging the Anil Agarwal Foundation with environmental violations. The allotted land adjoins the Balukhand reserve forest and wildlife sanctuary. The last nail in the coffin came when the high court quashed the land acquisition and directed the state to return the 6,700 acres to the original owners.Mining giant Rio Tinto — which has committed $2 billion in investments to develop three iron ore blocks in Keonjhar district along with partners Orissa Mining Company and National Mining Development Corporation — is still far from beginning commercial exploitation, though the MoU was signed as far back as 1995. Rio Tinto’s managing director, Nik Senapati, told BW: “It is a slow process, but we are hopeful of getting the permissions. A task force headed by the chief secretary is examining the issues.” BIHARBihar, at the turn of the century, was seen as a nightmare. Lawlessness and poor infrastructure kept investors away. When Nitish Kumar took over as chief minister in 2005, there was rightful skepticism. But in 3-4 years, he proved the skeptics wrong. His strategy has been to rebuild infrastructure, restore law and order, and offer investors a gateway to the markets of the East. Kumar inherited the handicap of having lost the mineral-rich areas with industrial centres such as Ranchi and Dhanbad to Jharkhand. But Bihar moved on to build new centres such as Darbhanga by attracting units, especially agro-industries, to tap its resources and the 104 million-strong market. Ruchi Soya is setting up a Rs 200-crore unit at Kaimur, while Britannia and Godrej Agrovet are homing in on Hajipur.In the past couple of years, Kumar has signed 176 MoUs. To speed up land acquisition, the government has allowed industrial units to buy land directly from farmers at market rates. Conversion to industrial use is allowed for a small fee. The results have been impressive. The state’s GDP has grown at 10.9 per cent between 2005-6 and 2009-10, from 3.5 per cent in the earlier decade. The share of manufacturing has risen from 10.7 to 19.9 per cent; and, as a measure of the decline of its feudal economy, agriculture’s contribution has fallen 21 per cent in 2009-10 from 39 per cent at the beginning of the decade.However, other promoters such as Lakshmi Mittal are disillusioned. ArcelorMittal had signed an MoU in 2006 to set up a 12-MTPA steel plant in Keonjhar district with a mega investment of Rs 50,000 crore. By the end of 2011, little progress had been made in acquiring the 7,500 acres the company had been promised. ArcelorMittal has made no move to renew the MoU, which expired last December. ‘PEOPLE FIRST, INDUSTRIES AND PROFIT LATER. THERE WILL BE NO FORCED TAKEOVER...’ Sahara India Power Corp’s Rs 8,000-crore, 1,320 MW power project to be built at Ghantabahal, in Orissa’s Bolangir district, has also had to virtually wind up with the state unable to hand over the required 960 acres. Opposition by farmers alleging violation of the government’s relief and rehabilitation programme, and the high court’s stay orders against acquisition have ensured that there has been no progress since the MoU was signed in 2009. Justifying the resistance, Madhumita Roy, spokesperson for the NGO ActionAid, told BW: “Industrial growth has not benefited the poor in 60 years. Rourkela has been around for 50 years, but have the tribals got jobs? Keonjhar and Sundergarh districts have the largest industrial investments in the state, but they also have the worst poverty.”break-page-breakUnveiling A ‘Soft’ PolicyThe Orissa government’s answer to this criticism is IDCO CMD Pradeep Kumar Jena. He is an important man for industries trying to establish themselves in the state. On Jena’s table are a string of neatly laid out business cards of worried investors. Champak Alloys, Vedanta Aluminium, Adani Power. Someone representing Narayan Aluminum is pleading with Jena that he cannot take possession of the allotted land as it has been recently encroached upon. Jena picks up the phone and barks at his subordinate: “I give you one week. Remove the encroachment, or else you will be suspended. Take your pick.”Turning his attention to the waiting media persons, Jena defines the new policy. “The chief minister has said: Industries are welcome, but there will be no use of force. Our R&R policy is: People first, industries and profit later. There will be no forced acquisition under any condition.” He conceded that Posco’s project size was being lowered to 8 MTPA and the acquisition target to 2,700 acres to avoid trouble spots.Posco’s stand is at variance with this. “There will be no significant changes in the terms of the new MoU. The target for land acquisition will ultimately be 4,000 acres. Our starting point of the plant will be 8 MTPA but we will go for 12 MTPA,” Posco spokesperson K.H. Lee told BW, signaling a strategy of ‘creeping’ acquisition. In the case of Posco, Jena also revealed that the government has dropped its bid to acquire the more difficult tracts of private land. Tata Steel at Kalinganagar, too, has followed the same policy of lowering its acquisition target and going on stream with just 3 MTPA in the first phase on 2,200 acres of the original target of 3,400 acres. Jena conceded that in the 2006-10 period, the government had botched up. “Force always rebounds. If we had been careful, things would have moved faster.” Jena is the state government’s new ‘human’ face. Talking about the acquisition drive for 12,000 acres in Kalinganagar, he said: “ActionAid took busloads of local tribals to the Hirakud Dam across the Mahanadi in Sambalpur district to show what awaited them if they agreed to the rehabilitation package.” Investors, too, are giving realistic responses, said Jena. “Industries realise that land acquisition is getting increasingly difficult and are willing to pay the price.” Though a Rehabilitation Advisory Committee (RAC) fixes the official compensation paid by industrial units, industries are paying many times more than the official rate. If the rate is fixed at Rs 1.5 lakh per acre, they pay an additional Rs 7-8 lakh an acre as part of the ‘informal’ package. In the case of Ind-Barath Energies, which signed an MoU in 2000 to set up a 1,360 MW coal-fired power plant in Jharsuguda district, Jena revealed that phase 1 has gone on stream with 700 MW after the company held bilateral talks with the local people and clinched a settlement without government intervention. Ground RealityThe ‘soft’ policy seems to be working in the case of Tata Steel’s Kalinganagar unit as well. A drive on the muddy service road through the fenced-off complex showed hectic activity with the blast furnace, steel smelter, sinter plant and coke ovens coming up simultaneously. The chimney of the sinter plant has been hoisted as a flag to signal the company is on the move, trying to make up for lost time. ANIL AGARWAL’S Vedanta Aluminium is unable to expand capacity from 1 to 5 MTPA as bauxite supply is blocked from the Niyamgiri hills (BW Pic By Umesh Goswami)After a recent visit by Tata Sons’ deputy chairman Cyrus Mistry, the company has gone on record that the first phase of the plant will go on stream in the first half of 2014 with flat products. A company spokesperson (who also drove the BW team through the heavily policed site) said though the company had lost over four years, it was determined to make up for lost time and even double the plant size to 12 MTPA.Situated a few kilometres away is the Gopaighatti resettlement camp where displaced locals have been given homesteads. Besides those ousted from the Tata Steel site, there are others from the Nilachal Steel and Jindal Power projects as well. The colony has a depressing feel, and bad roads. The poorly constructed houses hide the forced transformation under a coat of surreal yellow and pink paint.On the other side of the complex, beyond the chain-link fence, is land belonging to Chandia village. It is officially ‘acquired’ on paper by the company, but is still under the control of resisting locals. Jharika, who has led the anti-Tata Steel struggle since 2005, does not think the land will be seized for some time considering he is building himself a pucca house with shiny vitrified tiles amidst cattle sheds and grain stores. He described the 2006-09 period as “the blockade”. “We could not venture out of our villages. For three years, many of us did not see even the main road. We, too, blockaded the company and the government officials from entering.”The situation has changed now and Jharika is resigned to Tata Steel’s presence. He has no plans to lead another resistance, but is still stolidly opposed to displacement. An emotional shrillness enters his voice when talking of the future of his tribal kinsmen: “We have seen their package; it is jobs and some money. But our connection is to the land, the flowers and the grain we grow; and to our dead relatives who are buried here. We cannot get married without their blessings. If they push us off the land, our identity and culture will be crushed.”The mood among the locals around the Posco site at Dhinkiya and Govindpur villages is more upbeat. For them, the steel plant still looks a long way off. The road to Dhinkiya veers off the super tarmac of the six-lane expressway 10 km before Paradip, at Bhutmundi. The 23-km drive from the expressway, past the villages of Balithutha, Nuagoan and Govindpur, is bumpy. As we near Dhinkiya, the track degenerates into a mud bund between backwaters and fish tanks. Dhinkiya, the anti-Posco nerve centre, is literally the end of the road.PPSS’s Sahu walks us through a betel vineyard in Govindpur. We are asked to remove our shoes before we enter the matted bamboo enclosure that protects the glistening green betel vines. “That is because the Goddess Lakhmi (pronounced Lakh-mi and not Lakshmi) resides among the vines,” explains the proud owner, Kalaondi Jena. “They have to be tended like children. They need watering three times a week.” Women are not allowed in. CHUNG JOON YANG,Posco’s global CEO, met various ministers, but his firm’s Rs 54,000-crore steel plant has now been scaled down to 8 MTPA (Bloomberg)Sahu concedes the situation has changed substantially. “Yes, the government has stopped the use of force. Now they are using political means. They are splitting us along party lines, using the traditional divide-and-rule method. They cannot touch Dhinkiya, but they have split Govindpur,” he admits. He, however, promises it will be a bitter battle for the next 700 acres that the government wants to possess. Is There A Way Out?Posco has more than Sahu and the farmers of Dhinkiya to contend with. This March, a national green tribunal cancelled the environmental approvals that the steelmaker had got from the MoEF in January 2011 after years of lobbying and litigation. The environmental tribunal held that the piecemeal manner in which clearances had been accorded may have skirted the on-ground ecological situation. It has directed MoEF’s Expert Appraisal Committee to review the project. This means Posco will have to begin again.Patnaik, Orissa’s additional chief secretary and former IDCO chief, said the South Korean steelmaker had the resilience to last; he expects Posco to start work by April 2013. “They have the advantage of superior technology and can ride out these problems. Their savings from producing power from the waste heat generated from coal and iron ore makes them 15 per cent cheaper than competing steel plants,” he said. On the other hand, environmental litigant Biswajit Mohanty, who has fought the Tatas to stop the Dhamra Port from uprooting the world’s largest nesting ground of the rare Olive Ridley turtles, says this round of environment clearances for Posco will consume another 2-3 years. “Where will they source water for the steel plant? Their attempts to tap the Mahanadi river resulted in villagers breaking their pipelines,” claims Mohanty.Why are so many projects stuck? Is opposition to industrialisation endemic to states like Orissa and West Bengal? Writer Pattajoshi called it “the eastern mindset that is naturally suspicious of all development projects”. Or is it that some industrial projects botched up so bad that they have left a sour taste for generations to come? Posco, for instance, is not willing to discuss a change in alignment of the site to accommodate locals. “For the Koreans, when the Prime Minister of the country blesses a project, it means it is done! They had not taken the judiciary, the local resistance into account,” says Patnaik. Vedanta, too, has underestimated the sentiments that the tribes attach to the Niyamgiri hills.A section of government officials in Bhubaneswar blames lack of political will. “The chief minister wants it to happen, but is doing little about it,” a senior bureaucrat told BW on condition of anonymity. More serious is the problem of ham-handed clearance of projects without sufficient impact assessment. One bureaucrat boasted that at one stage the Orissa government was signing an average of one MoU per week. Ironically, the same set of bureaucrats of the power and energy ministry, in a recent review, noted that only four of the 21 MoUs signed with Independent Power Projects (IPPs) had made substantial progress! Significantly, despite all the drubbing, investors have not given up on Orissa. The state has emerged as the most-favoured destination for overseas investors, with investment proposals worth Rs 49,527 crore during 2011-12. This is ahead of No.2 and 3, Andhra Pradesh and Gujarat, according to the Associated Chambers of Commerce and Industry (Assocham). Good news for the babus in Bhubaneswar, but how will they address the fear that equates development with displacement? Ranging from the experiences of Hirakud dam and the Rourkela steel plant in the 1950s, industry and development have come to mean agony and displacement for local farmers and tribal people. It is a cross of history that everyone from Naveen Patnaik down to the tehshildar is carrying in Orissa today. Unless the cross is buried, it will be difficult to get the state’s ambitious industrialisation programme back on track. gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 17-09-2012)
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The road to the village of Betim snakes up gently from the Mandovi river, and after a couple of turns reaches a dead end. And this is where Villa Paradiso lies. Mumbai’s jet-setters fly into Goa’s Dabolim airport, enjoy their weekend there, and are back to their dealing rooms after a 40-minute flight on Monday morning. Villa Paradiso was among the first properties developed by Tata Housing after it was re-launched in 2006. The Portuguese hillside villas with Mangalore tile roofs and verandahs dressed with quaint balustrades were a good brand advertisement. The well-heeled snapped up the two-bedroom apartments for Rs 1.5 crore and more. It was worth their while. They soaked up the sun in the kidney-shaped swimming pool, and spent their evenings watching the lights of Panjim, or toasting their luck as the casino boats drifted past on the Mandovi below. Since 2006, Tata Housing has come a long way from its early chequered history. Incorporated as Tata Housing Development Company (THDC) in 1984 with Tata Sons holding 99.87 per cent, the company initially did well but slowed down in the 1997 real estate recession, with sales of just Rs 80 crore. By 2000, it was off the radar of the Tata think tank, and business activity ground to a halt by 2000. “Till 2006, there was no land, and no projects. Even the company logo was withdrawn,” recalls Brotin Banerji, MD & CEO, Tata Housing. LUXURY and mid-level projects have higher marginsMIXED MARKET: The 36-acre project under development in Gurgaon, Primanti, is a mix of super-luxury villas, executive floors and apartments (BW Pic by Tribhuwan Sharma)After the trough, the revival started in 2006, and real estate was on the roll again. The Tata Group saw an opportunity. Tata Housing was given a new lease of life, and business plans were redrawn to ride the boom. How has it performed in its second outing?Homes For AllSales executive Mahesh Mahovar is cooling his heels after completing a hectic sales campaign for nearly 600 apartments at Tata’s Talegaon project. La Montana, set amidst the rain-drenched hills of the Western Ghats, 125 km from Mumbai, is an ‘affordable’ second-home project with neat little flats starting at Rs 19 lakh. The bare-bone shells of the apartment blocks are up and hectic work is on at the site for constructing the podium. Mahovar says they will begin delivering homes by July next year, by when the second batch of the more expensive 125 row houses will also be ready for launch. La Montana is being developed by Smart Value Homes (SVHL), a Tata Housing subsidiary focused on the ‘affordable’ housing segment. “Many of our buyers include local employees working in the Talegaon industrial area; some are asthma patients while others are in search of clean air,” Mahovar tells BW.Interestingly, while other builders turned to ‘affordable housing’ as a recession-tackling measure in 2008-09, THDC did so by choice. The company made its mark in 2006 with the launch of its mass housing project at Boisar, an industrial town about 90 km north of Mumbai, targeting the large working class population. 65% of Tata Housing’s sales come from upmarket residential projectsAt the ‘budget’ end, the company sold 1,500 small one- and two-room homes under the ‘Shubha Griha’ brand, priced between Rs 3.9 lakh and Rs 6.5 lakh. Company officials said the stock was over-sold as soon as bookings opened. Tata Housing simultaneously came out with the superior ‘New Haven’ brand at Boisar with 1,800 units priced between Rs 12 lakh and Rs 28 lakh. For the more discerning, ‘New Haven Crest’ offered a set of plush 150 row houses.The company replicated the Boisar experiment at another 65-acre project at Mumbai’s distant suburb of Vasind, which falls on the Central Railway line. At Vasind, Shubha Griha ‘budget’ homes of 360 and 490 sq. ft are marketed at Rs 5.8 lakh and Rs 7.8 lakh, respectively. The ‘New Haven’ units came in the range of Rs 15-35 lakh. Lap Of LuxuryIs it Tata Housing’s strategy to focus on the mass, affordable segment? In fact, not. It was a starting point, but the company has been quite clear it will get higher margins from middle class and luxury segments, while falling back on ‘budget’ housing to boost its top line in times of trouble. “About 35-40 per cent of our product is from Smart Value Homes; Tata Housing accounts for the upmarket 65 per cent,” says Banerji. SVHL is targeting the mass segment. Not far from Talegaon, and closer to Mumbai among the Khandala hills, Ritesh Kothari is busy selling the last of Tata Housing’s luxury villa project ‘Prive’. At the top of the hill of the 20-acre property is the ‘show villa’ now snapped up by Raj K. Chauhan of Parle Agro for Rs 14 crore. The stone inlaid exteriors open up to a spacious glass-fronted living and dining area and a massive wooden open deck. Clouds drift past nonchalantly, and when they open up, it is a 180-degree, breathtaking view of the rolling hills beyond, and the valley below. The lower floor is the living area and bedrooms that open to a small private garden and plunge pool. And finally there is the ‘entertainment room’ on the ground floor. One can take the stairs, but there is also a small elevator, hidden behind wooden closets, that commutes between the three levels. HIGH-END is a tough market as inventory moves slowlyIN NATURE’S LAP: The luxury villa project, Prive, has 73 houses, some priced between Rs 12-16 crore(BW Pic By Subhabrata Das)Kothari’s other celebrity clients include Vineet Nagrani of Credit Suisse, Arvind Sampat of Standard Chartered Bank, cricketer Ajit Agarkar and renowned cardiologist Dr Sudanshu Battacharyya. For them and the 60 others who have bought these villas, the second home in the clouds is a 90-minute drive from Mumbai. Kothari opened sales a couple of years ago between Rs 3.5 crore and Rs 8 crore for these 73 exclusive villas. He is holding on to a dozen or so fully-furnished villas and has pushed up the price to Rs 12-16 crore. Tata Housing’s expected revenue from the project: Rs 300 crore. There is competition too. Sahara’s Aamby Valley and the Ajit Gulabchand-promoted Lavasa both offer ‘hill station’ homes in the vicinity.In the upper middle-class market, Tata Housing’s offerings include a 36-acre project in Gurgaon called Primanti, which offers a mix of super-luxury villas, executive floors and apartments in high-rise towers with the standard garnishing of spas, gymnasiums and other condominium comforts of gated communities. In Bangalore, the company is selling The Premont — a project with 320 residences atop Banashankari Hill in four towers as well as row houses in the Rs 1.8-2.4 crore range. Anchor ManBanerji is clearly a Tata man. He wears his company logo literally on the collar of his white shirt. “The company was in cold storage for over a decade. Its logo had been withdrawn and even the domain name was up for grabs. But within a few years we have taken Tata Housing from 0 to 60 million sq. feet.” Banerji is not exactly modest, but he is the anchor man behind Tata Housing’s runaway growth. At 38, he is the youngest of the Tata CEOs, and the company website acknowledges that 43 million sq. ft has been delivered with Banerji at the helm. During his 13 years with the group, he has worked in Tata Chemicals to re-launch Tata Salt as a branded product; and then was with Barista in the 2004-06 period. It was perhaps his turnaround performance at Barista, which brought the coffee retailer back into the black, that marked him as the man for reviving THDC. 'Within a few years, we have taken Tata Housing from 0 to 60 million sq. ft'Brotin Banerji, MD and CEO, Tata HousingBanerji attributes the company’s rapid growth to two factors. The company’s strategy to straddle all segments, from the top-end luxury market to middle class homes and finally to the mass, budget category, has paid off. He also says the company has adopted the joint venture route wherein it prefers to develop projects with landowners as partners rather than sink scarce capital into acquiring expensive land banks. Banerji disagrees with the view that the JV route can hit growth if pesky landlords create problems.“Joint development accounts for 50-60 per cent of our projects and we are managing to add 10-15 million sq. ft every year to the pipleline. The Tata name gives us credibility. Landowners come back to us since we help them multiply their assets manifold. That is because we always sell at a premium. We opened Primanti at around Rs 5,500 a sq. ft, when similarly placed Gurgaon projects were selling at Rs 4,000,” he says. Banerji clarifies that in these JVs, Tata Housing is careful to ensure that operational command remains with it. It’s a tough market today though, concedes Banerji, with the luxury residences moving slowly compared to six months ago. The price of construction material is on an upward trajectory. Steel is up from Rs 32,000 to Rs 55,000 per tonne in the space of 18 months. This is increasingly squeezing margins. But Tata Housing hopes that its multi-segment approach will keep it ahead. “With no new launches this quarter, we have again fallen back on the ‘affordable segment’. It is 55 per cent of sales this quarter. That is keeping our cash-flow going,” says Rajeeb Dash, head of marketing services at Tata Housing. “Our launches have come down substantially because we do not launch without full approvals,” concedes Banerji. “We get stuck not so much because of the market, as much as because of permissions not coming through in time.” Ramping UpThe certificate of performance was delivered to Tata Housing when holding company Tata Sons decided to invest Rs 500 crore as fresh equity in its real estate subsidiary about six months ago. The infusion tripled its paid-up capital and reserves that earlier stood at Rs 250 crore. The rationale for the move is obvious. Tata Housing needs funds for its aggressive expansion programme through land acquisition and developing projects across all segments of the real estate market. Tata Sons, with surplus money for investments, is searching for the right avenues within the group. Tata Sons’ strategy was to differentiate housing from other real estate. It, therefore, simultaneously launched a sister company, Tata Realty and Infrastructure (TRIL), in 2007, around the time of Tata Housing’s revival, to focus on non-residential sectors such as IT parks, SEZs, airports, roads and bridges. Both the group companies are headed by R.K. Krishna Kumar, as chairman of their respective boards. BUDGET housing boosts the company’s toplineHOMING IN: Tata Housing’s budget houses at Boisar, near Mumbai, are mostly in the Rs 3.9-6.5 lakh and Rs 12-28 lakh range(BW Pic By Umesh Goswami)“We thought rather than starve it (Tata Housing) of capital, we should give it the means to grow. We could have easily brought in a private equity partner or launched an IPO, but given the scale of improvement in its operations, we feel we should fund this internally,” said Kumar at the time of announcing the Tata Sons’ infusion.The results support the Tata Sons move. Tata Housing grew 78 per cent with sales of Rs 1,098 crore in FY12, from Rs 617 crore the previous year. Net profit, too, has risen to Rs 180 crore from about Rs 100 crore for the same period in the last fiscal. This puts THDC ahead of similar corporate realty companies of the same genre. Godrej Properties (GPL), for instance, logged a consolidated turnover of Rs 820 crore for FY12, up 47 per cent from Rs 559 crore the previous year; net profit, however, declined from Rs 131 crore to Rs 98 crore for the year ended 31 March 2012 (see chart). Mahindra Lifespaces, an M&M group company, had earnings of Rs 701 crore for FY12, 13 per cent up from the previous year’s Rs 612 crore. Net profit grew marginally from Rs 113 crore to Rs 129 crore. The Ashok Piramal Group company, Peninsula Land, recorded a turnover of Rs 532 crore in FY12, up from Rs 501 crore the previous year; but net profit slipped 22 per cent to Rs 151 crore from Rs 191 crore in the same period. There are, however, some question marks about the JV route for development. Banerji’s reliance on partnering landowners, a business plan that is focused on doubling sales year on year, will face the downside if partnerships sour and thus affect project delivery. Tata Housing may not admit to the pitfalls but it has recently been aggressively buying land. Speaking about the company’s growth strategy, Anuj Puri, CEO of property brokers Jones Lang LaSalle (JLL), says: “Tata Housing has become more aggressive under the leadership of Brotin Banerjee. They have been acquiring properties across India, which speaks clearly of their confidence in being able to crystallise their expansion plans. Last year, JLL India transacted a property at Bhubaneswar to them via the PPP route, wherein they paid a much higher premium than their nearest bidder.”Being latecomers to the game of putting together large land banks, Tata Housing is taking on unconventional projects. For instance, in the Mumbai suburb of Mulund, the company is redeveloping a Maharashtra Housing Board colony that involves constructing a humungous 3.1 million sq. ft and rehabilitating the hundreds of displaced families currently living in dilapidated tenements. For funding, Banerji says that with the new equity infusion, the company would consider a healthy 1:1 debt-equity ratio, implying raising up to Rs 750 crore in debt. “There is no IPO on the cards, but to keep the funds pipeline going, we are considering a set of quasi-bond offerings at the end of this year.” A healthy land bank, a wide portfolio of projects and the advantage of the ‘Tata’ brand are all on the side of giving Tata Housing a healthy rate of growth. But the question is: will the jittery realty market sustain the company’s ambitions? gurbir(at)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 03-09-2012)
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Despite the growing protest against misuse of subsidised diesel by the rich, the central government has no immediate plan to de-regulate diesel pricing. In a written reply in the Rajya Sabha on 21 August, minister of state for petroleum and natural gas R.P.N. Singh said the public sector oil marketing companies (OMCs) were losing Rs 15.55 a litre on diesel, Rs 29.97 a litre on kerosene and Rs 231 on LPG gas cylinders of 14.2 kg — a daily loss of Rs 450 crore.During 2011-12, the OMCs lost Rs 138,541 crore due to under-recoveries from the sale of fossil fuels. This does not take into account the subsidy of Rs 43,904 crore provided in the fiscal budget. Raising the campaign pitch with a set of studies, the International Institute for Sustainable Development’s Global Subsidies Initiative (GSI) concedes that though the government was committed to reducing subsidies to 2 per cent of GDP, the risk of high inflation and price rise had not allowed any deregulation initiative. The GSI study points out that though diesel prices include a relatively minor fiscal subsidy, the under-recovery is hitting the oil companies and the government, who between them are covering 25 per cent of the price. However, eliminating this 25 per cent under-recovery in diesel prices would lead to around a 1 per cent rise in general price levels. This is too big a burden for a low-salary economy and “even small spikes in inflation can put poor consumers at risk”, admits the GSI report. Sectors such as public road transport would be more vulnerable where prices could rise by as much as 8-10 per cent.These campaign groups suggest that under-recoveries be gradually eliminated by “allowing prices to increase by an average of Re 1 per litre over one or two steps per month, over a year or more.” Meanwhile, direct compensation to businesses that will struggle with higher diesel prices in the short-term, including public transport companies, can also be considered. GSI collaborated with the National Institute for Public Finance and Policy and The Energy and Resources Institute to bring out these reports.A 2009 World Bank study points to international experience. In 2008, the Mozambique government reduced taxes on a variety of oil products in response to high world oil prices. This was a replicated in 49 countries that intervened against the full pass-through of world oil price rises into transport fuels for consumers.India’s experience with rationing and dual pricing has been negative. A 2005 study by the National Council of Applied Economic Research estimates that about 38 per cent of PDS kerosene gets diverted to the black market. With better monitoring, this has been brought under some control.The biggest controversy is with diesel. With petrol costing about 42 per cent more, the use of diesel has shot up to 44 per cent of total fuel consumption compared to 35 per cent a decade ago. The view that owners of fancy diesel-powered cars and SUVs and rich farmers powering their gensets do not deserve these high subsidies is gaining momentum. The Economic Survey 2012 suggests both ‘adjustment’ similar to China, as well as ‘high road tax and vehicle taxes’. However, Praful Patel, heavy industries minister, aligned himself with automakers and opposed any diesel ‘price adjustment’ formula. For now, a consensus is unlikely.(This story was published in Businessworld Issue Dated 03-09-2012)
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Ever since Mukesh and Nita Ambani built themselves a new home — Antilia, on Mumbai's posh Altamount Road — the discussion on how India's rich and powerful live has never been the same again. Antilia has wowed those who aspire for the good things in life. For those who analyse poverty and its causes, such as writer Arundhati Roy, for whom Antilia is a symbol of opulence, mocking at the 800 million poor of India. But both protagonists and antagonists will agree that Antilia has redefined the meaning of a super-rich home. With its 27 floors, nine lifts, gymnasiums, six floors of parking and a staff of 600 running the show, the $1.7 billion home has set a new international record for the most expensive personal address.Has this set off a new scramble among the super rich? Perhaps. According to Anuj Puri, property broking firm Jones Lang Lasalle's country head, Kingfisher brand promoter Vijay Mallya has levelled his 4.5 acre ancestral home on Vittal Mallya Road in Bangalore to make way for his 82-apartment ‘White House'. Mallya himself will occupy an acre-size penthouse on the 33rd and 34th floors. Another broker who helped Mallya ink a number of foreign deals said the tycoon-in-trouble has negotiated deals for 25 or so top-line luxury chalets in resort destinations as far flung as Goa, south of France and Barcelona. These are kept in perfect readiness for guests, though Mallya himself may come on a visit maybe just once a year.Why do the rich and powerful build homes and offices that are much larger than what they will ever use? Homes and offices are not just functional hubs but also symbols of their owners' station in life. For many, it is to tell the world they have arrived. For others, it is an indication of the power and strength they wield in the corporate world.Subrata Roy Sahara, chairman of the Lucknow-headquartered Sahara Group, owns a white marble palace in a 375-acre estate that has a 2 sq. km. artificial lake and a 5,000-seater auditorium. He probably also holds the record for the largest corporate office in the world. An actor who visited him in Lucknow said it was "the size of a football field", designed to tire you out before you got to his table. The head of a television channel, who was made to wait in an anteroom, described the décor as the most opulent he had even seen, with mannequins of damsels serving as coat hangers. That was precisely the purpose: to overawe the visitor before he meets the ‘Saharashri'.This penchant among the super rich for displaying their wealth through opulent homes and offices serves more than one more purpose. It has created a micro-market of super luxury homes in cities such as Mumbai, Delhi and Bangalore for which the aspiring rich make a beeline. Even as brokers and media writers predict the downfall of the luxury property market because of super-inflated prices, the super-luxury segment remains unshaken, what with a trickle for supply and a large queue waiting to get in.How else does one explain the steady rise in prices in this niche segment? Sample this: The Indiabulls project at Worli called ‘Blu' — what used to be Bharat Mills — has recently opened bookings at a rack rate of Rs 45,000 a sq.ft; translated, this means a four-bedroom flat in the two-tower complex will cost Rs 24 crore. For celebrity value, the occupants of the 10-acre complex will rub shoulders with Sameer Gehlaut, the young chairman of the Indiabulls Group, who is building a tower in the complex as his residence.It is the principle laid down in Lutyens' Delhi for years now. In an area of around 2,800 hectares — about 2 per cent of Delhi — are some of the most lavish 1,000 or so bungalows of the country. Most of them are government-owned and occupied by ministers and parliamentarians. About 65 are privately owned, spread over Prithviraj Road, Amrita Shergill Marg and Aurangzeb Road, by the who's who of industry, from Sunil Mittal and L.N. Mittal to the Jindal brothers. Declared a heritage zone, the supply is limited. If a home changes hands, it will be upwards of Rs 400 crore.gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 30-07-2012)
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Mamata Banerjee's dream run seems to be sputtering. After the Congress party nominated Pranab Mukherjee for President against her wishes, it is now the turn of the Calcutta High Court to give her a lesson in law.Before Banerjee came to power in 2011, the Left Front had acquired and leased 997 acres of land to Tata Motors for the Nano project. However, some farmers had opposed the acquisition. Banerjee enacted the Singur Land Acquisition & Development Act, 2011, to reclaim 400 acres for the farmers. Tata Motors, though it had moved its Nano project to Gujarat by then, challenged this, but a single judge of the Calcutta High Court last September upheld the government's position. The Tatas then filed an appeal before a division bench, which has now held the Singur Land Acquisition Act to be unconstitutional and deemed the return of the Tata Motors' land to the farmers, therefore, illegal. 400 of the 997 acres of land leased to the Tata Nano project have been reclaimed Though the constitutional battle over the Singur Land Act will now continue before the Supreme Court, the High Court judgment is a lesson in how state governments should not act on land acquisition disputes. Populist demands and election-eve promises cannot be overnight translated into legislative fiats without considering their legal implications. And if they are, they will fall foul of the law. On the other hand, Mamata Banerjee's opposition to the Tata Motors project contributed significantly to her election blitz; she may have lost the legal battle, but she has already reaped the fruits of her anti-corporate position. For Ratan Tata, it is a pyrrhic victory. Tata Motors cannot and does not want to return to Singur. At best, the judgment may help the company reclaim some of its exit losses. (This story was published in Businessworld Issue Dated 02-07-2012)
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By 2007, a majority of the world’s people were living in cities. India was initially slow to urbanise, but it is now virtually a stampede. If communities of more than 10,000 people are classed as ‘urban’, in 2010, 35 per cent of India was urban. The number of cities in India with a population of over 1 million has gone up from 35 in 2001 to 50 in 2011 and is expected to touch 87 by 2031. Estimates vary on when India will be primarily ‘urban’. Home-grown planners say by 2031; the World Bank thinks the process will be slower. The growth of cities is not a ‘negative’. Cities provide the human chains necessary for a manufacturing economy and the knowledge pool for the service industry. They are the window of opportunity. The McKinsey Report of 2010 on urbanisation estimates that over 2010-30 period, urban India will create 70 per cent of all new jobs, and these will be twice as productive as equivalent jobs in rural India. “Generation of wealth is increasingly dependent on the knowledge industry, and cities have become the repositories of knowledge and technology. Cities are the engines of growth,” Isher Judge Ahluwalia, chairperson of the think tank Icrier (Indian Council for Research on International Economic Relations), told BW. The rush of migrants to cities is straining existing services (BW Pic By Subhabrata Das) But the growth of cities has brought with it a huge challenge. While new cities are grappling with uncontrolled migration, older ones like Mumbai, where migration has slowed, are battling to provide housing in the face of spiralling real estate prices. As a city expands, water supply and sewerage systems, roads and public transport — the lifelines of urban life — begin to crumble and civic utilities are unable to keep pace with increasing demand. It is not that planners and politicians are unaware of the challenge. Sheila Dikshit, Delhi’s chief minister, said at an urban conference recently: “Cities require a government that is not national. We need city-states.” The Drawing Board Mumbai’s new symbol of progress, the Bandra-Worli Sea Link, opened in June 2009, almost five years behind schedule and with a three-fold cost escalation to around Rs 1,634 crore. Dharavi, Asia’s largest slum spread over 535 acres, was slated for development with five sectors being offered for reconstruction to global consortiums in 2004. Nothing has moved despite several rounds of bidding. The office of Rahul Asthana, metropolitan commissioner of the Mumbai Metropolitan Region Development Authority (MMRDA), is bristling with maps of planned and ongoing schemes. MMRDA is the principal planning authority for the 4,355 sq. km. of extended Mumbai. It also has the mandate to execute some critical infrastructure projects. “The (population) density is so high that it is difficult to get right of way for projects. Resettlement also delays work,” says Asthana. Mumbai’s population density is among the highest in the world — 27,000 people per sq. km., three times higher than Delhi’s 9,300. London’s is 7,600 and New York’s 8,000 per sq. km. MMRDA is, however, not the only agency planning and executing projects for Mumbai. There is the Brihanmumbai Municipal Corporation (BMC), the Maharashtra Housing and Area Development Authority (MHADA), the state Roadways Development Corporation (MSRDC) that executed the sea link, and a dozen others. Can there be a holistic view for city planning with so many agencies competing for attention? It is only in the last decade that planning and governance of cities has received serious attention. In Delhi, the Union government exercises predominant power. In terms of development, the capital has evolved as three different cities — the crumbling Old Delhi and the eastern trans-Yamuna areas, the well-maintained Lutyens Delhi, and South and West Delhi, where posh colonies abut lower-middle class sprawls. Here, too, administration is divided between the New Delhi Municipal Council (NDMC), the MCD (Municipal Corporation of Delhi), and the Public Works Department (PWD). In Mumbai, the municipal commissioner and his senior aides are IAS officers appointed by the state government. In an earlier interview, Junaid Ahmed, World Bank’s sector manager-urban for South Asia, told BW: “Why should state governments be running the water supply system of cities like Lucknow or Bangalore?” Also Read: Shaken & Stirredbreak-page-break In contrast, well-run international cities have autonomous and committed metropolitan governments. In London, metropolitan governance was reintroduced in 2000 after a 13-year hiatus. The directly-elected mayor prepares a ‘London Plan’ setting out the overall policy, which includes issues such as zonal density and transport, which the city’s 33 boroughs have to adhere to. Berlin, too, has a two-tier metropolitan government that puts out a ‘Land-Use Plan’ for the local boroughs to follow. Incentive To Plan In developing city plans, and pushing cynical bureaucrats to adopt processes to raise and spend funds, the central government’s Jawaharlal Nehru National Urban Renewal Mission (JNNURM) has been playing a crucial role. Launched in December 2005 to fund urban infrastructure and basic services in 65 cities, it has allocated over Rs 66,000 crore so far. But to receive funds, cities must commit to a series of measures, such as preparing a city development plan and setting up of a planning authority. The municipal corporation of the twin towns of Pimpri-Chinchwad, near Pune, with a population of 1.7 million, is the largest recipient of JNNURM funds among Tier-2 cities. As much as Rs 2,572 crore has been pumped into building roads and water supply networks. And because it wanted to be funds ‘compliant’, the city, for the first time, developed a 2006-12 vision plan. “JNNURM gave us a boost. It pushed us to define our internal processes including setting up e-governance,” says Shrikar Pardeshi, municipal commissioner of Pimpri-Chinchwad. All Indian cities face waterlogging due to badly planned drainage systems (BW Archive) For Pardeshi and municipal officials like him planning and building cities is more about retrofitting gallis and unplanned tenements rather than starting afresh. Cities like Chandigarh are a rare case. Le Corbusier began building Chandigarh from scratch in 1952 based on a metaphor of a human body. He placed the Capitol Complex at the top as the head, while residential areas were neatly laid out in the inner roads with pre-determined plot sizes. It was modern but ‘un-Indian’. “It did succeed in providing a clean environment… But as a city, Chandigarh lacks the vitality of most Indian towns and cities, where streets and bazaars are dynamic places of public gathering,” say Sahay Shrey, Siddhartha Kandoi and Soumil Srivastava, co-authors of the paper Urban Planning in India. Transporting People Edwin Lutyens similarly planned the construction of New Delhi in the 1911-35 period. New Delhi, cut off from the mayhem of Old Delhi, was built with bungalows on tree-shaded radial avenues. While Lutyens Delhi prospered, Old Delhi, devoid of any plans to house the thousands of construction workers that swamped the capital, became a decrepit slum. This divide ultimately led to Delhi’s modern- day problems too. A non-residential central zone that is completely cut-off from where people live has led to long commutes. The state bus services have proved to be woefully inadequate. This, in turn, encouraged middle-class families to turn to private cars that clog Delhi’s roads. Low-cost housing is not a priority for town planners (Tribhuwan Sharma) So the Delhi Master Plan 2021 lays considerable emphasis on transportation. At the centre of the strategy is the Metro rail that will create nearly 300 km of network in the National Capital Region (NCR) by 2021. Currently, the Delhi Metro Rail Corporation (DMRC) operates six lines with a total route length of nearly 190 km, supplemented with the Integrated Rail and Bus Transit along three key rail routes. And finally, the feeder bus system is expected to be ramped up to 14,000 vehicles. For Mumbai, too, transportation is the key to building a sustainable city. The Metro rail project, which will supplement the city’s creaking rail network, has been divided into three phases, with eight lines covering 140 km by 2021. The first line — the 12-km, Rs 2,400-crore Versova-Andheri-Ghatkopar corridor — is nearing completion but has been delayed due to funding and right-of-way issues. It is now expected to be launched in March 2013. The other seven lines have not yet got off the drawing board. While Mumbai is struggling with its first Metro line, densely populated cities abroad have built robust underground rail systems. Berlin’s U- and S-Bahn extend over 475 km, London’s Underground over 408 km and New York’s Subway, 390 km. The big debate among planners, however, is: whether the Metro is the right answer? Former DMRC chief E. Sreedharan estimates that India has already committed about Rs 80,000 crore and will be investing a total of Rs 200,000 crore in developing Metro systems in the country over the next 10 years. Besides Delhi, Bangalore, Hyderabad and Mumbai, Metro rail projects are planned in Pune, Lucknow, Kanpur, Ahmedabad, Ludhiana, Kochi, Indore and Chandigarh. But Sreedharan acknowledged that these projects are highly capital intensive. Raising funds is difficult; and subsidising project and running cost is essential. Trivandrum, for instance, has been juggling with various models for over a decade now. First was a 45-km monorail system; then came the Rs 5,600-crore Metro rail proposal. Both these schemes have remained on paper. Also Read: Shaken & Stirred break-page-break A better alternative for the mid-metros, say planners, is the Bus Rapid Transport System (BRTS) that provides dedicated bus lanes. The innovation was born in Bogota, Colombia, in 2001, as the TransMileno System and has been replicated by more than 30 cities worldwide. Ahmedabad launched the BRTS in 2009, funded by the municipal corporation, the state government and the JNNURM. The BRTS network has gradually ramped up from 12.5 km and 18 buses to 45 km with 83 buses ferrying 135,000 passengers every day at an average speed of 27 kmph. When completed, the total project cost of Rs 1,000 crore, serving the 456 km sprawl of Ahmedabad, is but a fraction of what a Metro rail system will cost the city. Now Vadodara wants to adopt the BRTS. The city is developing a Rs 600-crore transport plan to serve the inner city with 52 km of dedicated bus lanes covering 14 focal points. Similarly, the Indore Development Authority is not only developing a 11.5 km pilot rapid bus system at a cost of Rs 135 crore, but is also investing in setting up 20 parking lots near BRTS stations. Where Will They Live? But in providing shelter to people, urban India is fighting a losing battle. The 2001 Census showed that 23.5 per cent of the population of 1,743 cities lived in slums. Mumbai is perhaps the worst off with 54 per cent living in slums and another 20 per cent in dilapidated tenements. Faridabad, Meerut and Aligarh have about 45 per cent of the people stuffed in shanty towns. Significantly, urban income poverty has declined from 49 per cent in 1973-74 to 25.7 per cent in 2004-05. But the level of ‘shelter poverty’ — a term used by the government’s High Power Committee on Urban Infrastructure — has been steadily worsening. Heavily distorted land markets, lack of affordable housing, and builders’ lobbies controlling the housing industry has spelled misery for the poor. Every city has its mass housing and poverty alleviation programme, but Bhopal is a study on how not to do a slum rehabilitation project. Of the 542 slum clusters in Bhopal, 162 have not been mapped. Of the Rs 2,153-crore JNNURM funds allotted for city development, only Rs 386 crore has been earmarked for slum development. The worst off are the far-flung slum rehabilitation locations — Kala Paani, Sankhedi, Kalkheda and Akbarpur. These are outside city limits, thus providing no access to livelihood. A LIFELINE: The Metro will have a 300-km network in NCR by 2021, connecting Gurgaon (above), Faridabad, Noida and Ghaziabad with Delhi (BW Pic By Sanjay Sakaria) The problem exists because mass, low-cost housing does not take precedence in town planning. Mumbai’s slum population of 54 per cent occupies only 8 per cent of the land mass. Bodies such as the Delhi Development Authority (DDA) and MHADA in Mumbai were set up with the mandate to offer low-cost housing. But without land and political will, these bodies have become irrelevant. In a market where builders do not find high enough margins in low-cost housing, the government will have to take recourse to increasing affordable housing stock. Mountains Of Money To resuscitate crumbling cities and to build infrastructure for new, expanding urban sprawls, gargantuan investments are required. The High Power Committee on Urban Infrastructure, whose report has been accepted by the central government, has projected a mind-boggling Rs 31 lakh crore of investment for the 20-year period from 2012 to 2031, for eight sectors of urban infrastructure. Urban services such as water supply, sewerage and waste management account for 26 per cent of the money needed or Rs 8 lakh crore. The lion’s share of 56 per cent or Rs 17 lakh crore is for constructing and rebuilding urban roads. Where will all the money come from? Municipal corporations and urban local bodies in India are perhaps the worst governed in the world. They generate little revenue and are dependent on handouts from state governments. Experts do not go beyond proposing revenue-sharing arrangements with central and state governments. If the buck stops here, there will be no ‘city-states’ as envisioned by Delhi CM Dikshit. The World Bank’s Ahmed says the answer lies in cities making themselves credit worthy. If a city has steady sources of revenue to service its loans, and an administration that is answerable and transparent, lending agencies would line up to fund their projects. Pimpri-Chinchwad, with two national highways passing through it, generates Rs 1,200 crore annually, 75 per cent of the municipal budget, from octroi. Says Ahmedabad’s deputy municipal commissioner (Projects), Dilip Mahajan: “Ahmedabad was the first to be credit-rated in 1998; that helped us raise Rs 356 crore in four tranches.” That is the way to go. Healthy revenue generation combined with a steady stream of debt funding to finance city building. Otherwise, the tomes written on building urban India will at best remain pretty wish lists. Also Read: Shaken & Stirred With inputs from Yashodhara Dasgupta gurbir(dot)singh (at)abp (dot)in (This story was published in Businessworld Issue Dated 20-08-2012)
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Builders are not a community that is known to hold mass protests. But on 3 May, realty developers will hit the streets to protest the government's ‘over-regulation'. The one-day token strike announced by the Maharashtra Chamber of Housing Industry (MCHI) will be marked by a freeze of all commercial activity by the construction industry in MMR (Mumbai Metropolitan Region) and a mass rally by 50,000, including builders, their supporters and employees, at Azad Maidan in south Mumbai. The Mumbai action will find an echo in Delhi too with Credai (Confederation of Real Estate Developers' Association of India) threatening to hold protests outside Parliament.Dharmesh Jain, vice-president of MCHI, says that the construction industry is hit by the "deliberate holding back of clearances for new projects". He says that 10 years ago, a file used to take 30 days to clear; now it takes two years. "It is a systemic problem building up over many years," says Jain, who heads the construction group, Nirmal Lifestyle. MCHI president Paras Gundecha claims that last year Mumbai's municipal corporation only cleared 10 per cent of the total number of building proposals.Jain says ‘over-regulation' was having an adverse impact on costs and the price of housing stock. "Every year of delay raises the project cost by 50 per cent; if we can't increase the sales volume, there can be no price correction," says the builder. HOMING IN # Developers are hitting the streets in Mumbai and Delhi on 3 May # Builders say affordable housing is also awaiting sanction On being told that volumes are low not because of over-regulation but consumer resistance to high prices, Jain says there is hardly any inventory of under-construction homes in Mumbai. "Mumbai was ahead of the National Capital Region (NCR) in sales a few years ago; today Mumbai's volume is half that of NCR."Data, however, shows that high prices are a deterrent to sales. According to property tracking agency Liases Foras, the average cost of residential apartments in Mumbai is Rs 10,000 per sq. ft, compared to Rs 3,234 in the NCR, Rs 3,806 in Chennai and Rs 3,935 in Pune. In the January-March 2012 quarter, Mumbai's residential sales bucked the trend and improved 20 per cent over the previous quarter, mainly on the back of 150 new projects launched last year. Liases Foras's managing director Pankaj Kapoor says that with prices going up 17 per cent, it will take 40 months to clear the inventory.According to MCHI figures, sales in Mumbai fell from 20 million sq. ft in the April-June 2009 quarter to 8 million sq. ft in the last quarter. In contrast, supply in Noida, which was 23 million sq. ft between 2008 and 2010, rose to 135 million sq. ft in the pipeline between 2011 and 2013. The MCHI has signed an MoU with the state government to build 500,000 units of affordable homes. Jain says most of the projects for affordable homes are pending for want of clearances.What has triggered this latest protest by builders? Market insiders point to a spat the representatives of developers recently had with Mumbai's municipal commissioner Subodh Kumar. The latter reportedly refused to tone down his strict regime for building proposals. With Kumar slated to retire by end-April, the construction lobby is hoping that things will ease up.(This story was published in Businessworld Issue Dated 07-05-2012)
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