The Gera Newsletter

Issue: # November 2011

Gera Developments Pvt. Ltd.

The controversy on the BDP - the need for an accommodative approach 

By Rohit Gera

   Real Estate as an investment   

The debate about permitting construction on the hills of Pune is currently being viewed by various factions on a win-lose basis.  If any construction is permitted, one group feels they have lost and the only way to win is to ensure no construction is permitted at all on the hills.  As a citizen of this city, I do believe that keeping the hills undeveloped is in the interest of the city and its residents.  There are however, a host of questions that arise when we get into assessing next steps in order to implement this no development policy. On assessing these questions, it is my belief that as a developing city, we cannot afford to retain the entire land earmarked as BDP in the draft development plan.  

 

The first question that arises is How much would it cost to pay the private land owners for acquiring their lands - No one denies that compensation is to be paid to the land owners.  The total BDP area owned by private individuals as per the draft DP is about 2395 acres of land (the total area under BDP discussion is approx 4115 acres of which 2395 is privately owned while 1720 acres is government land).  At an extremely low rate of Rs. 230 per sq ft, this works out to Rs. 1 Crore per acre.  We require a total of Rs. 2395 Crores to purchase the land.  Even at an absurdly low rate of Rs. 100 per sq ft, this still means the city needs in excess of Rs. 1000 Crores to purchase the land.  The option of course is to issue TDR as the currency to acquire the land, however, this leads to other issues of additional development of about 10.43 crore sq ft in other parts of the city.  Post acquisition of the land, we need to protect the hills from a security perspective and ensure that there is no encroachment as currently taking place on the hills in other parts of the city.  This has an additional cost that too on a recurring basis to the city.  

 

On the aspect of cost, the question is where do we get the money from? More importantly, even if we can raise this huge sum of money, should we spend it on purchasing the private land? Will we not be better of spending in on road, water, drainage infrastructure. Something that the city is crying out for? Is the government owned land not adequate to be used for recreational and public purposes?  Let us not forget that people from around the hills are the ones who visit the hills - those on the other side of the city rarely if ever do so. 

 

If we believe that the funds can be raised but better spent for the citizens of Pune, then we need to look at a different option apart from purchasing the land.  The other option currently on the table is to permit a small amount of development on the private lands and creating of the BDP on the government lands.  

 

In permitting the development on the private lands, certain valid questions arise that need to be answered-

What if there is illegal increase of the constructed area?  At a fundamental level, I believe if we have the machinery to prevent the lands from becoming slums, we can certainly prevent illegal construction.  There are other options too including creating a separate fast track judicial process such as arbitration to fast track demolition activities for illegal construction on the private lands etc.  The 122 plots of Koregaon Park form a green lung - inspite of irregularities that had taken place, the same was successfully eradicated because of the timely intervention of the citizens.  

 

We need to protect the environment.  The construction on the hills will damage the environment?  This can be done through a slew of development control rules such as structures can only be of a certain height, all with sloping roofs, hard paving apart from the structure can only be allowed on 20% of the ground,  the development must conform to LEED silver/gold/platinum status etc. 

 

What if there is a sudden spurt of development of the hills thereby destroying the hills?  This can be regulated by providing a maximum cap of acreage that can be developed every year (say 10% per annum thereby taking 10 years to develop the entire land parcel of 2500 acres).  The permits can be auctioned - those in a hurry to develop can pay a higher premium to get an early permit. These funds can be used to create the BDP in the government lands or even to use as a vigilance fund to monitor illegal construction on the private lands.  

 

Some other thoughts pertaining to the entire issue are-

Even if 4% is permitted, the private land owners must have the option to ensure that the government must purchase the land at a fair market value.  At Rs. 1 Crore per acre, with 4% construction, the FSI cost works out to Rs. 5750 per sq. ft. Many land owners may rather take this value rather than the 4% construction permitted. 

 

Today, we have no image of the city that represents the city of Pune.  Why can we not endeavor to create a vision of the city whereby the slopes with homes with sloping roofs, meandering 6 meter wide driveways, lush greenery become the endearing image of Pune?  This may not happen overnight but in time, this can become a reality. 

 

All said and done, I believe the biggest travesty will be if the views of the environmental lobby are not incorporated in an alternative solution only because they are holding on rigidly to their first choice of no development.  By participating in arriving at an alternative plan, their rightful concerns can be incorporated into a negotiated settlement.  Ultimately, this will be the win-win solution for the city.  

 

The views above are personal.  

Disclosure: The author's company will be benefitted by approx 1200 square feet if 4% construction is permitted in the BDP. 

 

Rohit Gera

Managing Director  - Gera Developments Pvt. Ltd.

 

As with other investments, real estate too carries a certain amount of risk. Readers are advised to undertake their own due diligence and take judgement calls based on their own research and not on the article.

 

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