Integrated townships present an immense opportunity to developers and a potential answer to vexing questions of urban development, writes SHILPA SHREE. With burgeoning demand for quality urban dwelling in India, integrated townships are increasingly being seen as a sustainable answer. "Integrated townships will be the future drivers of real estate growth and a solution for meeting housing demands," says Routhu Nagaraju, Vice President (Corporate Planning), Unitech Group, a publicly traded, real estate company. Concept and design For starters, let us define an integrated township. As the name suggests, it is a large, all-encompassing real estate project. It is a mixed-use development; while it is predominantly residential, typically comprising apartments (1/2/3BHK, or even duplexes) and row houses, it could have commercial, retail and social infrastructure, such as hotels, clubs, pools, parks, gardens, schools and colleges. Take, for instance, Thakur Complex in Kandivali in the western suburbs of Mumbai. It was predominantly residential but slowly added retail and commercial elements, schools and a college. So someone living there need not go out for anything! "While designing these townships, it is necessary to design a development that will be self-sustainable, cost-effective, modern and preferably self-dependent," says Architect Prashant Deshmukh of Prashant Deshmukh & Associates, based in Pune. "Investors and developers are key players in the township scheme. The Central and local governments offer concessions in the form of land-use pattern and tax structure to attract private developers for such massive investments. Developers are expected to locate the land, invest in construction and development, and evolve systems to manage and maintain the development." Detailing the process, Deshmukh explains how it commences with a market survey by an expert team who collects data regarding local conditions, demographic statistics and the conditions and demands of prospective customers. With this information in mind, a defined zoning plan is drawn up with a proper network of roads and breathing spaces such as green landscape, water bodies, amneity spaces and play areas. Supportive structures such as health centres, schools and community centres are inserted in the master plan. "Architectural designs should be integrated with landscapes and building services such as water and electricity," he adds. "The design approach has to be sustainable; the concept of zero energy needs to be effectively achieved through the use of sustainable materials and technologies." The India view The concept of an integrated township is not new to India. Jamshedpur, Bhilai, Rourkela and Durgapur in Eastern India are examples of early townships. "These townships have corporate or industry promoters running their administration and services with the consent of respective governmental authorities," points out a recent study compiled by CSE India on township projects, titled Resource (IN) Efficient Townships. "Besides this, several cities have emerged from the design boards such as Bhubaneswar, Chandigarh and Gandhinagar. Thereafter, the country saw a series of satellite towns such as Faridabad, Gurgaon, etc, and sub cities, namely Dwarka, Rohini, Navi Mumbai, etc, coming up. Although these cities had a different design and growth model, their administration and governance remain almost in the hands of the local government. Though everybody is engaged in discussing the pros of townships, nobody seems to be aware of the real numbers." Speaking more recently, Magarpatta City in Pune is often quoted as the most successful township in the country. "The secret of Magarpatta City's success is the fact that the company that built it took the landowners as stakeholders in the company and the profit was distributed equitably," says an official in the Pune Municipal Corporations' town planning department on the condition of anonymity. Other examples of successful integrated townships include Jusco by the Tatas in Jamshedpur, some DLF townships in Gurgaon, and Hiranandani Constructions' township in Powai. Size matters It is a given that townships are large - but how big is big? "Township projects in India are generally above 100 acre in size," responds Rajeev Talwar, Managing Director, DLF Universal. "What we do is much larger than that." That said, there is absolutely no clear definition on the size of integrated townships. "Each state has its own policy defining the size of a township; we have defined it as 100 acre and above in our draft integrated township policy of Andhra Pradesh," says Devendar Reddy, Additional Director-Town Planning, Municipal Administration and Urban Development Department, Secretariat, Hyderabad. "In my opinion, you cannot have a blanket rule for the size of townships across the country. Land is a state subject, so state governments should decide the size of these projects. But there is a need for unified guidelines from the Centre, which is lacking." The Andhra Pradesh Government is yet to introduce an integrated township policy. But states such as Gujarat, Uttar Pradesh, Maharashtra, Haryana and many others have already introduced their policies. In fact, Uttar Pradesh and Haryana have witnessed great progress in integrated township projects. The benefits For developers, the advantages of taking on such projects are not far to seek. As most of these projects are governed by state policies, there are a host of financial incentives in terms of long-term tax breaks and rebates. In some cases, as state governments promote these projects, land acquisition costs are subsidised and land conversion charges are often exempted. Also, states with integrated township policies have created a single-window clearance system to obtain permission and clearances, hastening the entire process. "The biggest benefit I see from a developer's perspective is that we obtain a huge piece of land to develop," says Talwar. "This helps us carry out a better plan, achieve economies of scale and offer end consumers walk-to-work options." "When it comes to integrated townships, everything is planned on the table," says Naresh Kumar Patel, Deputy General Manager-Urban Planning, REPL, a leading urban planning and real-estate consulting firm. "This offers a holistic approach for better housing, with enough scope for amenities and social infrastructure. The additional advantage of integrated townships is that they are planned for the long term, giving developers the chance to plan their investments better. There is a lot of branding and increased visibility." Development strategies For their part, developers would love to work on integrated projects on an ownership model. "I mean who would not love to?" asks Nagaraju. "It gives a lot of freedom, scope to experiment and resize, re-plan and reschedule the project development according to my wish." But the reality is different. "Land rates are so prohibitive that it makes it impossible for a developer to own the entire land parcel," says Patel. So a joint development strategy is adopted, where the developer enters into an agreement with the landowner and offers him a stake in the project. Another option is the public-private partnership (PPP) model, widely prevalent in Uttar Pradesh. Then, as mentioned earlier, there is the unique model of Magarpatta City, where the developer joined hands with the landowners. "It is very difficult to point out the best model," observes Nagaraju. "In some cases, ownership works; in some it does not." Counting cost Money, of course, is always too tight to mention. Ask stakeholders about the cost incurred for integrated townships and they will tell you it is rising by the day. While developers shy away from actual figures, Nagaraju gives us a ballpark amount. "The cost depends on the kind of construction and also differs from place to place," he says. "It may range anywhere between Rs 1,500 and Rs 3,000 per sq ft. And infrastructure cost could be around Rs 75-80 lakh per hectare." "Inflation is having a tremendous impact on raw materials and labourers," says Patel. "The construction of a high-rise building could cost Rs 1,200-1,300 per sq ft and infrastructure cost could be around Rs 1,200 per sq m. For me as a planner, it is hard to analyse the material requirement on tonnage basis. But the developer has to spend about Rs 1,600-1,800 per sq ft in the execution of all activities for development. In this, about Rs 1,000 goes in purchase of materials. So, for a 100-acre township, developers have to spend over Rs 400 crore on purchase of materials." "Banks in the recent past have begun expressing concerns about the viability of the commercial aspect of township projects," says A Anil Kumar, CFO, Puravankara Projects. "To mitigate this problem, it is important to finalise an anchor tenant. Once that is finalised, banks fund commercial projects." Obstacle course All considered, the most significant bump on the road in the development of integrated townships is land acquisition - as all our respondents unanimously agree. "The major challenge is to get a large tract of land in one place, free of litigation," says Reddy. Another hassle, as Nagaraju tells us, is getting clearance. "Uttar Pradesh has a single-window clearance system with 11 agencies to give clearances to such projects," adds Patel. "This is not the case in all the states. "Many states do not even have an integrated township policy," adds the official from Pune Municipal Corporation. "This leads to a developer running from pillar to post to get approvals, clearances, NOCs and permissions." The way ahead Despite the stumbling blocks, integrated townships present an answer to some of our most vexing developmental questions. According to a research paper by McKinsey's Global Institute, titled India's Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth, by 2030 India will have, "590 million people living in cities, nearly twice the population of the United States today... 91 million urban households will be from the middle class, up from 22 million today... 700-900 million sq m of commercial and residential space needs to be built - or a new Chicago every year." The numbers say it all. Also, as Patel emphasises, "It is the right time for integrated townships, otherwise you will find many developed housing areas deprived of associated social facilities. And after development, it will not be possible to create associated social infrastructure owing to shortage of land." Evidently, integrated townships are certainly an idea whose time has come. Laws governing Rajasthan's Integrated Township Policy 1. Rajasthan Municipal Act, 2009 (new enactment) 2. Affordable Housing Policy, 2009, with focus on EWS/LIG H through Public-Private Partnership (PPP) 3. New Building Regulations, 2010, for Jaipur (in place of Building Regulations of 2000) 4. Model Building Regulations for all towns of Rajasthan 5. Detailed guidelines for subdivision and reconstitution of plots in urban areas 6. Slum Development Policy through PPP 7. Draft Master Plan for Jaipur and other towns of Rajasthan 8. Policy for residential, group housing and other schemes in the private sector, 2010 9. Rajasthan Town and Country Planning & Development Bill, 2010 (draft) 10. Policy for Transferable Development Rights (TDR) (draft) Finance options for integrated townships The financing of such a large-scale project can be divided into two parts: land acquisition and construction. There are no financing options available for land acquisition; it has to be done through the company's internal accruals or private equity. Construction costs can be divided into two types: residential and non-residential. Funding residential construction is a simple and straightforward method. Customer advances and sale of units can bring in funds. Also, financial institutions do offer loans. Excess funds from residential units can be used as bridge funds to finance commercial buildings. When it comes to retail, it is very important to finalise the anchor tenant. This helps raise funds from banks. New Townships in India Mandatory criteria for Gujarat's integrated township policy To share your views on integrated townships, write in at feedback@ASAPPmedia.com