unlocking urban land value

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UNLOCKING URBAN LAND VALUESFOR INFRASTRUCTURE FINANCES

MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY

Learning from MMRDA’s Experience

Ashw ini Bhide, Jt Metr opoli t an Comm issioner,MMRDA

Dr . Sati sh Bagal, Financial Advisor , MMRDA

16 September, 2009



2

MUMBAI METROPOLTAN REGIONMUMBAI METROPOLTAN REGION

Area 4355 sq.km.

Population 1.92 Cr (2001)

Districts in MM R 1. Mumbai2. Suburban3. Thane4. Raigad

Corporations in MMR 1. Greater Mum bai2. Thane3. Navi Mum bai4. Ulhas Nagar5. Kalyan-Dombivali6. Mira Bhayandar7. Bhiwandi- Nizampur

Municipal Councils inMMR

1. Vasai2. Virar3. Nallasopara4. Navghar-Manikpur5. Ambernath6. Kulgaon-Badlapur7. Alibag

8. Pen9. Uran10.Matheran Hil l Station11.Panvel12.Karjat13.Khopoli

Villages 1000

Urbanization

94% Urban Population6% Rural Populat ion

Mumbai

Thane

Virar

Bhiwandi

Kalyan

Khopoli

Pen

Alibag

Nalasopare

Navghar

Ulhasnagar Ambernath

Badlapur

Panvel

Uran

Matheran

Karjat

Navi Mumbai

Thane Dist.

Raigad Dist.

SuburbanDist.

Vasai

Mira-Bhayander



MMRDA: Brief Introduction

• Established in 1975 under MMRDA Act, 1974.

• Regional Planning Authority for MMR

• Special Planning Authority for notified area.

• Development Financing Agency for ULBs within MMR.

• Nodal Agency for Centrally Sponsored Schemes like JNNURM.

• Co-ordination Agency for Infrastructure Projects implemented bymultiple agencies.

• Implementing Agency for various infrastructure projects within

MMR.



Major Infrastructure Projects by MMRDA

MUTP Capacity enhancement of Suburban Rail & Bus systems &

Construction of two important link roads.

MUIP Widening of arterial roads, construction of missing Links,ROBs, Flyovers & Elevated Roads.

Extended MUIPImprovement in regional connectivity.

Metro 2 corridors Costing Rs. 11000 cr on PPP basis being

implemented and 9 more planned

Monorail 1st Monorail in the country costing Rs. 2800cr.

Skywalks 4 Skywalks completed and 46 more under construction.

Rental Housing slum prevention program

Nirmal SanitationCampaign

10000 community toilets constructed and 13000 more under

construction.

New Projects MMC, ISBT &Tall Tower, Regional landfill sites, Regional

water supply, Innovation Park, Growth Centers



Financing Inf rastructure Projects in MMR

• Cost of ongoing projects : Rs. 8500 crores

• Future investment requirement as envisaged in ComprehensiveTransport Study : Rs. 2,00,000 crores

• Using land as source of infrastructure financing :- – Sale proceeds from the land at BKC

– Sale of additional BUA caused by increase in FSI

– Resource generation through planning activity in SPA areas :

Oshiwara Model – Effective use of DCR as a tool to tap intrinsic land value for

infrastructure projects

• Construction of tenements for Project Affected People

• Acquiring land for Metro car depot (at Versova)• Rental Housing Scheme

– Limited use of real estate development component in transportprojects on PPP basis



• Starting from the year 1980 MMRDA developed Bandra Kurla

Complex reclaiming the marshland and channelizing the Mithiriver.• MMRDA paid Rs. 956 cr as occupancy price for a total land parcel

of 208 ha to the State Govt. over a period of time.• Initially many State and Central Govt. offices were housed in ‘E’

block

• Then the ‘G’ block was developed as an International Finance &Business Centre• MMRDA as SPA designated different land parcels for specific

development purposes and auctioned them• The higher bidder would get the 80 year long lease and would be

responsible for the development of the site and also the onsiteinfrastructure

Sale Proceeds from MMRDA’s land at BKC



• Total lease premium received : Rs. 8871 cr for 100 ha of land and14.11 lakh sqmts BUA

• Starting from Rs. 1980 per sq mt the rate of LP reached Rs.504000 per sq mt in 2008

• Rise in FSI from 1 to 3 for residential and 2 to 4 for commercial in‘G’ block

• Additional BUA available : 33.11 lakh sq mts for commercial and3.05 lakh sq mts for residential

• It will be sold at 100% of RR rate for residential and 150% of RR

rate for commercial purpose

• Since 2003, MMRDA, in addition to its planning function hastransformed itself as an Infrastructure Development Authority.





• Revenues from land premium flowing into MMRDA’s budget arenow directed primarily to all major infrastructure projects

• Construction & Maintenance of roads, street lights, maintenanceof reservation, beautification within BKC is MMRDA’sresponsibility

• Municipal Corporation collects property tax of Rs. 95 crs annuallyand provides waste collection, water supply, sewage collectionand fire services.

• MMRDA is now exploring various other modalities of harnessingthe value of remaining 21 ha of commercial land at BKC

• It has also shifted its focus to a less developed area like Wadala

and is trying to emulate there the lessons learnt from BKCexperience

• MMRDA is also poised to identify and develop additional growthcenters on the lines of BKC with in MMR



Resource Generat ion throughPlanning Act ivity in SPA Areas

• MMRDA is SPA for Oshiwara District Centre within MCGM areasince 1992

• Here the Development plan is being implemented through landowners participation

• The lands are acquired by MMRDA for nominal compensation andare leased back to the owner for 60 years with additional 0.5 FSI

• The land owner is responsible for on site development and is free

to sell the building in open market.

• MMRDA gets premium at a fixed rate which is used for offsite

infrastructure like roads, drains etc.



Effective use of DCRs as a tool to

tap intrinsic land value forinfrastructure projects

• Construction of tenements for Project AffectedPeople

• Acquiring land for Metro car depot at Versova

• Rental Housing Scheme



Rehabili tat ion and Resett lement Colonies

• Shifting and rehabilitation of Projects Affected People : the most

vital part in infrastructure projects in Mumbai

• Amendment to MMRDA Act in 2003 by which MMRDA was given

all the power of Slum Rehabilitation Authority

• Clause 3.11, Appendix IV to DCR 33(10) provides for SR Scheme

for PAPs of vital projects, sitting on public land.

• Land owner gets TDR equivalent to existing FSI for surrendering

the land

• Developer gets construction TDR at 1:1.33 in lieu of construction

of tenements



Rehabili tat ion and Resett lement Colonies

• Extensive use of this power by MMRDA : 24 SR schemessanctioned which generated 33,183 tenements

• Land received : 45 hectors of approximate value of Rs. 337 cr

• Value of the tenements : Rs. 995 cr (Rs. 3 lakh per tenements)

• Value of the TDR granted : Rs.: 935 cr.

• Stock of tenements has given major impetus to infrastructureprojects in Mumbai.



13

Mankhurd Oshiwara Mahul - B

Majas GhatkoparPowai Plaza

View s of Rehabi l i t at ion Si tes

A i i l d V



Acquiring land at Versova

for Metro Car Depot

• Land admeasuring 13.80 ha. costing about Rs. 900 cr wasacquired for Metro Car Depot without going for Land Acquisitionprocess and without giving any monetary compensation

• Original reservation modified to “ Car depot/Allied Activities andcommercial use” u/s. 37(1) of MRTP Act

• Existing policy of accommodation reservation could not be madefully applicable for this reservation

• Hence directives u/s 154 of MRTP Act by State Govt. to modifyDCR 9 table 4 to suit the requirement which was subsequentlymodified

A i i l d V



Acquiring land at Versova

for Metro Car Depot

• Accordingly the land owners to handover minimum 75% of theland to MMRDA, free of cost and free of encumbrances and toretain 25% of land for development

• The owner can use 75% of permissible FSI of gross plot area onhis share of land and vice versa

• The owner can also load additional TDR on his share of landtaking into account the entire plot area with prior approval.

• By effectively using DCR as a tool MMRDA could get 9.3 Ha ofland free of cost for Car Depot at a crucial location.



CAR DEPOTAREA

OWNERAREA



Rental Housing

• A Slum prevention Program• Ensures affordable housing along with decongestion of Municipal

areas with a regional planning approach

• Envisions to create 5,00,000 rental housing units of 160 Sqft each

within MMR in next five years

• Incentivization through higher FSI or TDR

• Total Cost of the asset to be generated : Rs. 20000 cr

• Total rental to be collected per annum : Rs. 600 cr.

• Infrastructure charges to be recovered from approved projects :

Rs. 575 cr.

(Approval given :- 13 projects RHUs:- 1,73,585)

• Directives under sec.154 of MRTP Act to ULBs to append a

Chapter on Rental Housing to their existing DCRs



1818

RENTAL HOUSING SCHEME MODELS OF DEVELOPMENT

SINo

Applicable to Zone Type ofModel

TotalFSI

Componentfor RentalHousing

Component forDeveloper

1 Municipal Corporations of Greater Mumbai,Thane, Kalyan-Dombivali, Mira-Bhayander,Bhiwandi-Nizampur, and Special PlanningAuthority Areas at Vasai-Virar Subregion, andAmbernath, Kulgaon, Badlapur and

Surrounding Notified Area, and MunicipalCouncil of Panvel

Model-1 3 FSI 3.00 FSI* oftotal land

TDR $ equivalent to plotarea for land

+Construction TDR of

1.33 X 3 (FSI of RentalHousing)

2 Municipal Councils of Karjat, Pen, Uran,Alibagh and Khopoli. Municipal Corporationsof Thane, Kalyan-Dombivali, Mira-Bhayander,Bhiwandi-Nizampur, and Special Planning

Authority Areas at Vasai-Virar Subregion, andAmbernath, Kulgaon, Badlapur andSurrounding Notified Area, and MunicipalCouncil of Panvel

Model-24 FSI

1.00 FSI 3.00 FSI

(15 % commercial )

3 Urbanisable Zone-1 (U1) and Urbanisable

Zone-2 (U2) within Mumbai MetropolitanRegion

4 Construction of Rental Housing on anyunencumbered lands vested with MMRDA# inMumbai Metropolitan Region

Model-3 4 FSI 3 FSI: Rental Housing

1 FSI: Commercial

(to be developed by MMRDA)

Note:

1) FSI*-Floor Space Index, TDR$ - Transferable Development Right, MMRDA# -Mumbai Metropolitan Region Development Authority

R l E D l C



• MMRDA is implementing two Metro corridors on PPP basis andthe bidding process for ‘ISBT and a 530 meter tall Iconic Tower’ isunderway

• Both the Metro projects are least dependent on land as a sourceof bridging the viability gap

• Metro – 1 – 100 sq m area per station on the concourse is allowed

for commercial activities for commuter facility – total 1200 sqmarea (Total projects cost – Rs. 2350 cr, VGF – Rs. 650 cr)

• Metro – 2 – in addition to above, 4000sqm area one floor above

the platform is allowed for real estate development – Total area : 27 Stations - 108000 sqm

– NPV of the rentals to recovered over the concession period –Rs. 750 cr

(Total project cost: Rs. 7660, VGF 2298 cr)

Real Estate Development Componentin projects on PPP basis

R l E t t D l t C t



Real Estate Development Componentin projects on PPP basis

• ISBT and Iconic Tower –

– Plot reserved for ISBT in Wadala of 14 ha

– With 4 FSI available BUA is 5,60,00 sqm

– Proposed to develop ISBT along with a 530 mtr tall iconicbuilding with approximate cost of Rs. 3100 cr on PPP basis

– Concession period : 35 years – Bidding parameter : maximum annual premium to MMRDA

– Project site : major transport hub with Metro, Monorail and twoimportant link roads currently under development.



Strengths of Various Models

Model Purpose and

Suitability

Risks and Ease of executing

Direct Saleof land(Bandra-

KurlaComplex)

Get Upfront Cash forInfrastructureDevelopment

No Risk . Easy to Operate. However, timing isimportant. Taxation and issues of carryinghuge cash; Danger of resources being

diverted. Location limitations. With reducingasset base there is need to build new assets.

Selling FSIafterAcquiring

NotionalOwnership(Oshiwara)

SPA can develop thearea as per requirementoptimally through

IncentivizedDevelopment.

Low Risk but Complex procedure. Timeconsuming . Case by case approvals. Ownerswary of loosing rights. Moderate success.

These days courts question charging premiumon additional FSI. This difficulty is taken careof through Notional Ownership. Good Model.

Incentives of

ExtraFSI/TDRsthroughDCRs

Creating infrastructure,

especially housing fordisadvantaged class orfor acquiring strategicspaces, rehabilitation ofPAPs etc.

Could be very popular but fairly risky. Would

require considerable investments in onsite andoffsite infrastructure. A thorough and priorappraisal of locations, requirements etc.required. Requires monitoring, inspections andsupervision for targets and quality; Requires

close supervision over deliverables, quality .



Model Purpose and Suitability Risks and Ease of executing

TraditionalGrowth Centre

model

May be used fordevelopment of new areas

especially aroundtransport corridors andother strategic andregional infrastructure .

In the long term, some resources canbe raised by selling lands, FSI and

capturing value etc. These aremoderately risky and requireconsiderable planning and predictablestream of investments. Long term viewand some predictability required.

Having recently carried outComprehensive Transport Studies anda Business Plan for the entire MMR,the MMRDA is in a position to set upgrowth centers.

Use of SimpleDevelopmentCharges/Fees

Get funds for developingnew infrastructure

Easy to operate and implement. AllPlanning Authorities do this. Limitations,as this has a relationship withinfrastructure development costs.

Does not capture part of additionalvalue.





Embedding in PPPprojects withinfrastructure

development

Moderate Reduction in VGFrequirement in PPP projects,where VGF is necessary to

make the project viable.

Complex and difficult to know thevalue released. Infrastructuredevelopment with commercial use

of land requires clarity inConcession Agreement and goodmonitoring by IndependentEngineer. With increasing size ofland component, computation and

project valuation becomesdifficult.

Use of BettermentLevies

(Capture a part ofthe value added tothe land/property)

For capturing the increase inthe value due to new

infrastructure project , say forrepayment of debt

Arrangements for levy and chargecould be complex . Although the

MMRDA Act provides for this levythis has not so far been used.MMRDA has proposed levyingthis charge in the areas that willbe benefited by MTHL





PPP modelthat allowsReal Estate

Developmentwith thegovernmentland.MMRDA has

recentlycarried outsome studieson this with aview to lend

sustainabilityto itsresources.

This model is increasinglybecoming popular with thegovernments and sub-

national entities. This isused for redevelopment ofthe existing assets, buildingsor lands and look for anumber of financial rewards/

outcomes such as income-sharing, asset sharing, or acombination of both alongwith receiving some upfrontpayments.

This could be a very attractive way ofraising resources both revenue andcapital receipts. As indicated, there could

be special arrangements which can besuited to requirements through anappropriate concession agreement.

But, this arrangement could be risky,

There could be legal risks as alsosubstantial market risks. Moreoverhandling real estate issues requiresdifferent and complex competencies.The nature of the government

functioning may not permit a quick andappropriate response to the markets.This can be done on a moderate scaleafter mitigating these risks.




EMERGENT ISSUES

• BKC land is scarce and self limiting as a source of revenue

• Need to identify potential Growth Centers and reserve them in RP/DP

• Need to identify and acquire Govt. lands for this purpose

• Need to regulate development along side upcoming

infrastructure project by making effective use of planningprocess

– Multimodal corridor

• Need to capture the land value gains attributed to a majorinfrastructure project

– Impact fees (with reference to MTHL)

– Circle of influence around a Metro Station



• Need to channelize land value gains captured by different waysin a dedicated fund for infrastructure development

– Mumbai Development Fund

• Need to understand implication of selling higher FSI rights togenerate resources and take appropriate measures to rationalizethe system

• Need to achieve better co-ordination among various civic bodiesin order to check misuse of incentives given to developers and toharness the full value of Govt. resources.

EMERGENT ISSUES



• For various reasons sale of land/grant of extra FSI is a sensitiveissue and has to be taken up within an acceptable Institutional andPolicy Framework

• Excessive use of FSI or land can distort the development in an areaand can also create huge liabilities for future by way of greaterdemand for urban infrastructure

• Objectives underlying the sale of land/FSI have, therefore, to beclear and need to be dictated by imperatives of proper/desirabledevelopment and by need for resources for infrastructure

development. This needs a realistic and perspective assessment ofvarious infrastructure needs in the region over a reasonable horizon

• Given the large and rising urban conglomerates and hierarchy ofvarious local bodies, institutions and governments in the region the

task of designing appropriate Institutional Framework is verychallenging

• There is need to create in this framework mechanism/ dedicatedfund for pooling all land value gains and directing them to proper

utilization for creating necessary infrastructure

EMERGENT ISSUES



Institut ional Framework for MMRDA

• MMRDA has fairly sturdy institutional framework to realize high

land values from various models

• MMRDA Act gives mandate to MMRDA to develop Regional

Infrastructure in the entire MMR

• ULBs in MMR and their functionaries are adequately represented in

the Authority

• It has an envious track record of development Finance Assistancethrough soft loans to ULBs (Rs.3000 crores)

• MMRDA Act provides for levying betterment charges where the

value of land/ asset has increased due to a infrastructuredevelopment project

• MRTP Act allows Special Planning Authority (SPA) to levy and

collect Development Fee/Charges from developers/ institutions



• MMRDA has been functioning as monitoring and co-coordinatingbody for Regional Planning and Infrastructure Development

• In view of its performance, lean and lithe structure, experience of

handling innovative projects with new structures and speed ofexecution it has emerged as a lead organization for co-coordinatinginfrastructure development

• More importantly MMRDA has successfully concluded two majorand ambitious studies Viz. “Comprehensive Transport Studies forMMR” and “Business Plan for MMR”, which address the issues ofInfrastructure Provision adequately

• MMRDA is, therefore, in a strategic position to make optimal use ofland value from different models for infrastructure development

Institut ional Framework for MMRDA



THANK YOUTHANK YOU

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