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When builders turn zamindars

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Bottom Line: Aditya Pratap, Advocate, Bombay High Court, writes about the curse of land banking and the demise of urban planning.

Advocate Aditya Pratap, Bombay High Court, India real estate news, Indian realty news, Real estate news India, Indian property market news, Investment in real estate, Realty Plus, Track2Realty, Realty Fact, Litigations in real estate, Land titles in real estate, Dgitisation in real estate, Consumer complaints in real estateTwelve years ago, sometime around 24thMay, 2006, realty major Unitech Ltd. bagged a prime 300-acre land parcel in an auction held by the NOIDA Authority. Flush with funds from an IPO (Initial Public Offering) and a surging share price, Unitech placed an aggressive bid for INR 1582 crore (INR 15.83 billion) for the land situated alongside the Noida-Greater Noida Expressway.

Competing against DLF, the company won the auction and soon made plans to construct a grant 18-hole golf course surrounded by luxury apartments and villas, to be marketed as the plush “Unitech Golf and Country Club”. Flashy advertisements were immediately published and huge booking amounts were collected from aspiring buyers who looking forward to their dream homes in the project.

Tragically, nothing materialised! Fast forward to 2018, all that exists on site are a few half-built concrete shells, desolate sales offices and a vast expanse of vacant land situated next to a thriving expressway.

Jaypee Wish Town, its next-door neighbour and a sprawling 1162-acre behemoth, too shares a similar fate. Both projects are textbook examples of the dystopian saga of Indian real estate – unfinished projects, delayed possession, protracted litigation and insolvency, not to mention broken dreams and endless despair for homebuyers.

The liability called land banking: A common factor in builder bankruptcies:

While there is much ado about diversion of funds, mismanagement and the like, comparatively little attention has been paid to excessive land-banking carried out by Developers prior to their debacles.

When DLF and Unitech listed on the stock markets in 2006-7 both boasted land-banks comprising several thousand acres each. The bulls gleefully scooped up these stocks, anticipating windfall gains as raw land-banks transformed into saleable real estate. Such was the frenzy that builders all over India, be it the Ansals in Lucknow, DSK Group in Pune and Amrapali Developers in NOIDA, embarked upon a quest to become nouveou Zamindars of the 21stCentury.

However, such grandiose visions were destined to remain unfulfilled. The Unitech brothers Sanjay and Ajay Chandra are currently lodged in Tihar Jail, figuring out ways to liquidate their assets. Sushil Ansal, barely out of prison post the Uphaarfire tragedy, faces a series of FIRs ranging from cheating to molestation, arising from the deserted 6465-acre Sushant Golf City in Lucknow.  

Builder D.S. Kulkarni too is doing time in Yerwada Central Jail as he faces allegations of fraud and misappropriation of INR 2892 crore worth of depositors’ money in acquiring land for the 300-acre DSK Dream City in Pune. Anil Sharma of Amrapali Group is no better, having deposited his passport in a desperate bid to reassure investors that he would not flee the country. 

Governments build cities, not builders:

The common factor underlying the above sagas is the massive banks of land accumulated by the developers in anticipation of a real estate boom which never came. Over-confident about their execution capabilities, they ignored a time-honoured principle of Town Planning – “Governments build cities, Developers construct buildings”.

Fashioning themselves as creators of cities, developers rush to accumulate massive tracts of land where they can convert their dystopian visions into reality. The rich and famous get the best houses set amongst lush greens while the financially weaker sections get pushed to the side-lines, if they are accommodated at all. 

The sacrosanct principles of urban planning demand that public authorities must first acquire the entire land, prepare a master plan and define land-use zones. This must be followed by construction of public infrastructure such as roads, parks and community centres along with laying down water supply, sewer and electricity lines.

Thereafter individual plots must be demarcated for residential and commercial use, which may be subsequently auctioned or allotted to private parties, who would then develop the same. The roles of public and private entities are clearly defined and none can bite off more than what he can chew.

It may be noted that Section 9 of the Uttar Pradesh Area Development Act, 1973 envisioned Zonal Development Plans which would provide for proper demarcation and zoning of land. It stated that each Zonal Plan would provide for gardens, roads, open spaces, recreation, hospitals, schools and a host of other facilities which define a city.

Minute details such as elevation, alignment, height restrictions and architectural features were to be provided for. The Act thus set a blueprint for planned urban development whose fruits would be enjoyed by all citizens, irrespective of class, caste or creed. 

Handover of entire sectors to private parties for development – wilful neglect of town-planning duties by NOIDA Authority: 

Delhi’s next-door neighbour NOIDA (New Okhla Industrial Development Area), since its establishment in 1976, presented a relatively decent example of planned sectoral development. The Authority first acquired farmland and demarcated it into plots which were subsequently zoned and allotted. This way, the city was developed in an integrated manner trying to adopt the principles of sustainable development. Each Sector, in addition to housing, had its own gardens, sports complexes, community centres as well as retail and office zones.

The planned development of NOIDA, which had been satisfactory until 2000, took an unexpected turn when Jaypee Infratech Ltd., a group company of Jaiprakash Associates headed by business tycoon Jaiprakash Gaur, was allotted a 1162-acre land parcel by the Mayawati Government. By combining Sectors 128, 129 and 130 into a private gated community, the company aspired to build a 27-hole golf course surrounded by 34,000 apartments.

Similarly, in 2006, Sectors 96, 97 and 98 were amalgamated into a single 300-acre parcel auctioned to Unitech. Amrapali too, was allotted huge tracts of land in several sectors in Noida along with over 100 acres in NOIDA Extension (Greater Noida West), with a developmental potential of about 35 million square feet.

The strings accompanying the bounty were land dues of INR 3,000 crore to the Noida and Greater Noida Authorities and INR 1,000 crore to banks, with another INR 3,000 crore required for construction. Such grandiose schemes represented corporate ambition bordering on megalomania, which by applying Murphy’s law, became financial powder kegs awaiting a spark. 

Thus, the Noida Authority deviated from the policy of planned sectoral development and instead cleared the field for private developers. The private vision of urban development supplanted the socialist vision of land and housing for all. Public parks were replaced by private golf greens; community sports complexes by luxury clubs whose memberships sold in millions and closed gated communities sprang up in place of open residential colonies which were hitherto designed to facilitate inclusion and interaction.

Thus, the constitutional object of town planning, which was to facilitate people from different backgrounds to live and interact together, was defeated. It is needless to add that corruption and palm-greasing accompanied such decisions at every step, as the arrest of Noida Authority Chief Engineer Yadav Singh would later point out. 

Saving our Cities in the nick of time – land pooling as an effective counter to colonizers and land-bankers:

However, all is not lost. While India may have failed to build upon the example set by Chandigarh in the 1950s, new cities of the 21stCentury are using land-pooling as a model to create sustainable urban habitats as well as remunerate landowners. Naya Raipur in Chhattisgarh and Amaravati in Andhra Pradesh are prime examples.

By agglomerating farmland into a single pool and demarcating plots and green zones, city planners have discouraged land-bankers and speculators, who usually refrain from buying land parcels vulnerable to acquisition. 

Once the land parcels are combined, each landowner is awarded developed land proportionate to the area contributed by him, usually twenty to thirty per cent (20%-30%). The balance land goes into creating infrastructure, community and green spaces with residential and commercial plots being allotted or auctioned.

The result is a green and health city equally accessible to all. Further, proper planning of sectors ensures that households of all income groups have equal access to parks, clubs, sports facilities and schools. Hence the concept of elitist ‘posh areas’ disappears and instead, citizens of all income groups reside in green and beautiful areas.

The need for a Central Model Law on urban-planning and development:

Since land improvement and colonization are state subjects under List II of the Seventh Schedule of the Constitution of India, the power to wrest urban planning from the clutches of land-bankers and speculators lies with the State Governments alone. A nation-wide consensus under Article 252 of the Constitution is necessary which will enable the Central Government to come out with a model law on town-planning.

By giving ‘land-pooling’ the force of a parliamentary statute along with placing curbs on colonizers and speculators (in short, the land mafia), the model law will foster sustainable urbanisation and enhance the quality of life enjoyed by Indians.  

Given that half of India’s citizens are projected to live in cities by 2050, the time to act is now, failing which India’s megacities will find themselves down to road towards an urban dystopia riddled with pollution, disease, crime and depression.

Aditya Pratap is a practising lawyer at the Bombay High Court. He appears in diverse civil and criminal cases as well as before the Real Estate Regulatory Authority. Questions pertaining to the article may be emailed to him at aditya@adityapratap.com.

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