Making real estate sustainable
Rapid urbanisation is fast compromising the urban real
estate marketplace. Urbanisation must go hand in hand with environmental
sustainability measures, feels Anuj Puri, Chairman and Country Head,
Jones Lang Lasalle Meghraj
Though India has a monumental population, its rate of
urbanisation has been relatively low. This is a matter of some concern,
considering that India has three of the 20 biggest cities in the world i.e.
Mumbai, Kolkata and Delhi. It also has 23 cities that house above one million
Going by established and ongoing patterns, it can be safely said that true
urbanisation has been limited to India's western and southern parts. Moreover,
the process of urbanisation in these parts limits itself to certain cities.
While this is itself a serious situation, the bigger problem is the gross
imbalance between rural and urban development. It has been becoming increasingly
evident that agricultural growth is no longer an answer for our rural economy,
since India's average yield
per hectare is pathetically low as compared to countries like China.
Not surprisingly, there has been a steady exodus from India's rural parts to its
urban areas. This has proved to be a huge strain on their infrastructure. We
witness this to greatest effect in a city like Mumbai. Similarly, metros across
India are buckling under a steady inward migration from the rural areas - and
their infrastructures are not equipped to take the onslaught.
This is proving to be a major problem - one that is directly related to
sustainable real estate development in our cities. Rapid urbanisation is fast
compromising the urban real estate marketplace, and there are now real concerns
about what the scenario will be a few years down the line. We now realise that
urbanisation must go hand in hand with environmental sustainability measures.
To illustrate: In India, as in many other countries, the growth in municipal
waste is proportionate to its economic growth rate. This amounts to
approximately 40 per cent over the past three decades.
Further, by the year 2020, India's demand for commercial energy will very
probably increase by a factor of 2.5. An energy deficient country, India is
already unable to meet its energy demands and rapid urbanisation is not helping.
We see the results everywhere in the form of power shortages and supply
interruptions. This growing gap between the demand and supply of energy is a
clear SOS for stable, more environment-friendly alternatives of energy
conservation such as solar power.
Currently, the sector is divided into players that take the importance of
sustainability seriously, and those who do not. The second group, which is in a
majority, has issues with overall profitability, since rendering land and
buildings sustainable costs money. However, the macro-level issues have more to
do with 'change resistance'. The laws of change resistance underline the
difficulty in persuading people, corporations and nations to adopt proper
A sustainability focus in the process of urbanisation calls for a change in
individual values at the personal, corporate and collective levels. The problem
is not with ignorance - most people are aware about the need for environmental
sustainability, and even agree with it. The problem lies in the enactment of
At its very root, sustainability is a process or state maintainable at a given
level for prolonged periods. In the real estate context, it means developing
land and buildings in such a manner that the environment can sustain future
While talking of a sustained and sustainable real estate boom in India, one
should remember that that there is no market without a marketplace. Therefore,
for companies that deal in real estate in any capacity, environmental
sustainability is not a concept too distant from business sustainability. In
other words, there is no difference between sustaining the environment and
maintaining the marketplace for indefinite business activity.
With some exceptions, urbanisation has caused residential conditions in most of
India's larger cities to decline rapidly. There is a general shortage of
infrastructure, increased air, water and noise pollution and a rash of illegal
and unorganised structures cropping up.
Given this depressing scenario, it has now been established that townships are
the most suitable residential solution. If planned and executed properly,
townships are definitely the answer to the growing housing woes brought on by
rapid and lopsided urbanisation. They are efficient vehicles of social
integration while offering the necessary infrastructure.
Draft housing policy
The unregulated growth brought on by rapid urbanisation is also the result of
the activities of unregulated developers. We see a ray of hope in the upcoming
housing policy, which is now in the offing. The existing rules and regulations
guiding the activities of developers will come under a single umbrella. Of
course, a policy is not an Act. It is a kind of guideline under which amendments
to several acts will take place. Once this draft has been approved by the
Cabinet, these amendments will come in force.
While the housing policy is doubtlessly raw and functional, it is headed in some
correct directions. The policy actually encourages the entry of large-scale
developers and discourages unregulated developers of small stand-alone projects.
In today's context, developers capable of developing large townships are
corporatised. They have authenticity, credibility and a focus on future market
Scrapping of ULCRA
The Central government had not considered states like Maharashtra and Andhra
Pradesh when it repealed the ULCRA (Urban Land Ceiling and Regulation Act) in
other states like Gujarat, Karnataka and Punjab. It had its reasons, but it
became evident that the ULCRA rendered valuable land useless for all practical
purposes. In India, land constitutes approximately 50 per cent of the price of
Now that the Urban Land Ceiling Act is repealed in Maharashtra, considerable
portions of land will be released in central areas of cities. However, these are
out of the reach of middle-income buyers to begin with, so they will not
benefit. The land locked under the ULCRA and now being reverted to its owners
has appreciated in tandem with market dynamics since the passing of the Act 22
years ago. In any case, it will meet no more than 5 per cent of the overall
demand in Mumbai over the next one year.
Nevertheless, now that the Act is scrapped, projects will come out at a faster
pace, and developers will pass the benefits of speedier approvals on to the
In any case, repealing the Urban Land Ceiling Act was definitely the need of the
hour. While it was certainly envisaged as a means of protection to landowners,
it has not served any of the purposes for which it was created. By repealing
this archaic Act in all states, the government has assured that the real estate
sector will grow by at least 14 per cent by the year 2011-2012. Real estate's
contribution to the national GDP so far has been about 11 per cent. With the
scrapping of ULCRA, this figure will increase substantially.
This is an excellent and much-awaited move by the government, and definitely a
step in the right direction.
Altogether, 25,000 acres of land have now been freed in the financial capital of
Mumbai. However, only 10,000 of these are in developable zones, while the
remaining 15,000 fall in areas with restrictions, such as coastal zones,
forestlands etc. The players with the biggest land holdings previously locked by
the ULCRA within Mumbai include Godrej, the Wadia Trust and the Indian Railways,
with Hiranandani from the developer community.
[May 19-25, 2008]