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Magarpatta City | Pune, India Course of Project Development Management Wim Wambecq | Bruno De Meulder Submitted by Parul Jain Masters of Urbanism and Strategic Planning Methodology 0.0 Abstract …………. Pg. 3 1.0 Introduction: Project brief and context………. Pg. 3-5 2.0 The Process……………………Pg. 6-13 2.1 Fo...

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Magarpatta City | Pune, India

Course of Project Development Management Wim Wambecq | Bruno De Meulder

Submitted by Parul Jain Masters of Urbanism and Strategic Planning

Methodology

0.0

Abstract …………. Pg. 3

1.0

Introduction: Project brief and context………. Pg. 3-5

2.0

The Process……………………Pg. 6-13

2.1 Formation of the MTDCCL and division of share 2.2 Government approval and Conceptualisation 2.3 Self Financing model 2.4 Design and Development 2.5 Shifting Vocations: From Farmers to Entrepreneurs

3.0

Reflection………………Pg. 14

4.0

Bibliography……………. Pg. 15

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0.0 ABSTRACT This paper is a critical reflection on the unique development of the award winning and strategic SEZ1 or “Special Economic Zones”, the Magarpatta City, located in the district of Pune, in the state of Maharashtra, India. This socially equitable form of urban development is a unique model of land pooling, that challenged the existing Town Planning Schemes of the country, and carved its way into the transforming landscapes of Pune. A Former agrarian land co-owned by a group of farmers, was redeveloped into a completely sustainable and profitable housing complex creating a new model of land pooling, that emerged as a profitable and empowering solution to the constant demand of housing in the case of growing cities in the developing context. In this paper, I shall be discussing the conceptualisation and development of a seemingly impossible project, and how it overcame the many hurdles in its development by supplanting the coercive Land Acquisition scheme through innovative approaches and amendments in the town planning schemes of the state. The paper also focuses on how the project was realised through “self-financing schemes” and inclusive incentives for previous occupants, that were developed during the process.

1.INTRODUCTION: Project brief and context Cities in India are constantly expanding post the colonial era. The city of Pune is currently the second largest city in the western state of Maharashtra. From a mere 5 sq.km the city has expanded to a 700 skims in a span of 18 decades [817-1997]. Over the past few years, due to rise of the IT sector and employment opportunities, the city has witnessed huge number of migrants in the form of both blue collar and white collar workers, expanding the population of the city from 1,64,00 to about 3.1 million [source: census 2011], making it one among the largest and the most populous metropolises of the nation.

Figure 1 Chronological Development of Pune from 1820 -2011, Image source: Town planning department, Pune 2011

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A special economic zone (SEZ) is an area in which business and trade laws differ from the rest of the country. SEZs are located within a country's national borders, and their aims include: increased trade, increased investment, job creation and effective administration.

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Due to the spurring urbanisation and expanding population of the city, in 1960 the farming lands of Hadapsar on the eastern fringes of Pune were marked for Urban Development. It is important to understand here that the Land Acquisition Act2 of 1894 and Urban Ceiling Land Act3 of 1976 were pivotal moments for the farming community in India. It only exacerbated the issues of unemployment and migration due to shift from an agricultural economy to a service class economy. In the 1982 Draft of Development for Pune Municipal Corporation [PMC from here onwards], marked the lands of the Magar farming community for development, which meant that these farmers would have to sell their lands to the government at a rate lower than market prices owing to the Land Acquisition Act. The pressure of displacement and loss of source of income was the genesis of an idea called “The Magarpatta city”. Lead by Satish Magar, the head of the farming community and the largest landholder, this group of 120 farmers collectively decided to pool their lands of 430 acres and develop it themselves into a township that would feed to the growing demands of the city.

Figure 2: Pune-Pimpri Chinwad plan. The extended city

Image source: Rising in the east. Page 280

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Land Acquisition Act, 1894: As per the Act, the union or state governments can acquire lands for its own use, hold and control, including for public sector undertakings and for "public purpose" 3 Urban Land ceiling act , 1976 : To provide for the imposition of a ceiling on vacant land in urban agglomerations, for the acquisition of such land in excess of the ceiling limit, to regulate the construction of buildings on such land and for matters connected therewith, with a view to preventing the concentration of urban land in the hands of a few persons and speculation and profiteering therein and with a view to bringing about an equitable distribution of land in urban agglomerations to subserve the common good.

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Magarpatta township, thus “is an attempt to valorise their property in a holistic manner, that also gave them beneficial returns in perpetuity. In the constant struggle of displacement, loss of agricultural jobs and the rising need of decentralization, Magarpatta city is a harbinger towards many firsts.” (Jain, 2016) Magarpatta city was conceived as an SEZ which now is home not only to residential, commercial and IT development, but is also inclusive of a central park, a school, a multispecialty hospital, fitness, recreation and security services, required to form a neighborhood. The model has attained success in various aspects of sustainability, by implementing an onsite waste management system, solar energy system [ registered in Limca book of records], storm water mitigation and innovative planning by the establishment of a walk to work and school concept. Though the project holds its uniqueness in establishing each former farmer as the stakeholder of the project with 800 beneficiaries and generating constant income through revenue sharing. The project has been regarded and applauded as one of the top successful stories in the state, it was not an easy task. The project had to overcome multiple issues in terms of finance, resources and planning restrictions. This shall be elaborated in the further sections.

Figure 3: The IT Park at Magarpatta City

image source: www.magarpattacity.com

Figure 4:The cyber city looking toward Aditi Gardens

Image Source: www.magarpattacity.com

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Figure 5:Magarpatta city, Aerial view

Image source: www.magarpattacity.com

2.0 THE PROCESS The project included many actors, but MTDCCL, the company formed by Satish Magar, claims the most important role in the shaping of the project. Secondly, Project Designer Prakash Deshmukh of Space Design architects played a keen role in development of the project, starting from approvals till execution. NICMAR, the nonprofit organization of Pune were involved in vocational training required for the success of this project. HDFC was the only source of outside funding and promotors for this project. The roles of all these important actors have been elaborated in the following sections HDFC [part finance]

NICMAR [non profit research organisation]

SPACE DESIGN ARCHITECTS [design team]

MTDCCL

[owner+developer]

2.1 FORMATION OF THE MTDCCL AND DIVISION OF SHARE Satish Magar owned 100 acres of land out of 430 acres, and came from a political family, hence was appointed as the Directing Manager of the company. At first they thought forming a co-operative company, but learning from the failure of the sugar co-operative movement in Maharashtra, and the fact that each farmer family owned different sizes of land parcels. The company resolution was to safeguard land ownership and provide a continuous source of income to all the shareholders. And since co-operatives are based on equality rather than equity, the idea was ruled out, and the community decided to opt for a private limited company. 6

Two types of shares were created in the company  Preferential shares: these are short term shares where rights of owners could be redeemed at the end of the term. This type of share was later removed.  Equity shares: these were the long term shares that endowed landowners with permanent rights in the company and their lands. The peasants pooled in their individual landholding under Joint Development Agreement (JDA)4 to the project Special Purpose Vehicle (SPV)5.In addition to share in revenue, the peasants held equal portion in the project SPV- hence, had also a share in the upside of the entire development. (Dhere, 2012) Due to lack of liquid assets, the only form of initial investment was made by pooling in their shares of land, which was at that point of time valued at 2,145 INR. Thus, together the entity was formed and named as MTDCCL [ Magarpatta City Township Development and Construction Company limited] 2.2 GOVERNMENT APPROVAL AND CONCEPTUALISATION The Managing director of the company Satish Magar’s first step was to approach renowned architect Hafeez Contractor in order to get the plan of action drafted. The concept of township was very new to India then, and the farmers had the least knowledge on how to go about with this plan. Mr. Satish, along with Architect Hafeez Contractor and few others, visited residential localities in San Jose and Santa Clara in USA, from where the idea of walk to work was adopted as the key to the design of Magarpatta city. A research on the traditional community housing typology was also carried out, and the courtyard concept was translated to the need of a large central open space for the community. Space design Architects, Prakash Deshmukh’s firm from pune was appointed as the design team for the project. Next, the entire team with Mr. Magar approached the then Chief Minister of the State, Mr. Sharad Pawar and the secretary of Urban planning, Mr. D.T Joseph. Both of them were sceptical in the beginning regarding the feasibility of the project due to lack of any existing policy or documentation supporting such a development. The first hurdle was the Urban Land Ceiling Act that prevented any development company from owning a land larger than one thousand sq.m. This means that if challenged by the public in the court, they would be in trouble. In order to convince the state, and the authorities a report was demanded to be produced by the team, which would then follow a public hearing. In order to obtain a waiver from the Urban Land Ceiling Act, the company went through an entire political procedure. The entire team got together to form a detailed report of the visions and plan of action for this development. The peasants were visited by the Urban Planning secretary and the company entered lots of negotiations with the government in order to garner support for the project, simultaneously while the political processes were being carried out.

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The Joint Development Agreement (JDA) is singed in between the land holder native peasants and Magarpatta City Township and Construction Company Ltd(MTDCC). JDA gives authority of MTDCC to obtain the permission, approval, lunching, marketing as well as look the financial and administrative duties for new township 5 SPV also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure, even if the parent company goes bankrupt. A subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments. Also called a "derivatives product company." (SPV is also called as Special purpose entity may be owned by one or more other entities and certain jurisdictions may require ownership by certain parties in specific percentages.)

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Not only did they receive a waiver from the Urban Land Ceilings Act, the project also led to addition of special legislative provisions to the Maharashtra Regional and Town Planning Act of 1972, called the Special Townships Notification of 2006, that laid down the norms for amenities and infrastructure, and planning standards for its development, simultaneously incentivizing the developer and its citizens with various procedural and FSI benefits to promote a good, sustainable development. (Dhere, 2012) Creation of a Detailed Report of the Project

Negotiation with the government and the company

•Submitted to the State Town Planning Department and Pune Municipal Corporation [PMC]

•Project report received clearance

A notification was created of the development •This was followed by a public hearing that granted waiver in the end.

Figure 6: Process of government approval devised by author

2.3 THE SELF FINANCING MODEL The second hurdle the company faced was that of finance. Since the landowners themselves were to be the developers, there was no land acquisition money to initiate the project. The regulatory controls on the lending system to real estate companies, did not support the project model. Besides, the project in the financial market was looked at as a nonfeasible idea. A group of inexperienced and hardly educated farmers, coming together to build a new typology of housing was not convincing for the lenders. The project faced several dejections from the market. This led to Mr. Magar finally pulling the strings of his former political family’s social network, and approach the director of HDFC [Housing Development Finance Corporation] the leading finance development institute of India. The company approached HDFC Bank with a loan request for 1000 million INR in order to start the project, but the bank was able to pass a loan of only 20 million INR. 4 million of this money was required to get the plan passed by the municipality and the remaining 16 million were used to start the construction. The managing director of the Finance company, being on friendly terms with Mr. Magar offered him an advice for revenue stream regeneration through phasing and marketing of the project. The company then devised a strategy for the development of the project into various phases, beginning with the villas and larger apartments, and using the money from advertising and prebookings to continue with the other phases. Since the company was based on equity, each shareholder received part of the money from the sales and the rest of the money went to the company. This way a constant source of revenue was created. This revenue model was not enough; a lot of project cost was cut down by using sustainable construction methods that cut down the project cost. A lot of construction works were carried out by the farmers themselves, making use of the available resources first. Though required consultants were hired for all kinds of professional works. For marketing of the first phase of the project, the team couldn’t find anyone from Pune who was ready to promote the project. Mr. Magar had to again, approach a start up being run by some of his university friends in Hyderabad.

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FLOWS part of Revenue collected was reinvested in building next phases of the project

MONEY HDFC sanctioned loan for inittial infrastructure investment

REVENUE GENERATION A part of the project was built, and sold in the market, generating revenue

Figure 7: How a constant flow of finance was created [devised by author]

The project made use of a lot of Vastu Shastra Elements and derived concepts of neighborhood from the traditional housing typology of Maharashtra. To make the project lucrative about 26,000 trees were planted to create a large open green park that all the buildings would face. Through new participatory building processes, new forms of entrepreneurships were generated and the project was made viable. The details of this are discussed in the following sections. Once the initial sales kicked up, and the project gained popularity, the remaining phases received most of their funding, up to 65% from HDFC, and HDFC was the only promotor of the project during its initial phases. This model turned out to be an extremely profitable one for the farmers, since it was based on revenue sharing, all the shareholders were entitled to a percentage of the sales as dividends in proportion to their land holdings, and that accumulated through sales. Each landowner according to the Joint Development Agreement signed was the owner of that percentage in the FSI as per the master plan.

PHASE I • Erica (2/3bhk Row houses)

• Grevillia (2/3bhk Flats)

• Heliconia(1b hk homes)

• Roystone (2-

PHASE II • Iris (2 bhk homes)

• Mulberry Gardens (Bungalows)

• Jasminium (2/3 bhk flats)

PHASE III • Cyber city IT Park • Mega MallRetail • PentagonOffice Spaces

3bhk flats)

PHASE IV • Trillium (2/3bhk flats)

• Slyvania (2/3bhk flats)

• Laburnum park (3/4bhk flats)

• Zinia (1bhk flats)

• Acacia Gardens(bun aglows)

• Daffodils (2/3bhk flats) Figure 8: Phases of the project Source: slide share

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•Start up finace of 20 million INR received by HDFC bank against a request of 2000 million INR.

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•Setting up of revenue sharing system whereby project was constructed and sold in phases to generate income for the next phase

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•The cyber city was Leased instead of selling space in order to generate more revenue.

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•After initial sucess of the project , following finace was provided by HDFC [65%]

Figure 9 : Finance Management Chart devised by author

This ensured equity returns. It was collectively decided that 30% of sale proceedings would be shared between everyone and the rest was invested in the company funds In the beginning during Phase I, property was sold at 1000INR per sq. ft., which increased to 5000 INR in 2011. Hence the lands pooled in received a huge appreciation. The cost of land in the year 2000 was 3-3.5 million rupees, and by 2011, the valuation of the same land was around 35 million, hence in 11 years there was an appreciation of more than 900 percent in just land value. 2.4 DESIGN AND DEVELOPMENT

Figure 10:Magarpatta city, Masterplan

Image source: www.architecturelive.in

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How was sustainability achieved in the project through Project management? The project includes a lot of sustainable features like it is home to the largest open garden in Pune which is a 25-acre garden in the centre of the township. As we already know, the plan adapts the “walk to work school” concept by including the ‘The Magarpatta City Public School’ and the state of the art “Cyber city”. Besides the Cyber city and the SEZ, Metacentre and Pentagon were two other commercial centres that offered office areas for businesses. About 1200 students study in this school, and the cyber city employs around 80,000 people. Some of the more elaborate features of the sustainable concepts adapted in the township are: 

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To mitigate flooding and water shortage issues, the entire township was designed for rainwater harvesting. The farmers used their knowledge of top soils and climate to formulate rainwater col...