Vol. I Issue III, October - December 2009 · Silver may also rise as new avenues of industrial demand open up for the metal. Base metal demand is also ... in EWS and Low-Income Group

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Recommendations ofNational Conference on

“Public PrivatePartnership in Housing”

Property MarketOverview India,

Knowledge Report ThirdQuarter 2009: Colliers

International

Property MarketOverview : Third Quarter

2009 : ColliersInternational

Capacity Building in theReal Estate and

Construction Industry

RNI No. - DELENG17455/29/1/2009-TC

Vol. I Issue III, October - December 2009

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DEC 09 anuf:Layout 1 2/2/2010 11:28 PM Page 1

India’s Ingenuity and Optimism...

Real estate, a different perspective

Capacity Building in the Real Estateand Construction Industry

Cooperative Housing andSustainable Environment

Infrastrusture Funds

Planning Sustainable Cities- GlobalReport onHuman Settlement 2009

Waste Control in Construction

EDITORIAL COMMITTEEShri G. L. Raheja, ChairmanK. Raheja Constructions (P) Ltd.Shri N. K. Jain, PresidentBengal Ambuja Housing Development Ltd.Shri Sanjeev Srivastava, MDAssotech Limited, NoidaShri Getamber Anand, MDATS Infrastructure Ltd., NoidaShri Pankaj Bajaj, MDEledco Infrastructure&Properties Ltd., NewDelhiShri Mahendra Kumar, Regional ManagerLIC Housing Finance Ltd.Shri S. K. Singh, Joint Secretary (Housing)Ministry of HUPA, GoIShri Sanjay Singh, Joint SecretaryDepartment of Consumer Affairs,Ministry of Consumer Affairs, Food & PublicDistribution, GoICol. (Retd.) Prithvi Nath, Sr. AdvisorDLF Ltd. Gurgaon.Brig. (Retd.) R R Singh, Director GeneralNAREDCO, New Delhi.

EDITOR-IN-CHIEF:Brig. (Retd.) R. R. Singh

EDITORIAL TEAM:Er. A. K. SrivastavaAsad MubinYogesh Kumar

National Real Estate Development CouncilFirst Floor, 8 Community CentreEast of Kailash, New Delhi – 110065Ph: 011-26225795, 41608570, 46594346Fax: 011-26225796E-mail: [email protected]

Jaipur Office: RAJ REDCO301, Pink Tower, Opp. Nehru GardenTonk Road, Jaipur – 302015Tel: 0141-5108651, 2591941Fax: 0141-5108651

Lucknow Office: UP REDCO1st Floor, Pragati Kendra,Kapoorthala, Aliganj, Lucknow 226020,Tel: 0522 -2321921, 2326298,2328396 Fax: 0522-2371029

Punjab Office: Punjab REDCOChandigarh Technology ParkPlot No 2, Tower D, Ground Floor,Chandigarh-160101Tel : 0172-4607716, Fax : 0172-4607737

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Procedure for Formation of a LimitedLiability Partnership (LLP)

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Content

OOFFFFIICCEE BBEEAARREERRSS OOFF NNAARREEDDCCOO

Shri Rohtas Goel, CMD, Omaxe Limited

PRESIDENT

Shri Sanjeev SrivastvaM.D., Assotech Limited

SENIOR VICE PRESIDENT

Col. (Retd.) Prithvi Nath, Sr. Advisor, DLF Ltd

VICE PRESIDENT (North)

Shri Anup MohapatraPresident, Real Estate Developers

Association of OrissaVICE PRESIDENT (East)

Shri Gopal L RahejaChairman,

K Raheja Constructions P Ltd.VICE PRESIDENT (West)

Shri Ashok PatniState Convener &

Vice Chairman, RAJ REDCOVICE PRESIDENT (Central)

Sri P PREM KUMAR President, APREDA & M.D., Doyen Constructions Pvt. Ltd.VICE PRESIDENT(South)

Brig. (Retd.) R. R. SinghDIRECTOR GENERAL

Affordable Housing –the newparadigm

26

Property Market Overview India,Knowledge Report…

12

The Future of Indian Real Estate Market

5 Recommendations of NationalConference on “Public PrivatePartnership in Housing”

NAREDCO Certificate Programme36

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NATIONAL REALTY

Printed and published by Brig. (Retd.)Raghuraj Singh on behalf of National RealEstate Development Council (NAREDCO).Printed at Eminent Offset, A – 61, DDA Shed,Okhla Industrial Area, Phase II, New Delhi –110 020 Published at First Floor, 8 CommunityCentre, East of Kailash, New Delhi – 110065.Editor: Brig. (Retd.) Raghuraj Singh.

Shri K J Arora, CMDArora & Assciates Realty Ltd.

MEMBER FINANCE


Rohtas GoelPresident

rices of residential, retail and commercial real estate, across country, plummeted in 2008-2009 as global economic meltdown and tight liquidity impacted demand. Residential salesdeclined significantly and demand for office and retail real estate dropped substantially. Rentalwas lowest because of sluggish business and poor sentiments. Developers under liquiditypressure and debt burden, had to postpone / defer projects. Debt restructuring allowed by bankersand stimulus packages provided by Govt. of India came to the rescue of hard pressed developers.Over leveraged developers had to restructure their businesses and sell stocks and assets to meetdebt obligations.

With the improvement in economy and cut in Central Bank interest rates, liquidity has nowimproved and home loan interest rates come down. Property prices have also bottomed up dueto low demand, giving push to affordable housing. Central and State Govts. have launched manyaffordable housing projects for urban poor under various Govt. sponsored schemes.

Lately, we have seen a large no. of affordable housing projects, launched by privatedevelopers in various parts of the country, generating good response. IT, Manufacturing andServices sectors are back on track, reviving demand for office and retail real estate. Surpluses of2009 are getting absorbed and additional demand is being generated for future expansions.Revival of economy has also given push to market sentiments.

Going forward, pressure in residential segment will be on affordable housing, especially forEWS, LIG and low Middle Income Groups. Public Private Partnership (PPP) will emerge as theviable mode for the supply of low budget housing. Govt. strength in acquisition and supply ofland and private sector strength in construction will come handy in augmenting supply ofaffordable housing at affordable prices. Govt. grants and subsidies will play important role inmaking houses affordable. We expect 50 to 60 percent supply in affordable housing segment andremaining in High Middle and High Income Group segments.

Year 2010 looks brighter for real estate industry with demand for residential segment alreadyrevived and retail and commercial segments gaining strength with the revival of manufacturingand services sectors. IT, ITES and BPO revival and FDI in retail will play major role ingenerating demand for retail and commercial real estate. Real estate companies, however, haveto improve their internal governance and streamline their businesses to reap the fruits of growingeconomy.

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ear 2009 was eventful for financial market with the markets witnessing roller coasterride across the globe. The huge monetary and fiscal stimulus across the globe helped incurbing the damage the 2008 had caused. The positive clues from developed markets gaveemerging markets the much required reprieve and backed by their own strong economicfundamentals they were able to fight back the recessionary trends.

The commodities and agri market witnessed massive rise. Weakness of dollar helpedgold prices rise phenomenally. Stock market led from the front with return averaging 60percent. Even the US market which was worst hit rose 25 percent, due to huge stimulusmeasures under taken by US Govt.

Markets across the globe now seem fairly priced, liquidity ample and sentimentspositive, which can carry the markets forward. As the economic recovery gets stronger,Central Banks may slowly withdraw the stimulus in 2010 but this will depend onsustainability of the economic recovery and impact of withdrawal.

Year 2009 has witnesses massive upsurge in commodity prices. Prices of metals, crudeoil and food items have soared because of weak dollar. Demand for gold could remain intactas certain banks doubt the credibility of dollar as reserve currency resources. Silver may alsorise as new avenues of industrial demand open up for the metal. Base metal demand is alsolikely to grow on the back of growing industrial demand from developing countries. Crudeoil prices are expected to rise baked by recovery in global demand, dollar weakness andinflation. Commodity markets present attractive opportunities in 2010 as supply relatedissues in agri commodities and demand for metal and oil will drive prices higher.

Home sale data in US has been positive in last few months, a full fledged recovery stillseems far away. High unemployment and withdrawal of Govt. support may further hinderthe recovery process. China on the other hand is experiencing a major rise in property pricesleading to fear of real estate bubble. Indian real estate market during 2009 has picked upmainly on account of low interest rate and fall in prices. The out look for real estate in Indialooks positive in 2010.

Brig. (Retd.) R R SinghDirector General

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5Vol. I Issue-III, October-December 2009National Realty

ational Real Estate Development

Council (NAR EDCO), a Real Estate

Development & Promotion Council under

the aegis of Ministry of Housing and

Urban Poverty Alleviation, Govt. of India,

organized a National Conference on

“Public Private Partnership in Housing” on

9th October 2009 at India Habitat Centre,

Lodhi Road, New Delhi. The conference

was supported by Ministry of Housing and

Urban Poverty Alleviation, Govt. of India,

Planning Commission, Govt. of India and

UN-Habitat. The objective of the

Conference was to evolve transparent,

efficient, accountable and workable Public

Private Partnership Models in housing to

over come shortages in housing of MIG,

LIG and EWS categories, as envisaged in

Rajiv Awas Yojana, announced recently by

the Govt. of India.

The conference received

overwhelming response and more than

650 delegates, from across the country,

representing every segment of real estate

industry, participated in the conference. A

striking feature of this conference was

participation from Central and State

Govts. at the level of Secretaries, Housing

Commissioners, Town Planners and Heads

of Urban Development Authorities and

Local Bodies from large number of States /

Union Territories.

The National Conference was

inaugurated by Ms Kiran Dhingra,

Secretary, Housing and Urban Poverty

Alleviation, Govt. of India. She expressed

NMs Kiran Dhingra, Secretary, Ministry of Housing & Urban Poverty Alleviation, Govt. of India Lighting Inaugural Lamp


concern over maximum housing shortages

in EWS and Low-Income Group categories

and invited Private Sector to come forward

and take on this responsibility through

Public Private Partnership mode, as

envisaged in Rajiv Awas Yojana. She

assured all help from Central Govt. in this

regard. She commended NAREDCO for

organizing the conference on such an

important issue. Shri Sanjeev Srivastva,

Member Finance and Managing Director,

Assotech Ltd., read the Presidential speech

in the absence of Shri Rohtas Goel,

President NAREDCO, who could not

attend the conference due to ill health.

Shri Sanjeev Srivastva also spoke on real

estate industry perspective wrt Public

Private Partnership in Housing and role of

Private Sector in making good the housing

shortages. Vote of Thanks was delivered by

Brig. (Retd.) R R Singh, Director General,

NAREDCO.

Following sessions were held –

Session I Public Private PartnershipModels for Affordable Housing

The session on Public Private

Partnership Models for Affordable

Housing was chaired by Ms Kiran Dhingra,

Secretary, Ministry of Housing and Urban

Poverty Alleviation, Govt. of India. Co

Chairman and Rapporteur of the session

were Shri Kamal Taneja, Managing

Director, TDI and Dr. P.S.N. Rao,

Professor and Head (Housing), School of

Planning and

Architecture

respectively.

Speakers who

participated in this

Session were Shri

Mukesh Mehta,

Chairman, M M

Consultants Pvt.

Ltd., Mumbai, Shri

Harshavardhan

Neotia, Managing

Director, Ambuja Realty Development

Limited, Kolkata, Shri Gurdial Singh

Sandhu, Principal Secretary, Urban

Development Housing & Local Self

Government, Govt. of Rajasthan, Shri

Aseem Gupta, Municipal Commissioner,

Nagpur Municipal Corporation, Shri

Suhas Diwase, CEO, Pimpri Chinchwad

New Town Development Authority

(PCNTDA) and Shri Gulam Zia, National

Director, Advisory Services, Knight Frank

(India) Pvt. Ltd. Shri Mukesh Mehta made

presentation on Dharavi model of slum

redevelopment based on SRA concept,

Shri Harshvardhan Neotia presented West

Bengal Model of PPP in housing in joint

venture with Govt. of West Bengal, Shri

Gurdial Singh Sandhu spoke about

Rajasthan policy for attracting PPP in

housing based on incentives to private

developers, Shri Aseem Gupta presented

Nagpur model developed on TDR in lieu

of private land and Shri Suhas Diwase

presented the case

study of Pimpri

Chinchwad New

Town

Development

based on increased

FSI. Shri Gulam

Zia presented the

findings of the

Strategic Report on

PPP in Housing,

prepared by them

as Knowledge

Partner of NAREDCO and proposed two

models – Brown Field Development and

Green Field Development, for discussion

in the conference.

Session II Public PrivatePartnership – Financing andTechnology for Affordable Housing

Shri S K Singh, Joint Secretary

(Housing), Ministry of Housing and Urban

Poverty Alleviation, Govt. of India, chaired

the Session. Shri Sanjeev Srivastva,

Managing Director, Assotech Ltd. was Co-

Chairman and Dr. P.S.N. Rao, Professor

and Head (Housing), School of Planning

and Architecture was rapporteur. Speakers

who participated in this Session were Shri

R V Verma, Executive Director, National

Housing Bank, Shri Olivier Hassler,

Housing Finance Program Coordinator,

World Bank, Shri Ashish Karamchandani,

CEO, Monitor Group, Shri P

Madhusudhan Menon, Chairman, Micro

Housing Finance Corporation, Shri

Subhash Lakhotia, Tax and Investment

Consultant, Dr. Ashok Kumar Ahuja,

Professor of Civil Engg, Indian Institute of

Technology, Roorkee and Ms. Zeenat

Niazi, Programme Director for Habitat,

Development Alternatives. Shri R V

Verma presented Govt. perspective on

financing low income group housing, Shri

Olivier Hassler presented other countries

experience in tackling housing problem of

urban poor, Shri Ashish Karamchandani

Releasing strategic report on PPP in housing

Ms Kiran Dhingra, Secretary, Ministry of Housing & Urban PovertyAlleviation, Govt. of India, Inaugurating Souvenir of Conference

6 Vol. I Issue-III, October-December 2009 National Realty

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presented the opportunities for developers

in low income housing based on his own

model and Shri P Madhusudhan Menon

spoke on development of micro finance

schemes. Shri Subhash Lakhotia spoke

about the need of fiscal incentives for

increasing supply of low income housing

including rental housing. Dr. Ashok

Kumar Ahuja highlighted the need for

intensive research in material and

technology development and Ms Zeenat

Niazi presented the case study of a Public

Private Civil Society Partnership in low

income housing done in Punjab.

At the end of the Session II, Shri

Ashish Jindal, Regional Director (North),

Knight Frank (India) Pvt. Ltd. presented

the recommendations of the Conference.

Vote of thanks was delivered by Brig.

(Retd.) R R Singh, Director General,

NAREDCO. He thanked every one who

had contributed to the success of the

conference, especially Central Govt., State

Govts., Sponsors, delegates and organisers.

He specially thanked Govt. of Rajasthan

for sponsoring the event through Jaipur

Development Authority (JDA) and

Rajasthan Housing Board (RHB) and

Rajasthan Tourism Development

Corporation (RTDC) for sponsoring the

cultural programme.

Recommendations derived fromthe Conference are as under –

There can not be one standard model

applicable to vast

scenarios with

different cities

differing widely in

terms of

population,

density,

affordability and

development

control

regulations.

However, it was

possible to have a common approach

towards PPP in Housing. Transparency

emerged as the single biggest criteria

critical to the success of any PPP model. In

absence of transparent mechanism, the

public sector is hesitant in deviating from

the laid down regulations.

Recommendation 1: Transparencyto be the single criteria governing allthe steps of PPP projects, includingproject Formulation, Bidder Pre-Qualification and VendorSelection.

Land is one of the key inputs of

housing. Cost of land is one of the key

components of the total cost of the project.

Hence, Affordable land either within the

city limits, or at Greenfield sites, well

serviced by urban infrastructure and

transportation network, emerged as a

critical resource with potential to

sufficiently address the issue of housing for

all. To achieve the

objective of

housing, quantum

of land

requirement is

huge and for that

purpose the state

authorities should

take active and

immediate steps to

ensure availability

of affordable land

parcels.

Recommendation 2: Affordableland feasible for affordable / lowcost residential development to beprovided by Public Sector for allPPP Projects

Various approaches to Public sector

participation in Housing projects were

highlighted. Joint participation between

Public and Private sector, as in the case of

West Bengal Housing Board and Gujarat

Ambuja Cement Ltd., was discussed. This

approach is successfully delivering

affordable houses in West Bengal since

1993-94.

Nagpur, Pimpri Chinchwad and

Dharavi Slum Rehabilitation Models

demonstrated the potential of FSI

relaxations and TDRs as an effective

solution to affordable housing projects.

However the approach was discussed to

have limited applicability on cities with

already very high existing FSIs and

densities.

FSI and TDR model application also

requires a city wide comprehensive

infrastructure assessment and zone

definition clearly defining the TDR giving

and receiving zones of a city. Such

relaxations should also be supported by a

pre assessment study to understand the

population bearing capacity of the land

parcel.

Recommendation 3: FSI andDensity subsidies should not be on

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Ms. Kiran Dhingra Secretary, Ministry of Housing & Urban PovertyAlleviation, Govt. of India addressing the delegates

Presidential speech by Shri Sanjeev Srivastava,MD, Assotech Ltd.


adhoc basis, but to be on scientificassessment of city infrastructure andassociated retrofitting costs.

Auction approach though most

transparent, is associated with numerous

fundamental issues

1. Bid award is to a player taking the

highest risk.

2.Instead of a base objective of housing

being maximized, it is the premium

which gets maximized.

3. Auctions result in creation of extreme

social strata comprising of EWS and

HIG units.

4.Auction approach also results in

driving up the real estate prices.

A reverse bid approach focused at

maximization of affordable housing was

discussed during the course of the

conference and was widely accepted as a

better approach to an auction, resulting in

considerably lower project risks and

advantages to all stakeholders. The

approach is an effective mechanism for

channelizing the land premium back into

the project, hence, focusing at delivering

greater quantity of affordable houses.

Recommendation 4: It wasrecommended that the auction orthe forward bid approach bereplaced with a reverse tenderingapproach with a built in mechanismto segregate the affordable housingobjective from the market risk beingtaken by the bidder. NAREDCO’s

Brownfieldmodel, workedout by KnightFrank,advocates such ahedgingmechanism.

Greenfield

development

model, prepared by

NAREDCO with

the help of Knight

Frank, was recommended on a Build to

order philosophy, with a reversal of project

delivery mechanism. The units once pre-

booked and then formulated into the

project mix, would significantly remove the

market risks from the project. It was

recommended for the Greenfield sites to

have provisions of efficient and cheap

transportation to places of work.

Recommendation 5: It wasrecommended that the Greenfieldprojects be planned on a mega pre-booking approach. Everybodyregistering for these units, to beprovided units at Greenfield sites,well serviced by civic, urbantransport infrastructure. TheGreenfield model, recommended byNAREDCO and Knight Frankrecommends a pre-booked, preapproved project being bid for interms of singlevariable ofadditionalconcessionalland.

The

recommended

models by

NAREDCO and

Knight Frank also

highlighted the

fact that there is a

need of

incorporating a

rental housing component into a PPP

housing project. This will act as a slum

prevention mechanism. Future migrants

could get temporary accommodations in

these rental housing units and not force

them to move into a slum.

Recommendation 6: It wasrecommended to in-build anessential social rental housingcomponent in all PPP projects,which would act as a cushion tofuture migrations and act as aneffective slum preventionmechanism.

It was widely accepted that the project

mix formulated for both Redevelopment as

well as Greenfield models should be

vibrant to include all social classes co-

existing and sharing common

infrastructure. It was advocated for the

projects to have high standards of urban

planning and have due considerations to

social infrastructure of markets, hospitals,

schools, and open spaces.

Recommendation 7: It wasrecommended for project models toensure a uniform social mix so asnot result in segregation of classesbut a uniform social stratum.

Maintenance was identified as critical

to long term sustainability of projects. Low

maintenance cost burden on EWS and

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National RealtyVol. I Issue-III, October-December 2009

Delegates of the Conference

Vote of thanks by Brig. (Retd.) R R Singh, DG, NAREDCO

8


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LIG components was identified as a

requirement in PPP project formulation.

Recommendation 8: It wasrecommended to structureaffordable housing component so asto ensure lowest possible operationand maintenance costs. Alternatesubsidy based approach tomaintenance of these projects wasalso recommended.

Approval period was identified as a

very big bottleneck resulting in increased

project durations and high financing costs.

The discussions highlighted a need for a

time bound approval process supported by

a single window clearance mechanism.

Recommendation 9: It wasrecommended to formulate a timebound project approval time frame,reducing repeat efforts.

Recommendation 10: It was alsorecommended to continuallyadvocate the need forrationalization of FSI, Densities andApproval cum, registration costs.Example of states coming up withsuch policies, to be discussed withother State Governments, so as toshare and propagate best practicesacross the country.Recommendation 11: Need forvalue engineering, continuedresearch and development inalternate construction technologies

resulting inreduction inconstructioncosts andproject life cyclewas identifiedand it wasrecommendedto promoteresearch activityin the area

The

discussions highlighted that there exists a

significant untapped potential in the 1300

thousand crores low-income housing

market in India. A typical configuration of

such a housing project was discussed,

wherein the housing units in the price

range of Rs. 3 lakhs to Rs. 10 lakhs would

typically lie at a distance of one hour from

the CBD. The discussion also revealed that

one of the main features a potential buyer

of this segment predominantly seeks is

safety from escalating rentals and

ownership of the unit. Furthermore, the

need for treating land as an inventory and

not as an asset was highlighted along with

more streamlined focus on high volumes, a

model similar to a ‘factory model’.

Recommendation 12: It wasrecommended that there should beenhanced focus on volumes ratherthan the value and margins.

The discussions also highlighted a

need for the amendment of Section 10

under the Income Tax Act. Importance of

rental housing was highlighted and it was

further proposed that income from rental

housing be exempted from income tax.

The discussions laid emphasis on the need

of increasing the deduction limit on home

loans taken. In an effort to promote

affordable housing projects, it was

proposed that long term and short term

capital gains tax should be exempted for

affordable housing projects. The need for

developing big integrated townships that

are exempted from stamp duty was

highlighted.

Recommendation 13: It wasrecommended that the Governmenttake measures to amend Section 10under the IT Act and that incomefrom rental housing be exemptedfrom tax deductions. Also, it wasrecommended that capital gain taxon investments in affordablehousing projects be exempted.

The discussions pointed out the

limited access to housing credits for LIG

segment. This segment of the society is

perceived as high risk by financiers. The

need for risk mitigation, long term funding

and subsidy support was acknowledged.

Additionally, it was highlighted that there

is a need for affordability in both, the

supply of funds and cost of funds.

Recommendation 14: It wasrecommended that measures shouldbe taken to facilitate long termfunding to housing projects cateringto EWS and LIG segments. Also,with Government participation,more confidence is expected to beinfused into such projects, thereby,enhancing the opportunitiesavailable for funding such projects.

Recommendation 15 : Establish -ment of Housing Risk Fund underNHB, separate sub target forcommercial banks for affordablehousing loans, bringing affordablehousing under infrastructuredefinition and exemption of incometax, stamp duty and registration feewere recommended to cover riskand make affordable housingattractive to buyers, builders andinvestors.

Delegates of the Conference


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Mr. Mukesh Mehta, Chairman, M M Consultants Pvt. Ltd,Addressing the Delegates

Mr. Gurudial Singh Sandhu, Principal Secretary UDHLSGGovt. of Rajasthan, Addressing the Delegates

Mr. Sushas Diwase, CEO, PCNTDA, Addressing theDelegates

Mr. S K Singh, Joint Secretary, Housing, GOI,Addressing the Delegates

Mr. Harsvardhan Neotia, MD, Ambuza RealtyDevelopment Limited, Addressing the Delegates

Mr. Aseem Gupta, Municipal Commissioner, NagpurAddressing the Delegates

Mr. Gulam Zia, National Director, Advisory Services,Knight Frank, Addressing the Delegates

Ms Zeenat Niazi, Programme Director, DevelopmentAlternatives, Addressing the Delegates



National Realty Vol. I Issue-III, October-December 2009

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Mr. Subhash Lakhotia, Tax & Investment Consultant,Addressing the Delegates

Mr. Olivier Hassler, Housing Finance Program,Coordinator, World Bank, Addressing the Delegates

Ms. Madhusudan Menon, Chairman, Micro FinanceCorporation, Addressing the Delegates

Mr. Ashish Jindal, Regional Director (North), KnightFrank Presenting Recommendations of Conference

Mr. R V Verma, ED, National Housing Bank, Addressingthe Delegates

MsAshish Karamchandani, CEO, Monitor GroupAddressing the Delegates

Ms. Ashok Kumar Ahuja, Prof. IIT Roorkee, Addressingthe Delegates

11


Macro Economic Review• Various macro economic factors

suggested that the Indian economy has

bounced back. Asia Pacific Mid Year

Market Outlook by Standard and Poor

also indicate that the Indian Economy

has bottomed out and is set for positive

growth in 2010.

• In its recent report on

Macroeconomic and Monetary

Development, the Reserve Bank of India

(RBI) projected the country’s overall

growth rate higher, at 6.5 per cent, for

2009-10.

• Signaling industrial recovery, the core

infrastructure industries expanded at a

faster pace in the quarter ending July

2009 and industrial production grew by

6.8 per cent in July 2009 against 6.4 per

cent in the same month a year ago.

• Total FDI inflows have increased

since May 2009. In July, total FDI inflow

stood at US$3.516 billion, up from

US$2.582 billion in June and US$2.096

billion in May, representing increases of

36 per cent and 23 per cent, respectively,

on month-on-month basis.

• Foreign institutional investors (FII)

were the gross buyers, investing over

US$6 billion between January and July

2009.

• According to the Central Statistical

Organisation, the per capita income of

Indian individuals stood at US$773.54

in 2008-09, which is approximately

US$86.78 more than the previous year.

• After staying negative for continuous

13 weeks, inflation turned positive and

stood at +0.12 per cent at week ended on

5th September, 2009.

• The cumulative export continued to

slip for the 11th month in August

2009 by 19.7 percent India’s

exports slid for the 11th straight

month in August 09 and stood at

14.3 billion USD owing to the

continuing lower global demand

s

CommercialMUMBAI• Over 9.0 million sq ft of Grade ‘A’

office space was available to let in 3Q2009

in Mumbai. Approximately 40 per cent of

thi was new supply, which was

concentrated primarily in LBS, Thane,

BKC and Lower Parel.

• The projects (or parts of the projects)

that were ready for fit-out in 3Q2009

included Crezenzo, Lodha Excellus,

Windsor Annex, Sun Infotech Park,

Corporate Tech Park and 247 IT Park,

developed by Parinee Developers, Lodha

Developers, Windsor Realty, Unwal

Industries, G Corp and HCC, respectively.

• In contrast to the trend over the

previous three quarters, rentals of Grade

‘A’ office space remained stable QoQ in

almost all the micro markets except

Andheri East that witnessed a marginal

decline.

Increase in the number of queries from

investors & end users alike was seen as

evidence of improving economy. While

enquires increased in this quarter, the

conversion rate from query to transaction

remained low. However, the number of

transactions was higher than the previous

two quarters.

• In order to boost the city’s

infrastructure, the Mumbai Metropolitan

Region Development Authority awarded

the contract for the Mumbai Metro II

project (a 32 km elevated rail line between

Charkop to Mankhurd) to a Reliance

Infrastructure consortium. Phase I of the

Metro Project is expected to be operational

by 2010-11.

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PROPERTY MARKET OVERVIEWTHIRD QUARTER 2009 : COLLIERS INTERNATIONAL


DELHI• Delhi’s Grade ‘A’ office market saw

approximately 1.5 million sq ft of available

stock in 3Q2009, concentrated mostly in

Jasola.

• No new supply was added in the city’s

Grade ‘A’ office market in this quarter.

• Following the previous quarter’s trend,

demand for Grade ‘A’ office space

remained sluggish in this quarter and

rentals saw a fall of 7-12 per cent QoQ. The

fall in rentals was highest in the CBD as

many tenants were looking to relocate to

peripheral and suburban micro markets

with lower rentals.

• The rentals in CBD for Grade ‘A’ office

space was in the range of INR 230-300 psf

per month while the rentals in SBD were

in the range of INR 110-170 psf per month.

• The Delhi government has approved a

proposal for Phase III of the metro line and

sanctioned INR 30 million to the DMRC

for preparation of the Detailed Project

Report of Phase III, which will cover

another 120 kms in the National Capital

Region.

• In order to ease the parking problems

in the CBD area, the Government has

started work on an eco-friendly high-tech

parking lot behind Kasturba Gandhi Marg.

• The city infrastructure development is

picking up the speed in the wake of

upcoming Commonwealth Games and two

new flyovers at outer ring road were

opened for public in this quarter.

GURGAON & NOIDAGURGAON

• Grade ‘A’ office supply of approx. 8.0

million sq ft was available in 3Q2009.

Close to 70 per cent of this available supply

was in the form of IT/ITES spaces.

• Of the total available stock more than

25 per cent was contributed by new supply.

In this quarter, there was a considerable

addition of new supply.

• Some of the projects or parts of projects

that were completed, include- Spazedge,

BPTP I-Park, Bestech Cyber Park and Iris

Tech Park developed by Spaze Group,

BPTP, Bestech Group and Trehan

Promotors & Builders respectively.

• Rentals in most of the micro-markets

remained stable QoQ. Capital values

declined in the range of 4-10 per cent over

the same period.

• On NH8 / Udhyog Vihar the rental

and capital values for IT / ITES spaces fell

considerably by over 20 per cent and 9 per

cent respectively over the quarter.

Significant addition of new supply in

3Q2009 and the high vacancy rate in

existing inventory were reasons atributed

to this fall.

• Rentals are stabilizing due to the

improved economic market sentiment.

With this positive outlook, a number of

commercial projects were launched in the

quarter. Some of these projects include

Pioneer Park, Signature Tower II and Spaze

Business Park.

• The work on Gurgaon metro project

led by a consortium of IL&FS and DLF

Metro is likely to start in January 2010. The

project is expected to be operational by

June 2012. The state-of-the-art metro

connectivity will further improve the city’s

infrastructure and give impetus to the real

estate sector in the long run.

NOIDA• The Grade ‘A’ office market of NOIDA

witnessed an available supply of over 4.0

million sq ft in 3Q2009. IT/ITES spaces

contributed more than 80 per cent in this

available supply.

• No significant new Grade ‘A’ supply

was added in the quarter, as the

completion of some of the scheduled

projects was delayed. Uppal Commercial

launched a project in sector-18.Demand

remained stagnant as was evident from the

lower number of transactions.• An increased number of enquiriesregarding the movement from the STPI tothe SEZ were recorded. However theenquiries are yet to translate into actualmovement of companies.

• Capital values in the institutionalsectors fell in the range of 5-8 per centQoQ, primarily due to the significantavailability of stock and poor demand. TheNew Okhla Industrial DevelopmentAuthority, in a recent decision, allowedsupportive commercial activities onindustrial, institutional and educationalland, with certain minimum guidelineswith respect to plot area, abutting roadwidth and others. Banking is included asone of these commercial activities. Thedecision is unlikely to change real estate inthe city.• The scheduled operation of NOIDAmetro line in 3Q2009 is delayed and mightcommence by early next quarter.

CHENNAI• Over 8.5 million sq ft Grade ‘A’ office

inventory was available in 3Q2009. Old

Mahabalipuram Road (OMR), contributed

to more than 50 per cent of this available

inventory.

• More than 95 per cent of the available

supply was contributed by IT/ITES office

space. The Grade ‘A’-non IT space

availability continued to remain limited in

the city.

• An increased number of enquiries for

the movement from STPI to SEZ were

recorded from the IT companies based at

STPIs. However, it was restricted only to

the enquiries.

• The rental and capital values for non IT

spaces remained stable QoQ. A similar

trend was noted for the IT/ITES spaces in

all micro-markets excepting OMR during

the same period.

• OMR witnessed a decline of of 3 per

cent and 5 per cent over a quarter in its

rental and capital values, respectively. A

significant availability of vacant stock and

stagnant IT/ITES demand contributed to

this fall.

• The Tamil Nadu government is

planning to set up a ‘financial city’ near

Chennai through public private

partnership. The proposal is likely to


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attract the BFSI (Banking, Financial

Services & Insurance) sector. The

proposed hub would have state-of-the-art

facilities and infrastructure. It aims for the

balanced growth of all the sectors.

BENGALURU• Approximately 4.0 million sq ft of

Grade ‘A’ office space was available in

3Q2009 in Bengaluru. Of this available

supply, approx 60 per cent was located in

the Outer Ring Road (ORR), EPIP Zone

and Whitefield areas.

• More than 70 per cent of the available

supply was contributed by IT/ITES space,

with almost 40 per cent of this IT/ITES

supply concentrated over the ORR. Prime

projects/parts of projects that were ready

for fit-out in the quarter included the

Bagmane World Technology Centre. City

witnessed the completion of a prime

commercial project after almost six

months.

• Rentals remained stagnant QoQ after a

continual decline over the previous few

quarters. Capital values also showed a

similar trend over a quarter.

• It is reported that a few IT/ITES firms

are planning to set up offices in Bengaluru

(Or expand their office foot prints in the

city) however this is expected to happen

over the medium to long term. Thus, no

significant improvement in demand is

likely to be observed in the near future.

• The Bangalore Metro Rail Corporation

Limited (BMRCL) has almost completed

the land acquisition process for the

Namma Metro. Work on Phase I is taking

place in the city and is expected to be

completed by the end of 2012. The part of

Phase I from M G Road to Byappanahalli

is likely to be completed by the last quarter

of 2010.

PUNE• Over 8.5 million sq ft of office space

was available in 3Q2009. Of this Nagar

Road, Hinjewadi and Hadapsar/fursungi

contributed 63 per cent, 13 per cent and 9

per cent respectively. 95 per cent of the

available space was for IT/ITES office

space usage.

• Some of the projects/phases of the

projects that were ready for fit-out during

3Q2009 include the Embassy Tech Zone

(SEZ), Commerzone B6 and Ganga Silicon

Plaza by the Embassy Group, K Raheja and

the Goel Ganga Group, respectively.

• This quarter registered the launch of

Pride House and Sudev Axis by Pride

Purple Group and Sudev Ventures,

respectively.

• After a continuing decline in rentals

since the 4Q2008, third quarter of 2009

witnessed stable or marginal increase in

these values in most of the micro-markets

barring Nagar Road and Hinjewadi, which

witnessed a decline in the range of 5-6 per

cent QoQ.

• Capital values fell by 1-5 per cent in

most of the sub-markets over the quarter.

The muted demand for properties for sale

and negligible end user investor activity

contributed to this decline.

• Crucial infrastructure development

projects in the city, such as the work on the

proposed international airport near

Chakan, has not yet started. The

implementing agency has not received the

seed capital for land acquisition, despite it

having been approved by the State cabinet

six months ago. In addition, the proposed

bus rapid transit system (BRTS) along the

Pune-Mumbai highway in Pimpri-

Chinchwad has been delayed.

KOLKATA• Kolkata Grade ’A’ office market

witnessed an addition of approx. 1.0

million sq ft of new supply in 3Q2009. A

few of the projects/parts of projects

completed in the quarter were DLF-IT

Park-II and Infinium DigiSpace, developed

by DLF and Bhimrajka Impex Limited.

• Most of the scheduled projects/phases

of projects were delayed and are expected

to see their completion in the next quarter.

The third quarter did not register the

launch of any new significant Grade ‘A’

office project.

• Rental and capital values remained

under pressure due to muted demand. In

addition, new supply augmentation and

the existing significant vacant stock have

led to further corrections in rental and

capital values in this quarter.

• Rental and capital values declined by 3-

10 per cent and 5-15 per cent, respectively,

across all the micro markets on a QoQ

basis. The largest fall was observed in Salt

Lake and Rajarhat.

• A key IT Township project, involving

companies like Infosys and Wipro, was

cancelled due to the land acquisition

problems.

• The metro extension from Tollygunj to

Garia became operational in 3Q2009. Apart

from this, the work on East-West Metro has

also started and the work on modernization

of the airport is also in full swing.

ResidentialMUMBAI• 3Q2009 witnessed completion of two

premium residential projects namely

Atlantis and Grandeur by K Raheja

Universal and Lodha Group respectively.

• In mid housing segment a number of

projects were completed primarily in

Bandra and Tardeo. With the

commencement of Bandra Worli Sea Link,

the prices in areas abutting Bandra is

expected to rise in the near to medium

term. Capital values for premium

properties remained stable QoQ with the

exception of a few micro-markets, like

Worli, Bandra, Powai and Santacruz which

saw a marginal increase. Colaba and Cuffe

Parade saw a minor decline. Rentals in

most of the areas rose marginally due to

improved market sentiments.

• The Government is expected to

increase the FSI for the redevelopment of

cessed buildings from 2.5 to 3.

• A number of cluster redevelopment

projects are awaiting approval from

Maharashtra Housing and Development

Authority. These projects are likely to gain


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impetus with the rejuvenation in demand.

• After the completion of Bandra Worli

Sea Link, the other awaited infrastructure

development projects are Mumbai Metro

and the Santacruz-Chembur link road. The

work on phase I of the metro project is

scheduled to complete by 2010-11. Funding

for the second phase has been released by

the state government and the project has

been awarded to a Reliance Infrastructure

led consortium.

DELHI• Unlike previous quarter, Delhi

witnessed both the completion and launch

of a number of redevelopment projects in

areas, such as Shanti Niketan, Sarvodaya

Enclave, Vasant Vihar, Sukhdev Vihar and

Greater Kailash area, among others. DLF

launched the second phase of its Capital

Green Project in West Delhi. The price of

the apartment in phase II was

approximately 30 percent more than the

phase I price. Interestingly, the developer

claimed that it managed to book the entire

second phase of the project within the two

hours of opening of booking.

• 3Q2009 witnessed increase in the

number of premium

esidential transactions. However,

rentals declined in the range of 10-20

percent, as owners who were holding their

properties in expectation of higher rentals

have started negotiating and renting them

at lower rentals.

• In contrast to the rental trends, capital

values for premium residential properties

remained stable across most of the micro

markets QoQ.

• In an important decision, the Supreme

Court has ruled that tenants will be liable

to eviction if they make a “Second default”

in the payment of rent. The court

amended Section 27 of the Rent Control

Act, in which the tenant must deposit the

rent stipulated to the Additional Rent

Controller’s court, after refusal by the

landlord and, having not done so, he is

liable to be evicted,”

With the Commonwealth Games

approaching fast, the city is expected to see

completion of a number of infrastructure

projects in the next two or three quarters.

Emaar MGF is expected to complete few

flats by the end of the October 2009 in the

Commonwealth Games Village project for

a dry run of the fit-outs and operations.

GURGAON & NOIDA• In Gurgaon, some of the projects launched in

3Q2009 include Emerald Hills, Sun Breeze,

Grand Arch and Sovereign by Emaar MGF,

Unitech, IREO and Vatika respectively. A

number of under construction projects were

either put on hold or being constructed at a very

slow pace.

• In Noida, the projects launched in this

quarter include Lotus Boulevard Espacia,

Kosmos Heights, Unihomes and Home

121 by 3C, Jaypee Greens, Unitech and

Gardenia India Pvt. Ltd. All these projects

were launched in the affordable segment in

a price range of INR 2,100-3,500 per sq ft.

• Gurgaon rental market continue to

show decline in rentals in the range of 5-10

per cent QoQ. Capital values, however,

remained stagnant over the quarter. In

Noida, rental and capital values remained

stagnant QoQ across most of the micro-

markets.

• The Haryana government has amended

the norms in its low-cost housing policy

and fixed the price cap for low cost houses.

• Noida can be considered as affordable

in comparison to Gurgaon and Delhi in

terms of capital as well as rental values. The

capital values in the city were in the range

of INR 3,500 - 11,000 per sq ft and the

rentals were in the range of INR 10-20 per

sq ft per month in 3Q2009.

• Raisina Residency in Gurgaon became

the country’s first gold-rated green

residential project, rated by the Indian

Green Building Council (IGBC). On the

similar lines, Lotus Boulevard in Noida has

also registered for the green certification

showing the emerging green trend in

residential projects in NCR.

CHENNAI• In the Premium segment, there has

been an increased demand for beach

houses located on East Coast Rd. over the

apartments as they are available for almost

similar rental while providing more open

space, greenery and pools. Rentals for

premium properties remained stagnant

QoQ while the capital values in most of

the prime locations fell by 2-5 per cent

during the same period. There were more

lease transactions in 3Q2009, as compared

to the previous two quarters. This is

attributed to the increase in demand from

expatriates.

• Chennai is steadily observing an

increased trend towards the affordable

housing projects, which is evident from the

continual launch of projects in this

segment. However, demand for ‘ready-to-

occupy apartments’ is more as compared to

the new projects.

• To give impetus to the affordable

housing in Chennai the state government

has announced incentives in terms of

greater FSI for these projects.

• The state government has proposed to

invest over INR 7,500 crore in making

Chennai and other important towns of

state, “free of slums”.

• Taking a cue from the commercial

projects, there is an increased trend

amongst developers in Chennai to develop

green certified residential projects. In 2009

a number of projects such as Mahindera

Aquapolis(Aqualily), Shem Park, Amana

Enclave, Olympia Opaline and Green

Home have registered for green

certification.

BENGALURU• Projects launched in 3Q2009 includedWelworth City, Indus, Casa Gopalan and CSCBoulevard, CSC Belva & CSC Rhythmlaunched by Provident Housing, Century RealEstate Holdings, Gopalan Enterprises and CSCRealty respectively. All of these projects can becategorized under the affordable segment with



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the target segment of mid-income group. Theseprojects were spread across the city.• Rentals in the premium housingsegment declined in the range of 6-10 percent QoQ in the prime localities such asCentral, Jaya Nagar, Palace Orchard, WhiteField and Bannerghatta Road; while itremained stable in other micro marketslike Cooke Town, Airport Road and IndiraNagar. This was attributed to the weakdemand. Capital values in nearly all micro-markets remained stable.

• Increased interest towards the mid-

segment housing was observed and the

number of sale transactions under this

segment witnessed a rise in the quarter as

compared to the previous quarter. The low

realty prices and drop in the interest rates

accounted for this increased activity.

• Some developers redesigned their

previously launched projects in order to

cater to the mid-segment. Many other local

developers are expected to follow the suit.

Developers are adopting innovative

techniques in design and construction to

reduce project cost to make it affordable.

• With the on-going infrastructure

development projects taking place across

the city such as elevated expressway

between Central Silk Board junction and

Electronic City, widening of the Old

Madras Road and a number of other under

contrition bridges and flyovers are

expected to improve the traffic conditions

and accessibility to various areas.

KOLKATA• During the third quarter of the year 2009,

Kolkata witnessed completion of various

projects/parts of projects, such as Genexx

Valley, Rishi Enclave, Saket Nagar, Akshara

Pearl, Purti Flowers (Phase-I), Merlin

Emerald, Eden Habitat, Eden Daffodil, Eden

Elegance and Edan Woods, developed by

Paharpur Cooling Towers, Swarna

Infrastructure, Saket Group, Akshara Group,

Paansari Group, Marlin Group and Eden

Group, respectively. This supply was primarily

concentrated in north and south-west

Kolkata.

• A number of projects, such as Saltee Spacio,

Ujjas-The Condoville, 4 Sight Model Town,

Uniworld Vistas and Unitech Unihomes by

Saltee Group, Ambuja Realty, Ganguly Group

and Unitech Group, were launched during

3Q2009.

• The rental and capital values for premium

properties remained stable in almost all the

micro markets.

• The Areas of south-west Kolkata, such as

Rajarhat and Alipore, have witnessed a

downward movement in the range of 2-6 percent

in both rentals and capital values. This is

primarily because of the large available supply

and infrastructure issues.

• The much awaited infrastructure project of

Metro extension from Tollygunj to Garia

becomes operational in 3Q2009. The project

was on hold due to legal issues on land and

demolition of built-up properties lying under the

proposed elevated track. The project will improve

the connectivity of the southern residential area

from other parts of the city.

COMMERCIAL UBMARKETS

Mumbai

The major business locations in Mumbai

are the CBD (Nariman Point, Fort and

Ballard Estate), Central Mumbai (Worli,

Lower Parel and Parel), Bandra Kurla

Complex (BKC) and Andheri Kurla

stretch. Powai, Malad and Vashi are the

preferred IT/ITES destinations, while

Airoli at Navi Mumbai and Lal Bahadur

Shastri Marg are emerging as new office

and IT/ITES sub- markets.

Delhi

The commercial areas in New Delhi

metropolitan area can be broadly classified

into the CBD (Connaught Place), SBD

Nehru Place, Bhikaji Cama Place, Netaji

Subhash Place, Jasola and Saket .

Gurgaon

The prime business locations in Gurgaon

are MG Road, Golf Course Road, Cyber

City and Udhyog Vihar. Manesar on the

outskirts of Gurgaon is also emerging as

the city’s new office destination.

Noida

Noida market is comprised of sectors

broadly classified as institutional,

industrial and commercial sectors.

Institutional sectors include sec 16A, 62

and 125-142, industrial sectors include sec

1-9, 57-60 and 63- 65 while sector 18 is the

most developed commercial sector.

Chennai

Prime office properties in Chennai are located in

four principal sub-markets: the CBD, the IT

Corridor, the SBD and the PBD. The SBD

comprises Guindy, Manapakkam, Velachery and

other areas. The PBD primarily includes

Ambattur and GST Road, while the IT Corridor

is the Old Mahaballipuram Road (OMR) in

south Chennai.

Bengaluru

Prime office properties in Bengaluru can

be divided into three principal sub-

market— CBD, the SBD consisting of

Banerghatta Road & Outer Ring Road

(ORR) and PBD including Hosur Road,

EPIP Zone, Electronic City and

Whilefield.

Pune

The prime office sub-markets of Pune

include Deccan Gymkhana, Senapati

Bapat Road & Camp (SBD), while the

PBD includes Aundh, Bund Garden,

Airport Road and Kalyani Nagar, among

other locations. The eastern corridor,

along with Nagar Road and Kharadi, have

emerged as a preferred location for

financial and IT/ITES companies.

Kolkata

The major business locations in Kolkata

are CBD (Park Street, Camac Street, AJC

Bose Rd, Chowranghee Rd), Ballygunge

circular Rd, East Kolkata and PBD (New

Town & Rajarhat). The area around Park

Street, Camac Street and AJC Bose road

houses a number of high-rises commercial

buildings such as Chatterjee International

Centre, Tata Centre, Everest House and

Industry House among others.


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RESIDENTIAL UBMARKETSMumbaiThe high-end residential real estate

markets in Mumbai include Malabar Hill,

Altamount Road, Carmichael Road,

Napean Sea Road, Breach Candy, Colaba,

Cuffe Parade, Prabhadevi, Worli, Bandra,

Khar, Santacruz, Juhu and Powai.

DelhiThe prime residential areas in Delhi are in

the South region and comprise Vasant

Vihar, Westend, Shanti Niketan, Anand

Niketan and Central Delhi locations.

These areas enjoy proximity to embassies,

the airport and central commercial areas

Connaught Place.

GurgaonThe prime residential locations of Gurgaon

include Golf Course Road, DLF Phase I,

Sushant Lok and Sohna Road. The Delhi- Jaipur

Highway (NH-8) is also emerging as a preferred

residential location owing to its proximity to the

national capital.

NoidaNoida premium residential market is

comprised of sectors 44, 50, 92, 61,62,63 ,

28, 29,, 30 and Taj Express Highway.

ChennaiThe prime residential areas in Chennai

include Thiruvanmiyur, Valmiki Nagar

and Besant Nagar, R.A Puram, Mylapore

and Adyar in South Chennai,

Nungambakkam, Chetpet, Poes Garden,

Egmore, Alwarpet, T. Nagar in Central

Chennai; and Anna Nagar, Kilpauk in

North West Chennai.

BengaluruThe residential market of Bengaluru

comprises both apartments and

independent residences. Currently, high-

end residential developments are mainly

concentrated along the CBD, and Eastern

and South precincts of the city. Recently,

Northern Bengaluru has also witnessed a

spree of realty activity facilitated by the new

International Airport at Devanhalli.

KolkataThe prime residential areas in Kolkata include

PA Shah Road, Tollygunge and Bhawanipur in

South Kolkata, Alipore and Behala in South-west

Kolkata, Loudon Street and Ballygunge in

Central Kolkata; and Salt Lake, EM Bypass and

VIP Road in North Kolkata.

INTERNATIONAL FINANCIALREPORTING STANDARDS(IFRS) FOR REAL ESTATEThe International Accounting Standards

Board (IASB) is an independent body that

sets accounting standards. IASB’s objective

is to develop a uniform set of high-quality,

understandable and enforceable accounting

standards to help participants in the world’s

capital markets and other users make

economic decisions. This promotes the

standardized use of International Financial

Reporting Standards (IFRS) around the

world.

Why IFRS?At present, different countries prepare

their financial statements according to

local accounting standards. These

standards may differ in the recognition and

treatment of assets, liabilities, income and

expenditure, giving rise to differences in

the presentation of accounts by companies

in different countries. These gaps widen

further due to the social, economic and

legal factors prevalent in each country.

The IFRS provide standardised global

accounting principles that will mitigate

these gaps, and enable the comparison of

financial statements, reduce information

asymmetry and increase audit efficiency. In

over 100 countries, such as those in the

European Union, and Australia, New

Zealand and Russia, use of the IFRS

accounting standards is either mandatory

or optional. Countries such as China and

Canada have announced the adaption of

IFRS from 2008 and 2011 on, respectively.

AdvantagesThe advantages of adopting the IFRS are

manifold.

Economy: The IFRS will increase growthof international business, lead to efficient

capital markets and increase capital

formation.

Investors: Use of the IFRS for financial

reporting will result in improved investor

confidence and greater foreign capital

flows.

Industry: Companies will be able to raise

capital from foreign markets at a lower

cost, which will further help multinational

corporations to consolidate their global

accounts.

IndiaIndia has decided to adopt the IFRS from

March 31, 2011. This will require

companies to convert accounting

information to the IFRS in their reporting

on March 31, 2010 in order to facilitate the

creation of comparative financial

statements.

The Institute of Chartered Accountants of

India (ICAI) has made it mandatory for

Level-1 enterprises to adopt the IFRS.

Level-1companies will include those:

(i) whose equity or debt securities are

listed, or are in the process of being

listed, on any stock exchange,

whether within or outside India; or

(ii) which are a bank (including a

cooperative bank), financial

institution, a mutual fund or an

insurance entity; or

(iii) whose turnover (excluding other

income) exceeds INR100 crore in

the immediately preceding

accounting year; or

(iv) which have public deposits and/or

loans from banks and financial

institutions in excess of INR25 crore



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at any time during the immediately

preceding accounting year; or

(v) which are a holding or a subsidiary

of an entity that is covered in (i) to

(iv) above.

Fair ValueThe IFRS gives companies an opportunity

to report their real estate assets based on

fair value rather than historic cost. The

concept of fair value measurement in the

IFRS is more significant than in the Indian

GAAP. The IFRS requires that fair value is

reported either directly on the balance

sheet and statement of earnings or, at a

minimum, in the notes to the financial

statements.

In a recent directive, the RBI has asked all

banks in India to choose the fair value

model when adopting the IFRS.

Real Estate and the IFRSCompanies will be required to

report/disclose valuation of real estate

assets periodically if they come under the

purview of the following standards:

IAS 16 - Property, Plant & Equipment will

require companies (irrespective of their

industry) to report real estate assets used by

their business and operations based on fair

value or at historic cost.

IAS 17 - Leases will require companies to

value leased assets for reporting purposes,

including assets leased out, or any

commercial, industrial or residential

properties taken on lease for business

operations.

IAS 40 - Investment Property requires

companies to value their properties at fair

value if they have invested in them for

either capital appreciation or to generate

rental income. Even if companies chose to

report values at historic cost under IAS 40,

they need to disclose fair value in the notes

to the accounts.

IAS 2 – Inventories will be applicable to

real estate developers in order to value

their stock in trade.

Other relevant standards, such as IAS 11

(Construction Contracts), IAS 36

(Impairment of Assets), IFRS 3 (Business

Combinations) and IFRS 5 (Non-Current

Assets), will be applicable to specific

industries or transactions.

Depending on the type of company; the

nature of the real estate; and the level of

reporting decisions concluded, the IFRS

requires the determination of the fair value

of property in each reporting period.

Valuation IssuesThe definition of “fair value” is still being

contested and property appraisers differ

markedly in their views. The IASB realised

this issue in good time and has already

published a draft IFRS on Fair Value

Measurement that attempts to define fair

value in detail and provide the relevant

disclosures required for fair value reporting.

In India, property leases may be complicated,

with a limited period lease or a perpetuity

leas: a government or a private lease; a sub

lease; or special leases, such as on cantonment

land. These complicated transactions will

need to be reported at fair value, which may

not be an easy task given the limited

information available in the public domain.

Real Estate ValuersReal Estate Valuers will play a critical role in the

IFRS transition process. Our IFRS experience

in Europe shows us that over 70% of real estate

companies have chosen to report based on fair

value. The valuers will provide clients with all

the necessary information and reporting

documentations required for the IFRS. They

will further assist clients in making a decision

on the most appropriate level of reporting,

depending on their business and industry. The

valuers will assume the additional

responsibility of responding to any queries

from company’s auditors on the fair values

reached and their reporting

.

ImpactThe advent of the IFRS in India will have

significant implications for accounting

statements as it will impact the basis for

recognising revenues, evaluate multiple element

contracts and barter transactions, and allow the

use of fair value to measure assets.

The IFRS will be applicable retrospectively

to the inception of the company, although

exceptions are provided in specified areas.

This poses a huge challenge in accounting

for property, plant and equipment,

especially in the case of capital intensive

entities. Fair value is an important and

complex concept in accounting. Fair value

determination requires market knowledge,

experience and professional judgement.

The process thus calls for the active

involvement of a qualified valuer in

determining the fair value.

Colliers International’s IFRS Valuation

Practice applies the IFRS Fair Value

Standards aligned with the guidelines

created by the International Valuation

Standards (IVS) and Royal Institute of

Chartered Surveyors (RICS), in

conjunction with the most relevant market

data collected through in-depth market

research. Our international knowledge

platform, coupled with our nationwide

experience, ensures that we provide the

best level of financial reporting required

under the IFRS.


CMYK

CMYK

AbstractIndia’s economy is one of the

strongest economies in the world with an

ability to sustain this strength. Increasing

economic strength has led to increased

business activity. The suburban locations

are experiencing a much faster rate of

developmental activities and easier

availability of large pieces of land,

construction of larger floor plates offer

built-to suit facilities. Over 500 million

people are expected to live in urban India

by 2020. This will lead to development of

more cities and townships. 40-50% of the

capital expenditure is through

construction-related activities and the

construction industry is the second largest

employer in India.

Considering the changing

demographics, lower interest rate regime,

rising disposable Incomes and fiscal

incentives have made housing an attractive

option. Further, Nuclearisation of Indian

families and the growing middle class have

accelerated the Demand for mortgages and

for fresh housing. Assuming that 25% of

the workforce joining the IT/ITES sectors

requires their own independent housing,

there will be a demand for about 20m

square feet per annum of residential

development to meet the needs of

workforce joining this sector with higher

income levels. The urban housing sector is

expected to require investments of USD

25bn over the next 5 yrs. The real estate

boom has gradually percolated from the

big metros to tier-II cities. According to

Eleventh Five year plan and National

Housing Bank (NHB), there is a

requirement of about 28 million housing

units and the requirement will further

continue to increase in future.

IntroductionIn next decade, Indian real estate

landscape is expected to be dotted with

SEZs, international standard warehouses

and specialized industrial spaces. Large

integrated developments can

become a norm among the working

population. The Indian Property Market is

fast going through a learning-curve. Rising

interest rates have impacted the credit

availability to the sector, global economic

conditions seem to have subdued the

demand from investors and occupier’s

alike, Indian real estate stocks are down by

more than 50 percent from their yearlong

high and the once soaring real estate values

Dr. Indrasen SinghDean, NICMAR, Goa

19


appear to be plunging. This, no doubt is

the reality. Nonetheless, it is hoped that

this is a transitory phase and the picture

that would emerge once the churn is over

will be an embodiment of performances

that is bound to happen as the sector

continues as the sector to move along a

high growth curve.

The economic liberalization in the

1990s and the ensuring information

technology revolution have been

instrumental in giving the real estate

market its present form. MNCs-led

demand for quality office space resulted in

modern buildings springing up in new

suburban location. Increased job creation

and rising disposable incomes coupled

with lower interest on housing loans, had

in turn fuelled demand and affordability

for residential space. The change in

attitude and the spending habits of the

consumers led to an increase in

consumption and demand for retail malls.

Relaxing the FDI regulations for the

real estate sector opened the floodgates for

foreign capital inflow into realty sector.

The much-required capital in the last few

years has facilitated widespread

development of residential, office, retail

and hotel space in the country. It has also

been instrumental in organizing the

market to a large extent and bringing it

closer to real estate markets in other

developing countries around the world.

We are excited about these developments

as the growth that we witness today is a sign

of the emerging far-reaching and long-term

trends that will drive robust growth for the

sector in the years to come.

Foremost would be the

institutionalization of the sector and the

definite change in the ownership structure.

Instead of individuals, private equity

funds, hedge funds, REIT funds, insurance

companies, pension funds, banks and

other financial institutions would own,

invest or manage real estate assets in

office, residential, hotels, industrial, retail

space etc. Public sector organizations like

Life Insurance Corporation of India, UTI,

and Public Provident Fund, other pension

funds of central and state hopefully

become active investors in the real estate

industry.

This will also lead to sophistication in

the financial structuring of real estate

investments. They will provide access to

capital, both debt and equity capital from

public and private sources. Part from

offering an exit route for the developers to

revolve funds and improve their margins,

REITs will also allow individuals investors

to be a part of the real estate market.

On the product side, there will be

advancement in construction management

and project management techniques in

order to optimize costs, meet construction

timelines and achieve environmental and

health safety guidelines, intelligent, energy

efficient green buildings will become the

norm of the day. Property and facilities

management services will also undergo a

facelift. The provision of a good working

and living environment as well as the

enhancement of the asset lifespan will be

key considerations and these services will

be outsourced much more to firms

specializing in these functions.

Real estate activity will become more

widespread and will take many smaller

towns and cities in its fold. Improved

infrastructure, the potential of untapped

markets, increased access to capital

together with the saturation and spiraling

cost of metros will play a vital role in

promoting new growth centers.

Infrastructural projects including roads,

airports, ports and inter-city connectivity

will witness increased private sector

participating and evolve as real estate play.

This will significantly augment the

availability as well as the quality of these

services in the country.

Rental housing as well as rented office

space can become common as corporate

entities will look at reducing their fixed

asset liabilities, change in ownership

structure would also bring in standardized,

accepted practices for property valuations.

Property transactions will become easier

due to availability of research data,

computerized land records and simpler

processes for transfer of land titles and

taxation. Hopefully, all these would be the

prerequisites for evolving transparency and

uniformity in the market. After witnessing

periodic highs and lows, the interest rates

and real estate process will undergo a

rationalization and will finally be market

driven. The above listed trends are some

key real estate events that are most likely to

take shape in next decade.

Government PolicesAs India continues its scorching pace

of economic growth, many sectors that

were not historically favored by the

government are gaining prominence. One

such sector is real estate, which has a large

employment generation potential and is a

significant source of tax revenue.

Additionally, this sector has attracted a

large amount of foreign investment in

recent times. Therefore, the government is

doing well to address the many

complexities and ambiguities on the

indirect tax front that the sector is facing.

Historically, the key indirect taxes that

applied on the construction and real estate

were works contract tax (now VAT) and

stamp duty. With the expanding service tax

net, various construction activities have

been brought within the service tax net,

notable among them being construction of

commercial and residential complexes and

renting of immovable property, moreover

service tax on works contract was

introduced in the last budget.

However, the amount of works

contract tax payable, under both service

tax and VAT, is anything but clear. The

Supreme Court, in K Raheja development

Corporation’s case in 2006, held that is a

developer enters into a contract for sale of

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a residential apartment before

construction is completed, it would be a

works contract. If the agreement is entered

into after the flat or unit is already

constructed, this would be an agreement

for sale of immovable property and not a

works contract. Broadly, this was based on

the reasoning that an agreement to sell a

flat that is under construction is an

agreement to construct a flat for the

eventual buyer of the flat. An agreement to

construct a building/ apartment is a works

contract. Although this judgment was in

the context of the definition of the term

‘works contract’ under the Karnataka sales

Tax Act, the service tax authorities were

quick to adopt the ratio and demand

service tax on the labor portion of the

‘works contract.’

Sales of flats would anyway attract

stamp duty and registration charges, which

typically aggregate to 10% of the sale

considerations. Before the Raheja case, the

consideration passing from the buyer of a

flat to the developer did not attract VAT or

service tax. The Raheja decision deems this

sale agreement to be a works contract if the

flat is under construction.

If the principle in the Raheja case is

uniformly applied to all new apartments

that are constructed, there could be an

additional 8% (4% due to VAT and 4%

due to service tax) impact on the difference

between the cost of construction and the

sale price of the flats? This is a huge

burden that would be passed on to the

prospective purchasers of flats, sharply

increasing the cost of purchase.

To ensure a steady cash flow and

reduce financing costs during

construction, all flats are sold while they

are under construction. Therefore, this

burden would fall on every new flat that is

constructed. Further, the VAT authorities

can demand back taxes for many years,

limited only by the period of limitation

prescribed under the respective states’ sales

tax laws. The magnitude of the potential

tax liability is quite staggering.

However, is an agreement for sale of a

flat that is under construction really an

agreement for construction of a flat? Or is

it simply a financing arrangement, whereby

the purchaser books a flat while it is under

construction by the developer for himself

as an entrepreneurial venture rather than

on behalf of and under instructions from

the buyer.

The gap in consideration between

what the developer pays to the contractor

(which is admittedly a works contract) and

what the purchaser pays to the developer is

clearly attributable to the value of land and

the profit for the entrepreneurial risk taken

by the developer.

If this amount is subject to up to an

8% additional tax, by considering this to

be a works contract, it could almost finish

off this industry just as it is about to take

off? The sector is facing other disputes on

taxability of lease rentals and credit

available for inputs against service tax

liability on lease rentals, but these are

trivial as compared to the main issue on

works contracts but also needs

clarification.

It seems that this industry is too

important for the government to take a

view that such issues should be left to the

industry to sort out through recourse to

litigation. Therefore, if the government

takes a holistic view of the tax burden on

this industry, it can enact appropriate

measures to make the tax burden

moderate, clear and easy to determine.

Investment in Realty - AtractiveOption for NRI’s

At a time when the global financial

crisis is impacting the real estate sector

across the globe, NRIs are invariably in a

dilemma about where to put their money in

real estate. The local accommodation laws

in countries like Dubai have compelled

thousands of expatriate Indians to send

their families back home due to soaring

housing costs. This is why it makes sense for

expatriate Indians abroad to invest in

Indian real estate to meet any

contingencies. Barring Dubai, west Asia

does not encourage expatriate investments

in housing. Anyway, not all NRIs can afford

to invest in local housing. There are

different kinds for one group may or may

not fit into the investment category for

others. However, a cursory glance at the

options will enable them to take a

pragmatic approach to the investment

exercise.

The government regulations prohibit

investments in categories like agricultural

land, farmland/farmhouse and plantation

properties. Those who have inherited such

property from relative can retain them. But

to dispose them off, one needs to follow

certain ground rules laid down by the

authorities. For NRI end users who are

planning to eventually return home,

investments in residential property would

be the best option.

As NRIs have been accustomed to

living in places with good infrastructure

facilities, investments in housing should be

in cities which have educational, health

and reemployment opportunities. NRIs

could plan well to invest in Greenfield

projects which will reduce upfront

payment liability. Home loans are available

and banks have branched out to several

countries to extend facilities to NRIs.

With FDI in real estate, a number of

integrated townships will dot the skyline in

major cities. The entry of global realtors

will herald a new era in housing with the

introduction of global standards,

integrating facilities like school, mall,

multiplex, office etc within the same

complex. Returning NRIs who looking for

lifestyle projects should consider

investments in such options. An

investment in developed plots is yet

another option for those seeking medium

to long term options. Land value

appreciates much faster than apartments in


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Indian cities. Those NRIs who are looking

for investments purely as an investment

option will consider peripheral or

suburban areas where potential for land

price appreciation is higher.

Government of India-GuidelinesOne of the reasons often given for the real

estate sector not really picking up has be

paucity of fund flow into the sector. Real

estate business in India has by and large

remained in the unorganized sector and

thereby, has attracted little corporate

funding. Few efforts have been made to

streamline the sector and its financial

environment. One of the recent

developments however appears to be a

major shot in the arm for the real estate

sector. The decision of the Government of

India to permit foreign direct investment

(FDI), a long pending issue, has been

viewed by many as the much needed

medicine to bring about a competitive

environment in the sector, thereby forcing

smaller and unorganized players to move

out and make way for more professionally

and globally sound players to do the

production.

The Government of India, through

the Ministry of Commerce and Industry,

has stipulated the following guidelines for

FDI in the real estate sector:

1. The foreign company intending to

invest shall be registered as an Indian

company under the Companies Act of

1956 and will henceforth be allowed to

take up land assembly and its

development as a part of integrated

township development. All such cases

would be processed by the FIPB on the

recommendations of the Ministry of

Urban Development and other

concerned Ministries and

departments.

2. The core business of the company

seeking to make investment should be

integrated township development with

a record of successful execution of such

projects elsewhere.

3. The minimum area to be developed by

such a company should be 25 acres for

which norms and standards are to be

followed as per the local byelaws. In

the absence of such rules, a minimum

of two thousand dwelling units for

about ten thousand population will

need to be developed by the investor.

4. The investing foreign company should

achieve clear milestone once their

proposal has been approved.

5. The minimum capitalization norm

shall be US $ 10 million for a wholly

owned subsidiary and US $ 5 million

for joint ventures with Indian partners.

The funds would have to be brought in

upfront.

6. A minimum lock in period of three

years from completion of minimum

capitalization shall apply before

repatriation of original investment is

permitted.

7. A minimum of 50 percent of the

integrated project development must

be completed within a period of five

years from the date of possession of the

first piece of land. However, if the

investor intends to exit earlier due to

reasons beyond his control, it shall be

decided by the FIPB on a case to case

basis.

8. Conditions regarding the use of land

for commercial purposes, development

charges, external development charges

and other charges as laid down in the

Master Plan, byelaws, etc., preparation

of layout and building plans,

development of internal and

peripheral development, development

of other infrastructural facilities, etc.

shall be the responsibility of the

investor as per the planning norms and

standards on similar lines as those

applicable to local investors.

9. In the absence of such standards and

norms, every state government may

decide their own conditions for which

the UDPFI Guidelines may serve as a

guiding principle.

10. Land with assembled area for

peripheral services such as police

stations, milk booths, will be handed

over free of cost to the government or

local authority as the case may be.

11. The developer will retain the lands for

community services such as schools,

shopping, community centers, ration

shops, hospitals, etc. these services

shall be developed by the developer

himself and shall be mad operational

before the houses are occupied.

12. The developer after properly

developing playgrounds, parks, etc.

shall make it available to the local

bodies free of cost.

13. The developer will ensure compliance

of all norms and standards as

applicable under local laws.

14. For companies investing in SEZ, FIPB

may accord exemption to any of the

above mentioned conditions on a case

to case basis.

The New GatewayThe Indian real sector has witnessed a

revolution, driven by the booming

economy, favorable demographics and

liberalized foreign direct investment (FDI)

regime. Growing at a remarkable 30

percent, it has emerged as one of the most

appealing investment areas for both

domestic and foreign investors.

After going through various aspects of

Indian Real Estate we can conclude the

following:

• A positive outlook for FDI inflows

into Indian Real Estate sector –

favorable investment decision.

• Reforms formulated for providing a

well regulated business environment.

•Strategies for the investment

promotion agency to attract more

FDI into real estate sector.

•Entry strategies for the foreign

investors for a successful venture into

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Indian market.

Indian real estate market is growing

and it is in transition. As it moves towards

transparency it also moves towards large-

scale developments that are more leveraged.

In the past, most developers in Indian

usually have raised equity for projects from

a large number of small investors including

wealthy individuals, business people,

family, and friends. This has limited the

ability of some developers to raise the

capital required to scale up to larger

projects or build more projects and has

resulted in fragmented and untitled real

estate. But with the opening of the Indian

Real Estate market to the international

investors, the scenario has changed.

Partnerships with foreign developers

and investors will give local developers

access to substantial equity capital. Foreign

developers also bring other benefits to the

partnership including advanced

technology, global experience in project

management, and a knowledge of global

best practices in development that can be

applied to developing projects in India.

Once they have experience with joint

ventures in India, some foreign investors

may begin to develop projects on their own,

enter into long term partnerships with local

developers to build multiple projects, or

acquire interests in the businesses of local

developers. As with any investment, in any

country, foreign developers and investors

interested in India should conduct

thorough due diligence.

In contrast with some countries where

real estate markets have experienced over

supply, India offers the opportunity to

invest in ground-up development in a

number of geographic markets and across a

broad range of product types. Developers

are delivering a more efficient and better

class of building than they were just five

years ago and at a more affordable cost.

The key drivers to Indian Real Estate

are the IT/ITEs sector, BPO sector,

Commercial sector and Hospitality sector.

The Retail sector is expected to be the next

big driver to the real estate sector.

The implications of this boom that is

riding through the India markets are as

employment generation; closing of gap

between the demand and supply of

housing stock, increase investments,

capital formation, contribution to the

GDP, etc.

Though the picture looks very rosy

and attractive, the Indian Government has

a lot of issues to be addressed if they want

to be catalysts to the boom that is coming

its way. Thus it is in the best interest of the

nation and its citizens that the following

Real Estate Issues are addressed and

Solutions to the same be assimilated. They

are as follows;

Urban Land Ceiling Regulation(ULCRA)

The central government has repealed

this archaic law in 1999/2000, but the

state governments have not followed the

lead. Some states like Punjab, UP, MP,

Rajasthan, Gujarat and Haryana have

repealed this act. States like Maharashtra,

Karnataka, Kerala and Orissa are yet to act

on it. In fact, Maharashtra wants to repeal

ULCRA and enact another one of its own.

This law has been a failure and this is the

right time to act on it and to release more

land into the market. This will definitely

lower and price of land, which accounts for

about 50% of the price of the real estate

property in India, unlike the developed

countries, where it is much less.

Clear Title90% of all the lands in India do not

have clear titles. The ownership is unclear

and hence, the land is off the market,

thereby creating a scarcity of land. This is

due to poor record keeping and

complicated outdated processes. All this

must be revamped and bought into the

21st century. All updated records must be

computerized to increase transparency in

land ownership. And special fast track

courts must be set up to clear all legal land

disputes in a short period of time, so that

titles become clear for the buyers. This will

open up revenues for financing and

investment for development and lower the

overall cost of projects.

Stamp Duty & EgistrationThe cost of transferring land titles

must be reduced from 10+% stamp duties

to reasonable level of 3 to 5%; similar to

prevailing rates in developed countries.

This will encourage sellers to pay the lower

stamp duties, instead of trying to cheat the

government of the stamp and registration

cost. The government collections will also

increase due to this lower rate of stamp

duty and wider collection base. The high

duties have also encouraged unaccounted

money being used in most real estate

transactions in India. The registration

procedure should also be made transparent

and simple, so that changes/deletions and

corruption are minimized. Some states have

realized that lower rates of stamp duties will

translate into increased revenues from

registration of land comments, and have

planned and acted accordingly.

Rental LawObsolete tenancy and rental control

laws keep a large part of the urban

properties off the market. The rental laws

must be revised to protect the owner and

his/her property from the tenant. Allow

the termination of old tenancies, remove

restrictions on increase of rentals and

empower owners to reclaim their

properties without court proceedings,

which currently takes decades in some

cases. Here the market should be allowed

to set the rental amounts and the owner

must have full protection for his/her

property. This will provide security to the

landlord and reduce the deposit amount

required with the lease agreements. Once

the laws are enacted and strictly enforced,


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more investors will enter the real estate

market to utilize the rental fees as income.

This is especially true for the commercial

sector. The tax laws must be revised to make

renting of properties a financially viable

option. Some states like Maharashtra, Goa,

Bengal and Karnataka have already made

amendments to the rent act.

Forceclosure LawsThough the level of forceclosures for

the housing finance companies (HFC) are

relatively low at around 1.5 to 2%. The

forceclosure laws must be revised and made

up-to-date to suit the current context. The

laws for non-payment of Equated monthly

Installments (EMIs) and consequent

forceclosure and repossession of the

property must be revised, so that the

financing companies have the final rights

on the property, which is the collateral for

the housing loan. Once enacted, these laws

must be enforced. This will further boost

the housing finance business.

Building Codes, Standards &Permissions

Although there are several building

guidelines and standards in various cities

and states, the developers have not

followed them; nor have the authorities

implemented them. The system needs to

be made more transparent and direct, so

that there is no ambiguity and confusion.

Presently there are too many different

permissions and requirements in the

construction industry. They need to be

centralized, simplified, streamlined and

made transparent, so that there is no

scope for corruptions and time delays.

There must be a single window clearance

for all building and construction

requirements. This will reduce time,

paperwork and corruption at all levels and

attracts further investment capital. The

quality of construction has improved

considerably with the building standards

and codes.

Foreign Direct Investment (FDIs)The government has allowed foreign

direct investment in real estate industry, so

that finance is easily available at reasonable

interest rates for the developers. There should

be certain conditions to safeguard against the

fight of capital from this business as occurred

in south-east Asia in the 1990s. FDIs will also

enable new technologies to be introduced in

the housing industry, which will make the

business far more efficient and cost effective.

Recently FDIs have been allowed in

real estate projects with certain restrictive

financial, time and area constraints. This

will allow FDIs in large township like

Noida, Gurgaon and Navi Mumbai. But

more needs to be done to encourage

cheaper capital, modern systems and

technology. Innovative financing schemes

such as real estate investment trust (REIT),

real estate mutual funds and mortgaged

backed securitization will provide access to

low cost and long-term funds.

Development & PlanningThe city or state authorities must use

professionals to plan and execute all

development plans for cities and towns,

with the future developments in mind.

This must be done without any political

compulsions. The plans must be prepared

in advance and executed, without any

exceptions and all regulations must be

strictly enforced. The central and the state

governments must lay down specific overall

guidelines for the city/town corporations

and enforce them strictly. This will allow

proper zoning within cities and towns,

green areas and other infrastructure

systems to fall into place as the

development plans unfold.

Infrastructure (Electricity, Roads,Sewage, Drainage, Water Supply)

This is one problem area, which needs

to be tackled on a war footing. Most Indian

cities lack the infrastructure as it fails to

keep pace with the growth in population and

development. The central and state

governments must provide sufficient power,

water and roads to cope up with the growth.

The electricity/ Board boards must be able

to provide reliable power and the

corporation must charge reasonable

property taxes to cover the costs of roads and

water supply. The assessment base of

property tax must be changed from historical

value to capital value. The user charge for

water, sewage and electricity and other

municipal services must cover the actual cost

of delivering these services. Privatizing

municipal corporations may have to be

considered very seriously. Presently, the

property taxes do not cover the

infrastructure costs, plus there is pilferage

and actual charges are not collected.

Recognition of Housing as anIndustry

This is one issue that the government

cannot afford to ignore any longer. The

Indian real estate industry has been lagging

the rest of the world for too long. And this is

one industry which can provide a boost to

the overall economy, as was very clearly

emphasized in the Mckinsey Report of

September 2008. The following Budgets

must take up this point in its agenda to boost

the Indian economy and to pull it out of the

doldrums. The direct impact of this

recognition to the housing industry will be

easier access to capital and tax incentives,

which will jump-start the entire housing

industry. The government can provide

further incentives such as tax holidays, larger

depreciation and increased equity support

from HUDCU and NAREDCO.

Projection for the FutureThus we find that after making a detail

study of the Real Estate market in India, these

projections can be made which would throw

some direction on where the market is

headed towards.

1. It’s no longer just the metros that are

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attracting investor attention in the

residential realty market. Many others have

joined the ‘elite list’ that was earlier

restricted to obvious locations like Delhi,

Mumbai, Bangalore and Chennai.

2.Healthy capital appreciation has made

other metros and tier II cities as, if not

more, attractive. Add to it factors like ease

of investment, hectic construction activity

and exit options and you have a stream of

investors queuing up for a place in the

sun, which at the moment seems to be

shining brightest in places like Hyderabad,

Pune, Kolkata, Chandigarh, Mysore,

Nasik and Visakhapatnam.

3.Hot properties for residential investment

are Delhi and suburbia, Nasik, Mumbai,

Chennai, Kolkata, Pune, Chandigarh,

Mysore, Ahmedabad, Ludhiana,

Visakhapatnam and Bangalore with

return on investment in the next two

years ranging from a stable 3-5 per cent in

the case of Pune to as high as 15 percent

for Kolkata.

4.Residential markets across various metros

and large tier – II cities have witnessed

heightened activity over the last 12

months, particularly Mumbai and Delhi,

Bangalore, Pune, Chennai, Hyderabad,

Kolkata have also witnessed a rise in

construction and absorption. These cities

have seen substantial economic activity

and therefore, have a long-term future

from a purchase perspective.

5.Mumbai, Navi Mumbai, Thane City,

Pune, Kolkata, Hyderabad, Noida,

Gurgaon, Chandigarh and Mysore as the

10 most attractive locations for

purchasing residential property in 2008.

Though the returns vary in a broad

spectrum, most suburban markets –

where substantial residential

construction activity is taking place –

offer initial pre-tax yields of 4-6 per cent

per annum based on the rental income

out of residential properties.6. India’s list boom locations for this yearinclude Jaipur, Chandigarh, Noida,Chennai and Pune, besides the

suburban Mumbai, Bangalore,Hyderabad and Kolkata. At the momentthe property market in these locations islooking really attractive, while otherplaces may be overheated.

Apart from a booming securities and

trading market, India has become an

“investment heaven” for evolving

enterprises. Real estate has been in the

receiving end of much attention from

global investors in search of emerging

markets and with an increasing number of

joint ventures and tax saving options in

special Economic Zones, Indian realty

market could very well be considered a

local opportunity to go global.

From a common man’s perspective,

the first priority is to secure a home. For an

enterprising individual, the first priority

would be to find a secure “home” for

growing assets. With an increasing number

of investment options in FDIs and FII as

well as real estate development projects,

India could be a “home sweet home” for

global investment.

ConclusionsIncreasing demand by companies and

individuals has forced developers to

undertake larger capital intensive project

and hold it for a longer time. Increasing

awareness of Indian consumers about

structure and design of a property and

increasing influence of western culture has

forced developers to develop projects

which are benchmarked against

international standards in term of quality

and design. Housing mortgage rates have

fallen from 15.0% to 7.5% in past 5 years,

making credit cheaper and easily accessible.

The Government has been playing a

pivotal role in the development of this

sector. They have aided the sector by giving

income tax benefits to the consumer in

terms of fiscal benefits on interest and

principal repayments, benefits to

developers, rationalization of stamp duty in

certain states, abolishing of the Urban

Land Ceiling act in 9 states and

computerization of land records, apart

from other developments. In terms of

development of IT parks, state

governments provide various benefits and

concessions like extra Floor Space Index

(FSI), reduction or reimbursement of

stamp duty and registration fees, etc.

The gradual opening up of the sector

for FDI by the Central Government and

support of state government’s on realty

developments is a positive step. Another

impact would be the acceleration in

construction activities. With the reduction

of the minimum land area to 25 acres from

100 acres, projects would be completed

over a shorter duration. This would benefit

consumers, as quality realtors will quickly

move from one project to another,

accelerating the supply of quality space in

the country. The government is also in

talks for formulation of REIT’s regulation,

which will help in providing the much

capital for the development of the sector.

Indian and international funds are

starting to invest in the property sector. The

new FDI guidelines are expected to trigger a

surge of foreign investment, approximated at

US$1 billion to US$1.5 billion annually,

into India’s construction development

sector, including housing, office buildings,

retail stores, research and development

facilities, hotels, resorts, technology parks,

and other commercial real estate projects. To

enter the Indian market, a foreign investor

might form a subsidiary in India or joint

venture with an Indian partner.

Partnerships with foreign developers

and investors will give local developers

access to substantial equity capital. Foreign

developers also bring other benefits to the

partnership including advanced

technology, global experience in project

management, and a knowledge of global

best practices in development that can be

applied to developing projects in India.

Once they have experience with joint

ventures in India, some foreign investors

may begin to develop projects on their own,

enter long term partnerships with local

developers to build multiple projects, etc.


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‘A

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ffordable Housing’ echoes loudly

today in the real estate sector in India. All

developers are in the fray, developing

‘affordable housing projects’, one after the

other. The reasons are quite obvious.

Developers who were once only focused on

the ‘luxury segment’ alone are now talking

of ‘affordable housing’ – the reason being

simple – the luxury segment has dried up.

Post sub-prime mortgage lending crisis in

the US, plum jobs have evaporated, and so

have fat salaries. The effect of this is more

than visible in the Indian job market as

well. Fat salaries have become rare now.

Most of the developer projects catering to

such ‘fat salaried’ people have got ‘stuck’.

The real estate developer has nothing else

to do but to come down; to save his own

business. These were the same developers

who were once saying that ‘affordable

housing’ is the job of the Government and

that it is a social responsibility ! The

turnaround today is obvious.

One of the issues that emerges is

whether governments in the country have

done enough or not as far as affordable

housing is concerned. Almost right from

the day one, the Government of India has

been talking of providing housing to the

masses. Many programmes have been

initiated. Institutional arrangements have

been put in place to carry out the mandate.

All these have actually been fashioned on

the concept of ‘affordable housing’. Society

has been divided into four income groups

– economically weaker sections, low

income groups, middle income groups and

high income groups and all housing

projects were to provide housing

accordingly. A public sector undertaking

called the Housing and Urban

Development Corporation ( HUDCO )

has been created way back in the year 1970

to promote ‘affordable housing’. At least

50 percent of the housing which HUDCO

funds has to be for the EWS and LIG

categories. However, despite all this, the

unmet housing demand is humungous;

24.7 million dwelling units. All the central

and state government programmes, the

Housing Boards, Development authorities,

Slum Improvement boards, cooperative

societies, even the much touted Jawaharlal

Nehru National Urban Renewal Mission (

JNNURM ) are but a drop in the ocean.

Their contribution to the housing supply

in urban India is a far cry. One may say

that what was once called low cost housing,

low income housing and social housing is

now being called ‘affordable housing’; it is

just old wine in new bottles. However, one

must hasten to add that what has been

given all these years is not really ‘affordable

housing’, but housing which is subsidised

to those who cannot afford ! The

difference is subtle but serious.

Global Overview of AffordableHousing

On the contrary, let us for a while

look at the world around us. Is affordable

housing the problem only of our country ?

What are other countries doing about their

housing problems ? Both the developed as

well as the developing world has been

facing problems of affordable housing.

The difference perhaps is in the magnitude

of the problem. International recognition

of the urgent need for affordable housing

has been pronounced many a time. In the

World Urban Forum 2008 held in China,

providing affordable housing was seen not

as a mere sectoral objective but as a route

Prof. Dr. P. S. N. Rao Head (Housing) SPA Delhi

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to achieving the Millennium Development

Goals ( MDG ). The UN Habitat and the

UNCHS have been crying hoarse about

the need to get housing top on the

developmental agenda for decades now.

Affordable Housing Initiatives inDeveloped Countries

Canada The Canadian Mortgage

Housing Centre has an Affordable Housing

Centre, for consultations to help connect

with resources and ideas to produce

affordable housing projects, develop financial

incentives and assistance, provide mortgage

loan insurance, disseminate housing

information, encourage renovation programs

and organize consultations to help connect

with the resources and ideas to produce

affordable housing projects.

Australia The Government

adopted Affordable Housing in

Sustainable Communities Strategic Action

Plan in the year 2001. This plan articulates

a vision for affordable housing and

outlines a series of actions for realising the

vision and has brought out Affordable

Housing Design Guidelines.

USA The Government

established a National Affordable Housing

Network in the year 1994. This provides

assistance to NGOs (Habitat for Humanity

International) with more than 1000

affiliated NGOs to provide housing in

rural and urban America to provide low

cost homes for the disadvantaged

Americans. The Annual Affordable

Housing Summit held in May 2009

stressed the importance of reviving rental

housing as a key policy area. The three

specific affordable housing programmes in

the US are the HOME, SHOP and HOZ.

UK The Government initiated the

National Affordable Housing Programme

(NAHP ) where housing is provided for the

disadvantaged sections of the society.

Efforts in IndiaThe Indian housing situation is quite

different from that in other countries. Some

of the key elements of the housing system in

India are a) a pyramidical income structure b)

existence of the ‘great Indian middle class’ c)

the culture of savings which is a positive sign

d) a large base of formal sector workers who

can easily access home loans e) an even larger

base of informal sector workers who cannot

easily access home loans ( and perhaps who

cannot afford home loans ) and f) existence

of poor who cannot even afford food and live

on the bare minimum . Add to this is the

orthodox institutional structure, planning

norms and lack of clear policy to encourage

affordable housing. However, taking

cognizance of the need for affordable

housing, the Government of India

constituted a Task Force on Affordable

Housing in January 2009. This

recommended that a) flats in the range of

300 sft-600 sft. for EWS/LIG categories with

cost of the house not more than 4 times

annual income and EMI not more than 30

percent of monthly income and b) flats more

than 600 sft. but not more than 1200 sft. for

other income groups with cost of the house

not more than 5 times annual income and

EMI not more than 40 percent of monthly

income. Further, under JNNURM, the

Government has facilitated sanction of as

many as 1.5 million houses for the slum

dwellers and urban poor spread across as

many as 65 cities. In several cities, urban

development authorities and housing boards

are initiating public-private partnerships so

that affordable housing could be encouraged.

However, for the urban middle class,

particularly in the National Capital Region

( NCR ), the choice today is only the

private real estate developers who have

launched nearly a dozen projects where the

affordable housing units have been priced

in the range of Rs.15-20 lakhs. This is also

co-terminus with the interest subsidy given

by the Government of India. Real estate

developers have resorted to a variety of

ways of reducing the cost of the projects by

reducing the flat areas, slightly reducing

the specifications and cutting down on

luxury features such as swimming pools,

clubs, etc. Some of the developers have

also reduced their profit margins in order

to ensure that the prices are right to attract

buyers. Add to it, they have also

introduced festival discounts in the recent

past in order to attract buyers. All said and

done, reasonable prices are prevailing now

in the market which is quite favourable for

the middle income segment. Therefore, if

buyers have been waiting for that

opportunity, this is the time for them to

start scouting and seal the deal.

At another level, the issue today is

that developers are giving all these

attractive features and prices only because

the market is ‘down’. However, the

question is when the buyers start

increasing, are they going to increase the

prices once again ? In what way can this be

checked ? This is possible provided the

concerned development authorities viz.

NOIDA, Greater NOIDA, GDA, HUDA,

etc. start prescribing conditions such as a

limit on the maximum area of the flat

which a developer could build so that the

continuous supply of affordable housing

could be maintained at the desired level.

There is a huge unmet housing demand in

the 400-800 sft. size category in the Rs. 15-

20 lakh price range, where there is a great

opportunity for real estate developers.

Globally, it has been seen that strong

government intervention has led to the

emergence and sustenance of affordable

housing programmes in various countries.

It is good that the Government of India

has woken up to this. However, unless and

until stringent measures are prescribed to

keep a check on permitted flat sizes,

alongwith incentives for the developer to

make reasonable profit, affordable housing

may not be sustainable in the long run.

Prof. Dr. P.S.N. Rao is Professor and

Head ( Housing ), School of Planning and

Architecture ( SPA ), New Delhi. He is also

Founder – Chairman, National Association

of Realtors-India ( NAR-INDIA ). He can be

contacted at [email protected]

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inning eight Oscars at the 2009Academy Awards did more that turnSlumdog Millionaire into a box-officephenomenon. It raised the global profile ofMumbai, India’s commercial capital (inwhich the movie is set) to an unprecedentedlevel.

Similar to Shanghai in China, Mumbaiis the poster child of India’s economicRenaissance. However, like its Chinesecounterpart, Mumbai’s success representspart of a far larger story in the making. As the21st century economic resurgence of Indiaand China galvanizes global interest, Mumbaiand Shanghai are just two of a multiplicity ofemerging mega cities in these two nations thatwill account for a combined population ofthree billion by 2050 – by which time Indiawill have usurped China as the world’s mostpopulous nation.

After recording an annual growth of 9%or more in the previous four years, India’seconomic growth slowed to below 7% in the2008/09 fiscal year. However, while the impactof global financial turbulence is evident – andis predicted to endure through 2009 and 2010– the current downturn in the real estatemarket stems from reasons not necessarilyconnected to the faltering global economy.

The slowdown in Indian real estate fromthe 2005-2008 boom years was caused by anamalgam of reasons. There was anoverheating of prices in certain regions, andan oversupply of properties built for segmentsthat do not represent the primary corpus ofconsumers. Now, property buyers arewatching and waiting as they anticipate ablanket correction.

Despite the current slowdown, long-term growth is assured, particularly as India’sGovernment has pumped around 4.3 trillionrupees into the economy since September2008. India – and for that matter China –represents an economic scenario that hasevolved separately and on very differentparameters from the economies in most

developed countries. It is an emergingeconomy, with an emerging and maturingreal estate market.

Unlike China, India’s economy is notpredominantly export-based. India is a cost-effective outsourcing destination, with provenskill sets and favourable tax subsidies availablefor IT(Information Technology)-relatedprojects. “IT has been the primary growthdriver in India over the last couple of years,and it will continue to be so in the long term.

Indeed, ‘long term’ is the current buzzphrase for India analysts. Even if it does notseem so at the moment, India’s underlyingfuture growth can safely be pegged at 5-6% perannum. India is still witnessing increaseddomestic capital, individual spending powerand corresponding aspirational levels.

The purchasing power of Indianconsumers was highlighted in January, whenthe nation added 15.4 million mobile phoneusers – a new monthly record. India’s retailsector is worth an estimated USD350 billionand has been growing between 30-40%annually in recent years, although this hasslowed down considerably in 2009. Indianreal private consumption is predicted to rankthird in Asia Pacific behind China andVietnam. In the long term, rising retailrevenues seem certain to be driven by higherurban household incomes, the continuedemergence of domestic retailers and the entryof global retail brands.

Another factor weighing in India’s favouris a cautious approach to risk. People aresavings-oriented, subject to moderate leverageand are typified by caution. Moreover, we havethe maximum number of people in ourcollective skilled workforce and our financialsector has maintained a cautious approach.

However, while foreign investorsrecognize India’s strong economicfundamentals and the long-term investmentpotential of the real estate market, they too areapplying caution. India continues to be veryattractive, but foreign investors are nowjustifiably awaiting greater transparency in the

economy. They are also waiting for thepresent market fluctuations to be resolvedand the scheduled infrastructureenhancement projects to be launched.

This is a critical point. India’s stringentforeign-investment rules during the 1980s and90s are widely cited for preventing the samelevels of capital inflow that helped fundChina’s voracious infrastructuredevelopment.

There is a definite infrastructure deficit,but the Government has encouraged thePublic Private Partnership route to make upfor it. It is slow going, but we are seeing steadyprogress. However, Mumbai is not going to beShanghai for a few years to come.

This infrastructure deficit is creatingsignificant investment opportunities indeveloping sectors. The economy in generalwill have to settle down to more convincingstability, and the property market will have toshow more rationality and transparency for thefence-sitters to make their move. Meanwhile,affordable housing, industrial real estate andemerging segments such as retail warehousingand property and asset management are thesustainable growth areas in India.

Modern distribution warehousing ismuch needed to create an efficient logisticssector, serving the retail sector and the wholeeconomy. Demand for strategically locatedland parcels and retail warehousing-orientedconstruction services is extremely high,though supply is rather fragmented. Thelargest proposed logistics parks include the1235-acre Mumbai SEZ and the 865-acreReliance Haryana SEZ. Other significantlogistics developments are planned forHaldia, Kona and Nagpur.

To provide more diverse transportoptions, airport construction is continuingapace across India, and proposals are in placeto develop dedicated industrial and rail freightcorridors between major metropolitan cities,such as the Delhi-Mumbai Industrial Corridorand the Delhi–Kolkata High Speed FreightCorridor. The result is that property developersare under pressure - not only to completeongoing projects, but also to innovate.

Once they get out of the existinginventory and execution pipeline, they canlook at new land parcels and new businessavenues. Recovery in all segments will comewhen developers begin to re-strategize.

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INDIA’S INGENUITY AND OPTIMISM-The Continuing Saga of Potential in Indian Real Estate

Anuj Puri,Chairman & Country Head, Jones Lang LaSalle Meghraj


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ne of the noticeable recent developments has been the enormous growth in the Real

Estate sector. Today some 80,000 Indians have liquid assets greater than Rs. 5 crores and it

is increasing by 13% every year. Its emergence as a home for global outsourcing business and

the consumption-driven growth is contributing to its newfound real estate investment image.

Upcoming glitzy shopping malls, entertainment and amusement parks, luxury hotels,

Residential Condominiums and multiplexes are the results of development.

As a social being we need shelter & security of a home and an office to work in. Thus

the demands of buildings are unending and is bound to rise in the near future. However,

global warming has brought construction and development sector into the focus of

environmental regulators. According to them traditional designs and construction methods

are adding on to the issue of climate change.

The industry needs to wake up to its dual role in helping people cope with the

unavoidable effects of climate change whilst making more efficient buildings to aid efforts

to prevent things getting worse. The need to conserve energy and adopting sustainable

innovation is important and as an individual we should become a contributor. Not to forget,

in the long-term and sustainable progress, we will need to keep a tab on balanced

achievement of economic growth, ecological balance and social progress.

PBC™-STIP has been an active contributor towards environment for several years and

as part of its continuous & constant endeavour, it is now developing a new project,

GreenSpaces™, which is being built as world’s most energy efficient commercial building.

GreenSpaces™ is an upcoming $263 million 1.75 million sq ft USGBC LEED certified

platinum building coming in India. It is a CDM project and notified SEZ in Delhi NCR. It

is a ‘Flagship Project’ of the Asia Pacific Partnership, a government partnership of seven

countries i.e., USA, Canada, Australia, Japan, China, South Korea and India. The

management of Paharpur Business Centre & Software Technology Incubator Park is

promoting the project and will replicate its business model. It promises to be the world’s

highest rated USGBC LEED 3.0 green building in points.

Speaking of its proposed energy efficiency, GreenSpaces™ will save over 36,000 tons of

CO2 emissions per year on the demand side. This is in addition to the carbon reduction on

account of the generation of 1MW electricity from its rooftop photovoltaic and production

of electricity from biogas generated from waste. Apparently, the projected total energy use

(kWhr) of a conventional A-grade building of GreenSpaces’s size would approximately be 55

million kWhr/yr. In comparison, GreenSpaces™ projected energy use (kWhr) is

approximately 14.1 million kWhr/yr. Thus, GreenSpaces™ will save about 40.9 million

kWhr /yr of Energy. Even at Rs.5 per kWhr, this represents savings of over Rs.210 million

per year on operating expenses. This implies a reduction of more than 74% in the Energy

Performance Index (EPI), i.e., energy used per unit area of this Cleantech green building

project.

GreenSpaces™ is striving to achieve its mission to demonstrate that lifestyle change;

technology and design can reduce energy consumption of buildings from 40 to 10 percent.

And the best thing about it is, if it can be done in India then why not elsewhere where

technology and financial support is easily accessible. To track the progress of the project and

look at opportunities that it offers for investment - Please log on to www.greenspaces.in

Kamal Meattle CEO, Paharpur Business Centre

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A. K. Jain, Advisor, UN Habitat HS-Net

IntroductionThe UN Habitat Report “Planning

Sustainable Cities” (2009) reviews thetraditional approaches to urban planningand management. The Report examineshow relevant current planning systems areto 21st century urban challenges and theextent to which current approaches addressthe various goals of sustainableurbanization. It identifies innovativeapproaches as a basis for the reform ofurban planning and explores futuredirections in urban planning to makeurban planning more effective.

This Report is anchored on theconcept of sustainable urbandevelopment. As countries rapidlyurbanize, the issue of sustainableurbanization becomes crucial whereplanning plays a vital role. The goal ofsustainable urbanization is to deliverenvironmentally liveable, economicallyproductive and socially inclusive cities andtowns. As a multidimensional, dynamicprocess, sustainable urbanization capturesa vision of inclusive growth that is people-centred, and includes environmental,social, economic and political-institutionalaspects of sustainability. Achievingsustainable urbanization requires allaspects of sustainability to be addressedwithin the local context of opportunitiesand challenges posed by the urbanization.

Urbanisation as a DevelopmentPolicy

The Report underlines the need toview urbanization as a positivephenomenon. A total of 5 million newurban dwellers are added to the populationof developing countries each month. Thetask of providing for such large numbers isquite daunting, but this should not formthe basis of the negative disposition towardsurbanization as observed in somecountries. Rather, urbanization should beseen as a positive phenomenon and aprecondition for improving access toservices, economic and socialopportunities, and a better quality of lifefor a country’s population. In mostcountries, cities generate over 60 per cent ofthe GDP and are the ‘engines of economicgrowth’ and centres of innovation.

Urban planning needs to respond tothe rapid pace of urbanization, which is nota luxury, but a necessity. High levels ofurban growth in the absence of adequateplanning have resulted in spiralling poverty,proliferation of slum and squattersettlements, inadequate water and powersupply, and degrading environmentalconditions. The most significant challengesof urban planning today is how to addressthe housing, water supply and sanitationneeds of a rapidly urbanizing population.

An important demographic trend in

developing countries that has implicationsfor urban planning is the relatively largeproportion of the youth population. It ispredicted that by 2030, 60% of those livingin urban areas of developing countries willbe under the age of 18. Urban planningwill have to pay particular attention to theneeds of this segment of the population.The demographic trends generally indicatean ageing population. Planning for anageing urban population requiresinnovation as a rapidly ageing populationplaces increased demand on healthcare,recreation, transportation and otherfacilities for the elderly.

Despite the demographic importanceand potential role of small andintermediate cities, urban planning effortshave focused disproportionately on theproblems of large metropolitan areas,thereby further fuelling the problem ofurban primacy. The Report shows thatmore than half of the urban population inboth developed and developing countrieslive in cities of less than 500,000inhabitants. Small and medium citiesshould form part of the urban planningagenda for developing countries.

he process of growth in many cities istaking on forms that are largely informal.Various aspects of urban development –extensive peri-urban development ofinformal settlements, housing construction

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and the allocation of land, and provision ofurban services – are informal. This creates ahuge gap between actual urbanizationoutcomes and the orderly ideals prescribedby conventional urban planning. For urbanplanning to be relevant and serve thegreater good, it must identify innovativeways of dealing with informality.

Global urbanization and urbanplanning are taking place within thecontext of the worst economic recessionsince 1945. The year 2008 witnessed thevirtual collapse of the global financialsystem. The current global recession hasseveral implications for urban planningand urban areas in general. This impliesthat less funding will be available for urbandevelopment and capital projects.� In this regard, slum upgrading andprevention programmes, urbanregeneration and poverty reductioninitiatives, which traditionally rank lowon the priority lists of many developingcountries even in times of relativeeconomic prosperity, will be affected.

� The construction industry has beenseverely affected by the global economiccrisis.

� The decline in economic growth couldaffect the ability of developing countriesto achieve the MillenniumDevelopment Goals and to addresspressing environmental issues such asclimate change.

Higher levels of unemployment areenvisaged in various sectors of theeconomy, but particularly in finance,construction, automotive andmanufacturing for export industries, aswell as in the tourism, services and realestate sectors – all of which are closelyassociated with the economic well-being ofcities and towns. Following the increase inthe rate of unemployment, and urbanpoverty compounded by rising food prices,the World Bank estimates that the numberof poor people increased by between 130million and 150 million on account of theincrease in food prices in 2008. TheEconomic recession in developedcountries and a decline in remittancescould have major implications for urban

areas, given its role in poverty reductionand the financing of house construction,as well as improving education, health andliving standards.

Vulnerable CitiesWith cities being increasingly vulnerable toextreme weather conditions associatedwith climate change, urban planning mustrise to the challenge of providinginnovative solutions. Some of the ways ofachieving this are as follows:

Land-use planning and disasters: Giventhe occurrence of natural disasters in citiesacross the world, land-use planning canserve as a valuable tool for mainstreamingdisaster risk reduction into urbandevelopment processes. Land-use planningprovides a framework within whichinterventions by partner local actors forrisk mapping and community resiliencebuilding can be undertaken. Planningtools such as zoning, communityparticipation, geographic informationsystems, and information and educationprogrammes are all essential tomainstreaming risk reduction within theland-use planning process.� Building codes and disaster-resistantconstruction: Urban planning can playan integral role in developing buildingcodes that ensure safety standards incomponents of the built environment.Most countries have building codesaimed at ensuring that constructionmeets a minimum standard of disasterresilience. However, in some cases,codes might not be as appropriate asthey should be. In order to be effective,the building codes proposed by urbanplanning should be: realistic; relevant;updated regularly; understood fully andaccepted by professional interestgroups; enforceable; adhered to and;integrated fully within the planning andlegal system.

� Protecting critical infrastructure:Urban planning can play a major role inprotecting critical infrastructure andservices such as electricity, water andsanitation, telecommunications,

transportation systems and healthservices. Protecting such vitalinfrastructure and services will influenceresponse and reconstruction capacityand minimize secondary and indirectlosses, such as disruption in the flow ofgoods and services during the periodafter a disaster has struck a city.

� Planning and post-disasterrehabilitation: Urban planning cancontribute to post-disasterrehabilitation of human settlementssince municipal authorities and localgovernments are best placed tocoordinate relief and reconstructionefforts. Post-disaster situations,particularly in Asia and Africa, offerurban planning a unique opportunity,or clean slate, to rethink pastdevelopment practices, improve thesustainability of human settlements,and effectively prepare communitiesagainst risks. Urban planning can alsoensure that programmes and projectsundertaken after disasters address thelong-term development objectives andneeds of the affected areas, and ensurean effective transition to sustainabledevelopment.

� Urban planning and climate change:In order to cope with the effects ofclimate change, cities all over the world,but especially in developing countries,will need to implement innovativeadaptation and mitigation strategies.Urban planning can contribute toimplementing many of these strategies.Adaptation for cities entails suchdiverse actions as increasing theresilience of infrastructure, changingthe location of settlements andimplementing practices that enhancesustainable development. Mitigatingclimate change through reduction ofgreenhouse gas emissions in citiesrequires immediate and aggressiveaction. This includes: improvedbuilding materials and energy efficiencyto reduce costs; transport demandmanagement to reduce congestion andthe health impacts of transport; and thepromotion of renewable or alternative

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energy generation. All these are areaswhere urban planning holds good promise.

Urban Planning Reforms and NewApproaches

The emergence of the moreinnovative or contemporary approaches tourban planning can be attributed to theproblems associated with the conventionalmaster planning approach, and thechanging urban, economic andenvironmental contexts. While the newerapproaches have been shaped by aparticular regional context, someinternational ‘borrowing’ has alreadyoccurred. An important lesson from themaster planning experience is the dangerof transplanting planning systems andapproaches from one context to another,given the highly varied nature of urbansocieties across the world

The newer approaches do notnecessarily suggest models or solutions thatcan be taken ‘off the shelf’ forimplementation. Rather, they offer ideasgenerated from ‘situated’ experiences thatcan be considered in relation to the specificurban planning issues in other places.

The newer approaches comprise thefollowing broad categories:i. Strategic spatial planning and itsvariants;

ii. New ways of using spatial planningto integrate (municipal) government;

iii. Approaches to land regularizationand management;

iv. Participatory and partnershipprocesses;

v. New forms of master planning; andvi. Planning aimed at producing newspatial forms.

These approaches of urban planning aredifferent in the following ways:� They are strategic rather thancomprehensive;

� They are flexible rather than end-stateoriented and fixed;

� They are action and implementationoriented through links to budgets,projects and city-wide or regionalinfrastructure;

� They are stakeholder or communitydriven rather than only expert driven;

� They are occasionally linked to politicalterms of office;

� They contain objectives reflectingemerging urban concerns – forexample, city global positioning,environmental protection, sustainabledevelopment, achieving urban-relatedMDGs, social inclusion and localidentity;

� They tend to be sectoral, with concernfor issues such as gender, crime andsafety, health, heritage andenvironment being incorporated withinurban planning approaches as ‘cross-cutting’ programmes, often with theencouragement of internationaldevelopment agencies

� play an integrative role in policyformulation and in urban managementby encouraging governmentdepartments to coordinate their plansin space;

� They focus on the planning process,with the outcomes being highly diverseand dependent upon stakeholderinfluence or local policy directions.

The Institutional and RegulatoryFramework for Planning

A variety of new agencies have becomeinvolved in urban planning – for example,special ‘partnership’ agencies that focus onparticular development tasks,metropolitan and regional developmentagencies, as well as agencies createdthrough initiatives funded by external aidprogrammes. This has been partly inresponse to decentralization of authorityfrom national governments to cities,regions and quasigovernmentalorganizations, as well as to different formsof privatization.

In many large urban complexes thathave resulted from metropolitanizationand informal peri-urbanization processes,there is an increasing mismatch betweenadministrative boundaries and thefunctional dynamics of urban areas,leading to problems in coordinatingdevelopment activity and integrating the

social, environmental and economicdimensions of development.

The presence of large-scale land andproperty developers (often linked tocompetitive city policies) is expandingsubstantially, creating challenges fornational and local planning practices thatare seeking to promote greater equity andenvironmental sensitivity in urbandevelopment. Approaches to theformulation and implementation of planshave moved from assuming that a planningauthority could control how developmenttakes place, to recognizing that allstakeholders (including the private sectorand civil society organizations) need tolearn from each other about how to shapefuture development trajectories.

A widespread global trend in recentyears has been to redesign planningsystems to make them more relevant tocontemporary urban conditions. In theseefforts, increasing attention is being paidto institutional contexts and how toencourage more active and inclusivegovernance capacity within them.

Formal legal systems are central indefining the extent, nature and location ofthe regulatory powers of planning systems.They not only define such rights but alsolegitimate the limitation of such rights,often for public purposes. In recent years,international covenants on human rightsand national human rights law have cometo have a significant impact upon planninglaw and other regulations.

Urban planning can play a significantrole in integrated development, since mostnational and local development policiesand related investments have a spatialdimension. It can do this most effectivelythrough building horizontal and verticalrelationships using place and territory asloci for linking planning with the activitiesof other policy sectors, such asinfrastructure provision. Therefore,regulatory power needs to be combinedwith investment and broader public-sectordecision-making.

To command legitimacy, regulatorysystems must adhere to the principle ofequality under the law, and must be broadly

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perceived as doing so. It is important torecognize that regulation of land andproperty development is sustained not justby formal law, but also by social and culturalnorms. In designing planning systems, allforms of land and property developmentactivity, formal and informal, must be takeninto account and mechanisms for protectingthe urban poor and improving their rightsand access to land, housing and propertymust also be put in place.

The protective as well asdevelopmental roles of planning regulationmust be recognized in redesigning urbanplanning systems. Statutory plans andpermit-giving regulate the balance betweenpublic and private rights in anydevelopment project, as well as providingthe authority for conserving importantcommunity assets. Protective regulation isnecessary for safeguarding assets, socialopportunities and environmentalresources that would otherwise besqueezed out in the rush to develop.Regulation with a developmental intent isnecessary for promoting better standardsof building and area design, enhancingquality of life and public realm, andintroducing some stabilization in land andproperty development activity, particularlywhere market systems dominate.

Regional governance structures arerequired to manage urban growth thatspreads across administrative boundaries,which is increasingly the case in all regionsof the world. Spatial planning in thesecontexts should provide a framework forthe coordination of urban policies andmajor infrastructure projects,harmonization of development standards,comprehensively addressing the ecologicalfootprints of urbanization, and a space forpublic discussion of these issues.Planning Participation and Politics

In most developed countries, formalprocedures for public participation inplanning decisions have long existed andwell-established representative democraticpolitical systems enable citizenparticipation in urban planning processes.Yet, this has been found to be tokenistic insome developed and transition countries.

In many developing countries, atechnocratic blueprint approach to planningpersists, inhibiting the direct involvement ofcitizens or other stakeholders in decision-making. Attempts to adopt participatoryplanning processes and revise planninglegislation accordingly have been minimal.Limited capacity, resources and autonomy atthe local government level mean thatdecisions are often made by technocrats. Inspite of this, a growing number of cities areadopting participatory approaches toplanning due to the widespread recognitionthat technocratic approaches have beenlargely ineffective in dealing with thechallenges of urbanization.

A variety of innovative approaches forparticipatory planning, from the local tocity level, have been developed in recentyears, often with support frominternational programmes, such as theUN-HABITAT-supported UrbanManagement, Sustainable Cities andLocalizing Agenda 21 programmes.

Participatory Urban Appraisal andCommunity Action Planning

At the local/community level,participatory urban appraisal (PUA), whichdraws on tools and methods ofparticipatory rural appraisal, has been usedto identify needs and priorities. PUAprovides information inputs into decision-making rather than itself being a decision-making tool. It has therefore beencomplemented by community actionplanning (CAP), which developsactionable ideas and implementationarrangements based on the informationgenerated through PUAs.

At the city level, participatorybudgeting has enabled citizen participationin municipal budgeting and spending,while city development strategies (CDSs)have enabled communities to participatein the prioritization of urban developmentprojects. Participatory budgeting has beenfound to strengthen civil society byencouraging the development of open anddemocratic civic associations, givepreviously excluded groups influence overdecision-making and bring investment to

neglected communities. A CDS usesparticipatory processes to develop anaction plan for equitable urban growth. Todate, over 150 cities worldwide have beeninvolved in developing CDSs.

Bridging the Green and the BrownAgendas

Rapid urban growth in the past 50years has meant that managing the built (orhuman) environment, while coping withenvironmental pollution (especially waste)and degradation, has become a significantchallenge in the cities of developedcountries and has overwhelmed manycities in the developing world. Fewer than35 per cent of the cities in developingcountries have their wastewater treated;worldwide 2.5 billion and 1.2 billionpeople lack safe sanitation and access toclean water, respectively; and between onethird and one half of the solid wastegenerated within most cities in low- andmiddle-income countries is not collected.Most of this deprivation is concentrated inurban slums and informal settlements.

The brown functions of a citygenerally consume and degrade its greenresources and processes, respectively,unless the city intervenes throughprocesses such as urban planning andenvironmental management. The green,natural systems of a city have real limitsand capacity issues associated with theiruse. In particular, the two majorenvironmental concerns of climate changeand oil supply pose significant challengesfor urban planners.� Greater use of renewable energy:Renewable power enables cities tocreate healthy and liveableenvironments while minimizing the useand impact of fossil fuels. A number ofurban areas are now partly powered byrenewable energy techniques andtechnologies, from the region to thebuilding level. Growing energy andproviding food and materials locally aspart of a city’s green infrastructure alsoreduces fossil fuel dependence and canbring substantial ecological benefitsthrough emphasis on natural systems.


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� Striving for carbon-neutral cities:Carbon neutral cities are able to reducetheir ecological footprint throughenergy efficiency and by replacing fossilfuels, thus providing a basis forecological regeneration by creatingoffsets in the bioregion.

� Distributed power and water systems:The development of distributed powerand water systems aims to achieve ashift from large centralized power andwater systems to small-scale andneighbourhood-based systems withincities. This can enable a city to reduceits ecological footprint, as power andwater can be more efficientlydistributed.

� Improving eco-efficiency: In an effortto improve eco-efficiency, cities andregions are moving from linear tocircular systems, where substantialamounts of their energy and materialneeds are provided from waste streams.This involves the adoption of a moreintegrated notion which sees cities ascomplex metabolic systems whereoutputs traditionally viewed as negative(e.g. solid waste, wastewater) are re-usedas productive inputs to satisfy otherurban needs, including energy.

� Developing cities without slums: ‘Citieswithout slums’ is presently one of themost important goals of urban planningin developing countries. Attaining thegoal of cities without slums will requireinnovative approaches that can enableslums to be upgraded, if not as models ofsustainability, certainly in ways thataddress the most pressing brown andgreen agenda challenges of poor access tosafe drinking water and sanitation as wellas degrading environmental conditions.Introducing strategies for synergizingthe green and brown agenda in citieswill not be possible without viable andappropriate urban planning systems.

Uurban Informal SectorThere is no single planning model for

responding effectively to urban informality.The challenge is to devise an approach toplanning that is capable of tackling the

undesirable outcomes of informality whilerecognizing the contribution of informaldevelopers, entrepreneurs and serviceproviders to the urban developmentprocess. Governments should pursue athree step reform process:� Firstly, recognising the positive roleplayed by urban informal development;

� Secondly, considering revisions topolicies, laws and regulations tofacilitate and improve informal sectoroperations; and,

� Thirdly, strengthening the legitimacyand effectiveness of planning andregulatory systems on the basis of morerealistic standards.

The following strategies offer potentialand should also be pursued.� Alternatives to eviction: Internationallaw now regards forced eviction as ahuman rights violation and urgesgovernments first to consider allfeasible alternatives and, second, toadhere to good practice guidelines ifeviction is necessary.

� Regularization and upgrading ofinformally developed areas:Regularization implies recognition andprovision of secure tenure, whileupgrading generally focuses on theprovision or improvement of basicservices, although it may also involve re-planning and redevelopment to ensurecompliance with planning and buildingregulations. Formalization of tenure isgenerally taken to involve the provisionof title to individual plots – thestrongest legal form tenure rights cantake.

� Strategic use of planning tools: Thisinvolves using public planning andfinancial resources strategically to guidedevelopment. Some of the specific toolsinclude the construction of trunkinfrastructure to encouragedevelopment in planned directions andto generate revenue for publicinvestment, and land readjustment,whereby city authorities consolidateparcels of land for service provision andsubdivision through mutually beneficial

agreements with landowners.� with informal economic actors tomanage public space and provideservices: This involves the recognition ofinformal entrepreneurs’ property rights,allocation of special purpose areas forinformal activities and provision of basicservices and support to informaloperators and support of informaloperators’ organisations.

Planning, Spatial Structure of Citiesand Provision Infrastructure

The sprawling slums of many cities arethe most visible manifestations of poorprovision of infrastructure. Not only dosuch settlements tend to lack access todrinking water and sanitation facilities,access is also likely to be difficult sincemass transit systems are often poorlydeveloped, and areas accessible to the poormay not be located on main routes.

The growth of peri-urban areasaround cities, particularly as urban growthoutpaces infrastructure development, isone of the most prominent currentchanges to urban structure. In Asia, this isoccurring on a dramatic scale: in Jakartaand Bangkok, some 77 and 53 per cent ofurban growth by 2025, respectively, isexpected to be in peri-urban regions, whilein China, some 40 per cent of urbangrowth by 2025 is expected to be in peri-urban areas as far as 150km to 300km fromcore cities.

Since the late 1970s, the privatizationof infrastructure development andprovision, and developer-driven urbandevelopment has tended to drive patterns ofurban fragmentation and spatial inequalityin many countries. Although the privatesector has tended to focus on moreprofitable aspects of infrastructuredevelopment (including the development ofgated communities), privatized provision ofservices has also occurred in poorercommunities. While these processessometimes extend services to areas thatwould not otherwise have them, they alsoimpose considerable costs on the poor.

To enhance the sustainable expansionof cities and facilitate the delivery of urban

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services, urban local authorities areincreasingly formulating infrastructureplans as key elements of strategic spatialplans. Such strategic spatial plans, linked toinfrastructure development, promote morecompact forms of urban expansion focusedaround accessibility and public transport.

The structure of road networks andpublic transport systems shapes the spatialorganization of many cities, and has been acrucial element in attempts to restructurecities spatially. However, theaccessibility–value relationship has meantthat lower-income groups have had littlechoice of where to live and work. Inaddition, the availability of trunk lines forwater and sewerage and transmission linesfor electricity in particular areas reducesdevelopment costs and has also influencedpatterns of growth. This type of bulkinfrastructure is also increasingly seen as akey element in shaping patterns of spatialdevelopment, after road and publictransport networks.

The increasing focus on strategic spatialplans, linked to infrastructure development,promote more compact forms of urbanexpansion focused around accessibility andpublic transport. The importance ofpedestrian and other forms of non-motorizedmovement also require recognition.

Transport–land-use links are the mostimportant components in infrastructureplans and should take precedence, whileother forms of infrastructure, includingwater and sanitation trunk infrastructure,can follow. The public sector shouldprovide the main routes and infrastructuretrunk lines in advance of development,allowing the private sector, NGOs, otheragencies and communities to connect tothese main lines as they are able.

There is also a growing movementthat supports small-scale, neighbourhood-based distributed infrastructure systems,especially for water and power supply.

Clearly, what is possible varies acrosscontexts: in many countries, much moreambitious planning is feasible, andstrategic spatial plans linked toinfrastructure development might promotemore compact forms of urban expansion

focused around public transport, andattempt to improve urban services,environmental conditions, economicopportunities and livelihoods on theexisting urban periphery, as well as inrelation to new development.

The involvement of a wide range ofstakeholders is essential to thedevelopment of a shared and consistentapproach, but the infrastructure plan itselfalso needs to be based on credible analysisand understanding of trends and forces.The plan should also provide the meansfor protecting the urban poor from risingland costs and speculation, which are likelyto result from new infrastructure provision.

The Monitoring and Evaluation ofUrban Plans

Monitoring and evaluation of theimplementation of urban plans hasbecome part of practice in the moreprogressive planning departments of citiesand regions in developed countries.However, in the transitional anddeveloping countries, very little progresshas been made so far in embracingmonitoring and evaluation as integral partsof the urban planning process.

In developing countries, the mostextensive application of monitoring andevaluation has occurred as part ofdevelopment programmes that are fundedby international agencies, managed by stateorganizations and implemented by localauthorities. There is less evidence ofcommunity/official urban plan-levelmonitoring and evaluation in developingcountries. There are typically few resourcesfor planning generally, and especially forplan enforcement or monitoring.

Monitoring and evaluation of urbanplans should be mandated under nationaland/or state planning legislation. Planmonitoring and evaluation should beconsidered an essential part of urbanplanning practice and local governmentadministration. Monitoring andevaluation should be made a legalrequirement, supported by relevantlegislation (e.g. a planning anddevelopment act).

Urban planning systems shouldintegrate monitoring and evaluation aspermanent features. This should includeclear indicators that are aligned with plangoals, objectives and policies. Urban plansshould also explicitly explain theirmonitoring and evaluation philosophies,strategies and procedures. Use of too manyindicators should be avoided and focusshould be on those indicators for whichinformation is easy to collect.

Planning EducationA survey undertaken for this report

indicates that there are about 550universities worldwide that offer urbanplanning degrees. About 60 per cent (330schools) of these are concentrated in tencountries. The remaining 40 per cent (220schools) are located in another 72countries. In total, there are at least 13,000academic staff in planning schoolsworldwide. While developing countriescontain more than 80 per cent of theworld’s population, they have less than halfof the world’s planning schools.

Urban planning education in mostcountries has moved from a focus onphysical design towards an increased focuson policy and social science research.Graduates from planning schools focusingon physical design find themselvesincreasingly marginalized in a situationwhere planning processes progressivelyrequire knowledge of issues related tosustainable development, social equity andparticipatory processes.

Urban planning schools shouldeducate students to work in differentcontexts by adopting the ‘one world’approach. Some planning schools indeveloped countries do not educatestudents to work in different contexts, thuslimiting their mobility and posing aproblem for developing country studentswho want to return home to practice theirskills. The ‘one-world’ approach toplanning education is an attempt toremedy this and should be encouraged.

A complementary measure is thestrengthening of professional organizationsand international professional networks.


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Such organizations and associations shouldbe inclusive, as other experts with non-planning professional backgrounds aresignificantly involved in urban planning.

Finally, urban planning educationshould include tuition in ethics and keysocial values, as planning is not ‘value-neutral’. In this context, tuition shouldcover areas such as the promotion of socialequity and the social and economic rightsof citizens, as well as sustainable urbandevelopment and planning formulticultural cities. Recognition andrespect for societal differences should becentral to tuition in ethics and socialvalues, since effective urban planningcannot take place and equitable solutionscannot be found without a goodunderstanding of the perspectives ofdisenfranchised and underservedpopulations.

In addition to traditional degree courses,planning schools should also addressimmediate capacity shortfalls in the urbanplanning profession by providing capacity-building short courses for practicing plannersand related professionals.

Towards a New Role for UrbanPlanning

There are several broad, elements thatneed to be recognized and taken intoconsideration in urban planning. Theserange from acceptance of the need to reviseurban planning, through the ways in whichinnovative approaches and practices inurban planning are implemented, to howthe relationship between urban planningand the market is addressed.� The need to revise urban planning:For planning to be an effective tool,urban planning systems in many partsof the world will need to be revised. Amajor conclusion of this Report is thaturban planning systems and approachesin many parts of the world are notequipping governments with thenecessary tools to deal with key urbanissues of the 21st century. The natureand scale of current and impendingurban problems are of such amagnitude that government and civil

society interventions to manage urbanchange will be imperative..

� Planning innovations must be shapedby context: If planning is to play asignificant and positive role, it needs tobe recognized that there is no one modelof system of urban planning that can beapplied in all parts of the world. TheReport reiterates that a great diversity inurban conditions exists throughout theworld, and that one important reasonunderlying the failure of urban planningin developing countries is, in part, theimportation of ‘foreign’ models andapproaches. Usually, these models arebased on assumptions and contextswhich do not hold in the importingcountry. When this occurs, the result isineffective and inappropriate planning.While it is certainly possible to generalizeabout urban planning ideas andconcepts, the way in which these mightbe used will be highly dependent uponcontextual factors.

� Embedding innovative ideas: Veryoften, innovative planning ideas or newapproaches are simply ‘bolted on’ as anadditional and parallel process toexisting or conventional practices andregulations, leaving the underlyingsystem to continue with business asusual. And where there is a clashbetween the norms and values driving innovative planning ideas, andthose affected by such ideas, then thereis a tendency to selectively ignore or usenew ideas and combine them in variousways with conventional practices. Itneeds to be emphasized that innovativeplanning ideas will only be effective ifthey articulate closely with theinstitutional arrangements, and culturalvalues and norms of the context inwhich this is taking place.

� Urbanization as a positivephenomenon: Any new role for urbanplanning must acknowledge thaturbanization is a positive phenomenon,and a precondition for improving accessto services, economic and socialopportunities, and a better quality oflife for a country’s population.

� Recognizing the environmentalchallenge: Any new role for urbanplanning must duly recognize theenvironmental challenge that urban areasincreasingly have to contend with. Overthe next decades, cities and towns in allparts of the world will have to makeadjustments that may be more profoundthan at any other time in their history.These will be in response to climatechange and resource depletion, all ofwhich will pose new challenges. Forinstance, coastal settlements will face thechallenge of responding to differentcoastlines and sea levels, somesettlements will face new water shortages,while others will need to find ways ofdealing with the effects of flooding – andall urban places will have to change theirdependence upon oil as an energy source.Reconfiguring cities from car dependentto public transport-based and non-motorized movement systems may be themost significant spatial change that has tobe faced. What these changes imply isthat governments will have to return toan interventionist role in cities not seensince the post-war period in thedeveloped world, and perhaps never seenin parts of the developing world. Thoseurban governments that fail to intervene,or do not have the capacity to do so,could be left with devastated cities anddepleted populations.

� Relationship of urban planning to themarket: New approaches to planningwill need to redefine the relationshipbetween the planning system and themarket. Planning has traditionally beenperceived as simply ‘red tape’, stiflingeconomic progress. Unless the planningsystem can be seen to provide anefficient and useful service for theprivate sector, it will always be subjectedto attempts to bypass, subvert orcorrupt it. Planning system must befirm enough to deal with theexternalities of private developmentand to extract public financial gainwhere it is due. The actions achieving more effective

urban planning will vary from region toregion.

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Overview of the Housing Scenarioin India

The Real Estate and Construction

sector in India plays a significant role in

terms of value contribution to the

country’s economy and in terms of

employment offered and this role is

expected to grow even further. With

almost 80 percent contribution towards

overall property development, the

residential segment is projected to drive

real estate demand in the country,

accounting for nearly 63% of the total

space demand (amounting to 687 million

square feet) during the period 2008-12.

Given the existing shortage of 24.71

million urban dwelling units and

increasing urbanization, it is projected that

over the next 10 to 15 years, 80 to 90

million housing dwelling units will have to

be constructed with a majority of them

catering to middle and lower income

groups. The Planning Commission

estimates that alleviating the urban

housing shortage could potentially raise

the rate of growth of GDP by at least 1 to

1.5 percent.

The Government formulated the

National Urban Housing and Habitat

Policy (NUHHP) in 2007 with an aim to

provide “Affordable Housing for all” and

have declared 2009-2010 as the year of

affordable housing. Considering that

nearly one out of every four persons reside

in slums in cities & towns, it is not without

reason that the Government has set

themselves a target of making India slum

free within five years. In addition to

initiatives by various cities and states, the

central government has announced a

scheme named ‘Rajiv Awas Yojana’ to offer

the urban poor a dignified living

environment including an affordable

home.

The Government has acknowledged

that the task ahead is indeed humungous

and is therefore looking to encourage

public private partnership in housing. The

PPP model where the state offers land and

private developers bring in capital and

efficiency is envisaged as a possible cure for

housing problems. Apart from the funds

and incentives that are required of

partnership schemes, the importance of

skilled manpower and capacity building

need to be taken up and addressed in a

bigger way so that the local government

and private sector are equipped with the

requisite skills, knowledge, experience and

capacity to execute these ambitious reform

based projects.

Issues of manpower, productivityand quality

Despite the strong all round growth

and long term potential, the real estate and

construction sector continues to be riddled

with impending challenges pertaining to

problems of high fragmentation, low

productivity, poor quality and lack of

standards. Many projects are plagued by

time and cost overruns and include

disputes that may need to be resolved by

legal means or arbitration. The industry

has therefore earned a reputation of sorts

of being ineffective and inefficient, ill

suited for meeting today’s challenges.

The eleventh five year plan

acknowledges shortage of skilled

manpower, both at worker and supervisory

levels, as well as the lack of experienced

construction engineers and inadequate

quality in construction works as major

impediments in raising the productivity

Sachin Sandhir, MD & Country Head , RICS



levels. The inadequate quality in

construction works emanates from lack of

incentives for inducting new technology,

lack of pre-qualification requirements for

trained and certified workmen, lack of

appreciation for lifecycle costing approach,

and lack of adequate R&D. In order to

enhance the technological capabilities of

the industry, it urges all stakeholders to

actively support training and certification

levels for skilled workforce and promote

construction techniques that use

information technology.

The plan identifies strengthening of

urban local governments through capacity

building as a key strategy for urban

development and recommends setting up

of an apex agency to coordinate the

activities of national and state level

training institutions. Administrative

Reforms Commission has also proposed

urban governance capacity building

programme in order to address capacity

gaps in urban local bodies.

Manpower situation – existingshortage and future requirements

The Indian economy is facing a

significant shortage of skilled workers

across various sectors of the economy.

With respect to the construction and real

estate sector in India, the strength of

skilled workforce has been consistently and

substantially going down from 26.0% in

1995 to 17.50% in 2005, whereas relative

proportions of unskilled workers have

gone up from 73.08% in 1995 to 82.45%

in 2005 .

In this context, the shortage of skilled

manpower is significantly hampering the

construction industry. According to the

Construction Industry Development

Council (CIDC), shortage of specialized

workforce in the Indian construction

industry is approximately 33 percent. The

shortage of manpower at the senior level is

more acute at an estimated 60 percent.

Recent press estimates put the shortage of

the skilled workforce in housing and

construction sector at 2 million persons.

The shortage of skilled workers is slowing

down the construction activity in many

States and it has been observed that

construction work is being delayed by an

average of 6 months to a year because of a

talent crunch.

It is quality over quantity that is

forcing developers to import architects,

designers and planners from countries

such as Singapore, Thailand, Australia and

New Zealand on handsome salaries thereby

pushing up the project costs and impacting

profitability. In addition to this, project

management is emerging as a large

challenge in construction projects with

international analysts such as Citigroup

stating in their coverage on the

Construction sector that they foresee

sizeable execution and cost overrun risks.

Larger investments in infrastructure

will result in an increased demand for

construction and real estate professionals.

The Eleventh Five-Year-Plan forecasts a

manpower requirement of 3.72 million

man-years for engineers and 8 million man-

years for technicians and support staff in

the construction and real estate sector.

With several ambitious projects on anvil

during the Eleventh Plan, the demand for

construction manpower is expected to

grow at a consistent pace of at least 10%-

12%, thereby resulting in an annual

accretion of around 3.5 million persons to

the existing stock.

Current education systemsAs compared to the demand, the

existing educational institutions and

professional bodies have not been able to

scale up the delivery of qualified

professionals to the sector. Apart from

Civil Engineering, Town Planning and

Architecture, the current education set-up

in India does not adequately provide for

specific curriculum requirements and

specialized courses for the construction

and real estate sector. Barring a few

institutions such as, National Institute of

Construction Management and Research

(NICMAR), Construction Industry

Development Council (CIDC), National

Academy of Construction (NAC), Centre

for Environmental Planning and

Technology (CEPT, Ahmedabad) and

Indian Institute of Real Estate (IIRE)

which cater to a very small percentage of

the people employed in the sector, no

professional training and certifications are

available for the professionals in this

sector. As a result, most people currently

employed in the sector learn fundamentals

of the business on the job and hence the

quality of professionals employed and the

quality of work delivered, leaves a lot to be

desired.

Government initiatives towardscapacity building initiatives andskill development

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The Government is cognizant of the

above challenges and has initiated several

steps to address these issues. Some of the

initiatives impacting the real estate and

construction sector are mentioned below-

� In 2008, the Government of India set

up the National Council on Skill

Development (NCSD) and a not for

profit trust named National Skill

Development Corporation (NSDC) to

encourage private sector participation

in the field of skill development. A total

of Rs.10 billion has been provided for

this initiative which will later go up to

Rs.150 billion. NSDC will put special

emphasis on 20 high-growth, high-

employment sectors which include the

construction and real estate sectors.

� The Department of Economic Affairs

(DEA) in collaboration with the World

Bank undertook a study to examine

how capacities for conceptualizing,

structuring and managing PPPs could

be developed in India. To intensify and

deepen the capacity building of public

functionaries (target officials of Central

and State Governments, para-statal and

local government bodies across

functional Domains), DEA is

developing a comprehensive capacity

building programme, in collaboration

with World Bank and other

Bilateral/Multilateral agencies. It would

include conducting of a training needs’

assessment, development of course

content, training of trainers and roll-

out through of the programme through

few demonstration modules for the

initial handholding of trainers.

� The ministry of housing and urban

poverty alleviation (HUPA) has taken

on Capacity Building to address issues

of slums & poverty as part of their 100

day agenda. With an objective to create

and enhance human resource and

institutional capacity to implement

programmes for the urban poor, the

ministry has prepared and circulated a

toolkit on comprehensive capacity

Building programme to all State/UT

Governments. Financial assistance is

being provided for skill training,

capacity building, and City/State urban

resource centres.

� The National and state housing policies

make the Urban Local

Bodies/Development

Authorities/Housing Boards

responsible to develop capacity building

at the local level through suitable

training programmes

� Aimed at operationalizing National

housing policy and as a part of

JNNURM, a scheme for affordable

housing in partnership has been laid

down by HUPA. The scheme along

with the criteria guidelines and

incentives for PPP, lays down a

provision of 5% grant for meeting

administrative expenses including

capacity building and project

monitoring.

� For better implementation and

monitoring of the projects sanctioned

under JNUURM, the following are

underway – (a) Capacity building and

communication activities for slow

performing cities through Rapid

Training Program (RTP) (b) Peer

Experience and Reflective Learning

(PEARL) to foster cross learning among

cities and institutions (c) Supporting

professionally manned Programme

Management Unit (PMU) at State level

and Programme Implementation Unit

(PIU) at ULB level

� To address the needs of those

municipal bodies which are not covered

under JNNURM or other Government

schemes, a Capacity Building Scheme

for Urban Local Bodies was launched in

2008-2009 for providing grants to build

capacities of the officials and elected

representatives in ULBs. Under this

scheme, the long term Capacity Needs

are envisaged to be addressed through

� Academic and Professional Institutions

which shall be encouraged and

supported in introducing courses

aimed at improving Urban

Management.

� Induction training for key policy

makers and administrators on Urban

Management shall be encouraged at all

levels.

� In order to promote excellence in

specific areas of urban management,

project implementation and urban

governance, it is proposed to set up

Centres of Excellence in reputed

institutions in the country to create the

necessary knowledge base for improving

municipal service delivery and to foster

cutting-edge and crosscutting research,

capacity building and technical

knowledge base.

� Financial support will be extended to

the identified institutions/Cities/States

for setting up of such centres of

excellence

Role of the RICS in capacitybuilding for the real estate andconstruction sector

The Royal Institution of Chartered

Surveyors (RICS) is the world’s leading self

regulatory professional membership body

for qualifications and standards in land,

property and construction, and has over

150,000 members in more than 146

countries practicing across 17

specializations. A non profit body

headquartered in London, RICS is

governed by a Royal Charter provided by

Royal Charter, granted to it by Her

Majesty's Privy Council in U.K, which

requires it to work in public interest.

To this end, RICS has developed and

operates high standards of entry to the

profession together with a continuing

commitment to maintain and advance the

highest technical, professional and

regulatory standards covering all aspects of

property, construction and associated

environmental issues. The membership of

the RICS represents the Pre-eminent

Chartered qualification for professionals


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in the sector and is considered the mark of

property professionalism worldwide.

In addition to providing a global

qualification, RICS sets professional

standards, industry best practices and

guidance in different areas including

Property Valuations (IVS compliant Red

Book) Construction (Black Book),

Quantity Surveying (Rules of

Measurement), Facilities Management

(White Book), Project Management,

Commercial Property to name just a few

and will be introducing these standards in

India with an aim to have these standards

institutionalized in the times to come.

RICS also accredits more than 500

academic courses across institutions all

over the world. To name a few institutions,

RICS has collaborated with Massachusetts

Institute of Technology (MIT), MIT Center

for Real Estate; Johns Hopkins University,

Edward St John Department of Real

Estate; Nottingham Trent University;

Oxford Brooke’s University, Department

of Real Estate & Construction and

London School of Economics among

many others. RICS assesses each relevant

university programme to ensure there are

both an appropriate curriculum and the

resources in place to enable the delivery of

the programme to meet the high standards

demanded by the RICS.

RICS launched in India in Dec 2008

with a mission to work towards elevating

the standard of professional performance

in the Indian real estate industry and to

bring in international standards and best

practices. Since then, RICS India has

made considerable progress in building a

strong membership base, comprising of

some of the most eminent names in the

real estate and construction industry.

RICS is already working with some of the

top Global firms in India ensuring that

their staff satisfies the stringent standards

for qualification that RICS imposes.

As in other parts of the world, RICS

will be accrediting reputed Indian

educational institutions that meet the high

standards set forth by RICS and train

professionals to contribute to the growing

need for skilled manpower in this sector.

The process of short listing academic

institutions and evaluating the courses

both at undergraduate and post graduate

level has been initiated.

Going forth, RICS will endeavour to

contribute to the nation building process

especially in this critical area of skill

development and up-gradation. The most

complimentary, appropriate and

important nation building exercise that

RICS India plans to undertake, is to step

in the field of Education and Training by

offering specialized courses in a variety of

disciplines within the real estate and

construction sectors. These courses will

cater to a huge industry demand, where

presently there is virtually no one

providing the supply.

To start with, RICS will offer distance

learning, online and executive education

programs to focus on specialized skills

development for professionals employed in

the sector and in the times to come, RICS

India will establish a world class institution

offering campus based programs. In

addition to the educational courses, RICS

will be conducting a host of professional

development workshops across the nation

to spread awareness of internationally

recognized best practices across disciplines

such as construction standards, quality

safeguards & guarantees, contracts and

dispute resolution, design & technology,

green environment & sustainability which

will all contribute to the developers gearing

up to manage larger size projects than they

have historically been exposed to. Within

the last 6 months, RICS India has already

conducted workshops in urban

sustainability and green buildings as well as

property valuation as per international

valuation standards and will be holding

workshops in construction management

and contract administration later this year.

Path Ahead: need for institutionalframework as a backbone forproviding skilled manpower

The Government, industry

associations, educational institutions, real

estate and construction companies are all

taking unique steps to try and bridge the

skill gap. While efforts are being made,

they are currently being carried out in

isolation resulting in sub-optimal results.

There is need to expand the training and

skill certification programmes, both in

terms of content as well as geographical

reach. What is required is a coordinated

effort from all stakeholders including

Government, industry association,

educational institutes and companies to

come together and build strategies,

framework and identify effective and

scalable solutions to bridge the demand-

supply gap for skilled manpower.

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ut simply,

environment is the surrounding. The

depth of the word ‘environment’ is much

more complex than its uncomplicated

definition sounds. Environment, though

intricate is a naturally delicate balanced

system that facilitate the orderly growth

and development of innumerable elements

of this universe. Ironically, human beings

who are benefitting the most from this

benevolent natural boon are transforming

rapidly into its foremost destroyers. The

mankind and its irresponsible, reckless and

ungrateful outlook towards environment

have posed a major threat to its

sustainability. The non-exhaustive list of

unnerving activities like large scale

destruction of forest lands, merciless felling

of trees, over-extraction of minerals, metals

and oils, callous dumping of

industrial/household wastes into rivers

and streams and many more are

contributing dangerously towards fast

paced rate of degradation and pollution.

In the process, funnily, human beings

cared little for its own survival who failed

to realize its sole dependence on nature

and its salubrious environment. As a fish

is to the water; we are to the environment.

The far-reaching presence of the term

`environment’

permeates to every

aspect of human life

– employment, food,

housing, clothing,

health, education,

entertainment, travel, etc;

The absence or scarcity of any

of them would leave the human life

crippled, which underscores the need for

re-orienting human attitudes towards

nature. The evolution of human attitude

from that of a `destroyer’ to that of a

`protector’ is the only savior. Agreeably,

the path towards recovery may be steep, the

distance to be covered may be long, the

cost involved may be high; yet this change-

over is a pre-requisite for maintaining

sustainable environment for securing

survival with dignity.

Elements of nature - air, water, earth,

sky, flora and fauna are the most precious

gifts of nature to the mankind to be enjoyed

in right measures. As a saying goes, “we give

what we take”, hence recouping them to

maintain the ordained balance for ever is

essential. The components of nature as

proven are not limit-less; if exploited

ruthlessly their speedy depletion is assured,

which may create chain reactions and

rapidly degenerate other components. As

appropriately stated by environment

scientists, human beings of today can only

‘borrow’ these components for their use

during their limited life time and are

required to be `left intact’ for the similar

use of the next generation and generations

thereafter. Rules and regulations,

howsoever unwritten they may be, are

sacrosanct and inviolable, for this borrowed

use. The rules demand strict compliance

and adherence factor; after all the choices

before mankind is limited, either live with

prosperity or perish with misery.

You count one, we have plenty! This

goes without doubt for ever increasing

causative factors which lead to the over-

exploitation of nature’s pride and gradual

environment degradation. One such

attribute is the rapid population growth.

The twentieth century has witnessed

India’s population leap by over 335% -

from 238.4 million in 1901 to 1027 million

in 2001.

Source: Registrar General; Census of India,

2001

** State of World Population, 2008 -

UNPF

The accelerated economy growth rate

has added to the agony of robust

population pressure. This has widened the

gap of demand and supply of forest resources

which seems un-bridgeable. The limited

supply is unable to satiate the ever-increasing

demand of fire-wood timber and pulpwood

during the last few decades. In addition,

needs of woody materials for packaging and

panel products and wood-based

Dr. M. L. Khurana, MD, NCHFI

P


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Table I: Growth of Population in India

43


manufacturing units have also gone up.

Statistics about the type of fuel used

for cooking by Indian households show

that as much as 61.5% of the households

used wood. This was as high as 72% in the

case of rural areas. For many states this

percentage ranged above 95%. This is an

indication about the huge destruction

being caused to the forest covers through

the felling of trees and cutting of tree

branches and plants.

Once what camouflaged the real

colour of land with its spread of green has

been sadly disappearing due to denudation

of forested areas. The effect of

deforestation is a chain reaction:

Degradation of watershed has already

shown its effect by depleting the water flow

in rivers and water falls. Lower water

absorption rate and surface run-off of rain

water is resulting in the lack of recharging

of underground water, the underground

water table is progressively receding deeper

and deeper, and the area of drought prone

zone has been increasing. Wells and tube-

wells dry-up during summer, the same is

true in case of ponds, tanks, etc. Soil

erosion has become frequent. All this and

many more consequences of destruction of

forests are impacting the productivity of

our crop land greatly.

Since the ancient age of scripting

Indian literature called Vedas, the emphasis

was on the environment, its umpteen uses

and the doom what can be drawn upon if it

is not preserved. The Matsya Purana says,

"Ten sons are equal to a tree”, which implies

that a single tree gives one the comfort and

support as much as ten sons are capable of

giving in their lifetime. Safeguarding a

country from all spheres requires the forests

to be well protected by its keepers; it is stated

nowhere else but in Yajur Veda. Our Vedas

prohibit the wastage and polluting of water

and other natural resources. They professed

the importance of villages and towns to be

surrounded by cluster of trees, whose

gradual effects can protect us from storms

and keep a check on the growth of deserts.

Indian epics, fables and parables were

incomplete without references to the

forests, trees and charming gardens

(vatikas)! Be it Rama’s exile into lush

woods in Ramayana or our rishi-munis

who practiced physical and spiritual

austerity their forest ashrams. It is believed

that they reared the trees as their own sons.

The concept was pristine since those times

that the trees were the lifeline (pran) for

existence as they absorb harmful gases like

carbon dioxide and emit life-giving oxygen

(pran-vayu) for the benefit of manunshya

(Humans). Besides the overall attitude of

respect that they taught, they even thought

of certain yajnas to purify the air. In

Indian customs, purposeless destruction of

the banyan, peepal (Sacred Fig tree),

mango and tulsi (Holy Basil) are

considered inauspicious and hence

prohibited. Man was meant to live in

harmony and communion with prakriti

(nature). For obvious reasons the

equilibrium between man and nature was

not supposed to be altered.

In retrospect, it can be believed that

our Vedic Rishis seem to have foreseen the

environmental degradation that is now

worried over by environmentalists. As eras

and centuries flipped by, our rivers went

on being polluted and if this trend

continues and touches a point of no-

return, drinking water; the base of life, will

be a chronic issue. Products produced out

of polluted land are poisonous and as a

result there is a substantial rise in diseases

and epidemics. One would not understand

the value of water unless deprived from

even a drop of it.

Recently addressing an eminent

gathering at Birmingham (UK)

Dr.A.P.J.Abdul Kalam, former President of

India, said “I have a vision of India where

each of our 20 Crore children plants five

trees each, we would be able to plant a

Billion trees to help preserve our land,

improve our climate and make our

environment more sustainable.” By

replenishing nature we are giving ourselves

a chance to breathe and live more. The

choice remains ours, end of a civilization

or beginning of one.

Mahatma Gandhi quoted, “There is a

sufficiency in the world for man's need but

not for man's greed.” With advancement

of technology and changing life styles

people are hoping to achieve maximum in

minimum time, which are visible through

the changes in their consumption pattern,

new travel modes, faster and multiple-use

transport vehicles, increased mobility,

social and cultural change-over etc. A strive

for betterment in lives of the masses are

evident from our surroundings and, in

order to satisfy the emerging fresh needs,

some elements of the fragile but balanced

environment are getting over-exploited.

Since some of the components of

environment are non-replaceable, they are

permanently destroyed, leaving un-filled

gaps which lead to an imbalanced natural

environment around us which further

leads to sub-par realization of various socio-

economic goals and objectives.

The system of nature, of which man is

a part, tends to be self-balancing and self-

cleansing. The opportunity is now to

amend and rewind the loss. A bend

towards vegetarianism is must if the world

is to conquer climate change as per Lord

Stern of Brentford, a leading authority on

global warming. He says “Meat is a

wasteful use of water and creates a lot of

greenhouse gases. It puts enormous

pressure on the world’s resources. A

vegetarian diet is better. Direct emissions

of healthcare from cows and pigs are a

significant source of green house gases.

Methane is 23 times more powerful than

carbon dioxide as a global warming gas.”

The Hon’ble Prime Minister

Dr.Manmohan Singh recently has been

noted iterating the importance of

preservation of environment. He said that

“Environmental sustainability is an

important objective and the government

had readied a National Action Plan on

climate change outlining the country’s

response in this critical area. The National

Action Plan focuses on increased energy

efficiency and greater use of clean energy

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technology. However, he made it clear that

damage of the environment was not a

result of developing countries’ action.

“(This is….) not as a result of anything that

we have done. In recognition of common

but differentiate capabilities, which is our

hope that while all the countries will be

required to contribute according to their

capacities and abilities, the world’s major

economies will be prepared to (ensure that)

large capital flows become available for

integration for adaptation measures”The threat to the planet Earth is not

limited to India; it has seeped through thepermeable activities and behavior ofhuman beings. However, fortunatelyenough the respective Governments andcitizens all across have arisen in awareness.Few noted actions taken by variousGovernments are as follows:1. India has released the National ActionPlan on Climatic Change on 30th June,2008. The plan was an amalgamation ofeight missions such as the NationalSolar Mission, the National WaterMission, the National Mission forEnhanced energy Efficiency, etc. One ofthe eight missions is the NationalMission for Sustainable Habitat, whoseprimary goal is to promote sustainabilityof habitats through improvements inenergy efficiency in building, urbanplanning along with improved recyclingmanagement of solid and liquid wastesand power generation. The focus is alsoon the model shift towards publictransport and conservation of energy.

2.Maldives’ biggest threat off-late is the fearof being swamped by the rising sea levels.An appeal for concerted action on climatechange with its Cabinet has resulted in theworld’s first under-water meeting tohighlight the danger posed to low-lyingnations like it by global warming. 3. The Government of Nepal is proposingto hold its next Cabinet Meeting at basecamp of the world’s highest mountain-Mount Everest to highlight the impactof global warming on the greatHimalayan glaciers.

4. On 4th November, 2009 representatives

of World’s leading faiths gathered atWindsor Castle at the invitation of theDuke of Edinburgh to discuss the roleof religion in protecting the planet. Thegathering was addressed by UnitedNations Secretary General Ban Ki-moon. He urged to the worldwiderepresentatives of the Hindu, Muslim,Sikh, Christian and Buddhist faiths totake inspiration from spiritual leaders tobring the weight of their moral authorityto “act more courageously” in meetingthe challenge of climatic changes. `House’ is pre-requisite for a

harmonious social environment and animportant aspect of human life as it providesto the people the much needed shelter andsecurity to exist and perform their activities.It is locus of human life which not onlyprovides spatial identity but also bindindividuals into a family strengtheninghuman relationships. It is also the place wherethe food for the family is cooked, served andconsumed and essential function for the verysurvival of the family members. It iscustomary to keep the house and itsenvironment clean, take care of its aestheticvalue. The house, though non living reflectsthe mood of its family members. As it bubbleswith spirit and enthusiasm during anyauspicious occasions; it is also a mute witnessto the loss, destruction and death occurring tothe household members. It is an inseparablecomponent of life. Thus, it witnesses birth,survival and death, the inevitable process ofhuman existence. A house becomes themicro-unit of the State and social well being ofeach house collectively determines the state ofaffairs of the State. Since a house itself iscomposed of numerous components derivedout of nature, the development of housingalso calls for a very careful exercise to ensurethat the house construction activities do notvitiate the environmental balance. Thecrucial housing inputs like construction landmaterials especially wood-based items aredirectly related to environment and only theirjudicious use alone can prevent depletion ofthese natural elements. Housing cooperativesover the last century have evolved as aneffective medium for providing shelterespecially for the weaker sections of the

society; they feel proud to have adoptedenvironment friendly measures to safeguardthe environment. The housing cooperativesstrongly oppose the use of arable agriculturalland as housing-sites; instead they areencouraged to be located on non-arable landeither within or in close proximity to existinghuman habitations. Members of housingcooperatives’ motive are to use the technologyoptimally so that they can depend on locallyavailable fabricated building components. Inan attempt to go greener, usage of wood basedcomponents have drastically been reduced,instead substitutes manufactured out of wastematerials like saw dusts, gypsum and strawmixtures, etc. are gaining importance.Following plan of action should be adoptedfor achieving sustainable housing settlements.•Promoting land-use planning andmanagement•Promoting energy efficient andenvironmentally compatible buildingmaterials and construction technologies.•Promoting integrated provision ofenvironmental infrastructure where maincomponents are water supply, sanitation,waste management and drainage.•Strengthening of regulatory andmechanisms for national standards andcodes developed for sustainable.By a sheer quirk of fate, the millions

of people who are living in the slum areasare also albeit contributing their mite inlessening the depletion of precious andscarce natural resources; though thecontributions by them result out ofcompulsion rather than by choice. Back inthe villages from where they had originatedin search of greener pastures, theenvironmental conditions werenonetheless better. Their only goal appearsto be to live as close to their work centresas possible. In the process, too manypeople come to squat on limited land areaslocated generally by the sides of railwaytracks, parks, gardens and playgrounds aswell as un-constructed plots within thebustling city. Their housing structures aremade of purely temporary and to an extentdegradable materials like gunny bags,plastic sheets, packing cartons, brokenbrick pieces, bamboos and dry leaves/reeds


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without many components which maycause depletion of natural resources.

The National Cooperative HousingFederation of India (NCHF) which isspearheading the cooperative housingmovement in the country had drawn upthe blue-print of an ambitious programmeof re-settlement of squatters in freshlocations in proper layouts andfunctionally suited small housingstructures through cooperative movementof the beneficiaries. This is the tip of aniceberg which leads to a large revolutionarychange that could bring huge difference inthe lives of millions of our slums dwellersthrough cooperative efforts.

I am sure each one of us sigh a breath ofsympathy when we see a slum and it iseconomically and socially torn dwellersstruggling all odds even to muster minimumhuman comforts like safe drinking water,toilet and clean environment. However,collectively through the medium of housingcooperatives, once they are facilitated tomove towards their `own’ small shelters, itwould be a great relief to these haplessmillions to atleast stand up and lay hands onsomething which they can call their own andcan survive with few basic amenities. It isquite impressive noting that the initiativetaken by the NCHF have some takers inFaridabad (Haryana) and necessaryformalities are being worked out to extentcooperativisation of slum dwellers who havebeen allotted flats under JNNURM. Thismay prove to be a positive towards enormousenvironmental improvement.

It would be unfair if we do not recallthe pioneering efforts initiated by SulabhInternational in constructing sanitarylatrines in slum colonies for providingessential relief to the slum dwellers to livein improved hygienic environment. Anapplauded success of the waste re-cyclingsystem introduced by them has furtherbrought a transformation to the wholepattern of the living environs which madeenabled the wastes which contains diseaseprone microbes to get collected, segregated,recycled and processed into useable by-products as packing materials, manure, etc;richly benefiting the nature all around.

The housing cooperative movement hasmade rapid strides. From a humble

beginning in 1909 with the establishment ofthe first cooperative housing society inKarnataka, the movement has traversedeventful paths of progress and achievementsand earned national acclaim. Thecooperative ideology evolved to stay. Thehistory and growth of the movement hasalways been in tandem with the economicand social development of the country;cooperative institutions have emerged asmajor powerful organizations for harnessinghuman resources and the Movement hasspread to every part of the country be it ruralor urban areas, hills or plains. The risinggraph of performance of housingcooperatives can be judged from the welldescribed facts – during 1959-60 only 5564primary housing cooperatives werefunctioning with a membership of a meager0.32 million and a working capital of Rs.550million. Presently, the numbers stand tallwith over 92,000 primary housingcooperatives with 6.6 million memberships.

Masses from economically weakersections and low income groups have beenbestowed with the privilege of having ashelter by the primary housingcooperatives. It is estimated that they haveconstructed over 2 million housing unitsand many more are under various stages ofconstruction, which is undoubtedly acommendable contribution. Majority ofthese houses are targeted to the people inthe low income category.

Motivation can bypass hardest ofobstacles. This statement can be livedthrough the example of emerging successof large scale housing activities supportedby whole-hearted commitment of people,which is indeed an enlightened awarenessamong the beneficiaries. With changingtimes the emphasis is now on educationaland training programmes that are beingimparted to the members of housingcooperatives aimed towards creatingawareness and promoting environmentfriendly equipments and materials likesmokeless chullaas, use of conventionaltimber and timber products instead of pre-fabricated components and many such eco-friendly procedures and instruments.

NCHF has made an appeal to the Stateapex housing federations, district housingfederations, primary housing cooperatives

as well as other cooperative institutions toplay an effective role in protectingenvironment. 66 lakhs members of housingcooperatives have been requested to joinhands in protecting the nature andconsequently helping the mankind tobreathe fresh air; they have been urged toplant atleast one sapling for the cause.NCHF Secretariat has received encouragingresponse regarding the appeal of treeplantation from housing and othercooperatives in various States. Some of thecooperatives are proactive enough inconducting awareness programme on globalwarming and benefit of planting trees, whileothers are contributing their bit byundertaking plantation in collaborationwith the State Governments and NGOs.

The scenario discussed above can besummed up and concluded stating thatwhat lay in the hands of housingcooperatives is a very large socialresponsibility which goes beyondsheltering the people. It has embracedresponsibility of maintenance ofequilibrium of the environment, which isthe ultimate shelter for the entire humanrace on the earth. For sustaining theseefforts on a continual basis, they wouldhave to evolve programmes for thefollowing mentioned leads:•Knowledge sharing : Throughdissemination of information amongfellow members and associations forimproving awareness about environment; • Skill Enhancement: It can be achievedslowly and steadily through periodictraining & development workshopsdesigned to improve the capacity ofpersonnel to address environmentalissues more effectively;

• Replenishing Forest Land: Absoluteprohibition from deforestation andplanting more trees so that the ecologybalance is maintained.

• Eco-Friendly Products: Encouraging theuse of environment-happy buildingmaterials and components forminimizing the use of wood-basedproducts.Very strict adherence to these social

responsibilities alone can ensure thesuccessful sustainability of environment.

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ack of infrastructure is considered tobe one of the major constraints in India’sability to achieve double digit growth inGDP. It is estimated that more thanRs.2,000,000 crores worth of investmentswould be required for the infrastructuresector over the eleventh plan period of 5years (2007-08 to 2011-12). While around70% of the requirements may be financedthrough budgetary resources, internalgeneration and market borrowings bypublic sector units, the remaining 30%would have to come from privateinvestments in infrastructure.

Definition of infrastructure:As per the RBI, a credit facility is

treated as “infrastructure lending” to aborrower company which is engaged indeveloping, operating and maintaining, ordeveloping, operating and maintaining anyinfrastructure facility that is a project inany of the following sectors, or anyinfrastructure facility of a similar nature: � a road, including toll road, a bridge or arail system;

� a highway project including otheractivities being an integral part of thehighway project;

�port, airport, inland waterway or inlandport;

� a water supply project, irrigation project,water treatment system sanitation andsewerage system or solid wastemanagement system;

� telecom services whether basic orcellular, including radio paging,domestic satellite service (i.e. a satelliteowned and operated by an Indiancompany for providing telecom service),network of trunking, broadband networkand internet services;

� an industrial park or special economiczone;

� generation or generation anddistribution of power;

� transmission or distribution of power bylaying a network of new transmission ordistribution lines;

� construction relating to projectsinvolving agro-processing and supply ofinputs to agriculture;

� construction for preservation and storageof processed agro-products perishablegoods such as fruits, vegetables andflowers including testing facilities forquality;

� construction of educationalinstitutions and hospitals;

� any other infrastructure facility of similarnature. IRDA, in terms of a Gazette notification

dated February 13, 2008 has amended theInsurance Regulatory and DevelopmentAuthority (Regulation of Indian Companies)Regulation 2000 dated July 14, 2003 (asamended on February 26, 2003) to align thedefinition of investment in infrastructurewith the RBI norms. Unfortunately, animportant sector of “Housing”, which was

part of the IRDA’s earlier definition ofinfrastructure, got omitted in the process.

In view of the acute shortage of“Housing” that we in this country have andthe need to address this issue on priority basisand also considering the contribution of the“Housing sector” to the national GDP, it issuggested that now at least the “AffordableHousing part” may again be included in thedefinition of “Infrastructure”.

Key Infrastructure Initiatives in theEleventh PlanAirports�Modernization of 4 metro and 35 non-metro airports

�3 Greenfield airports in North East�Constructing 7 other Greenfield airportsNational Highways�Six-laning 6,500 km of GoldenQuadrilateral and selected NationalHighways

�Four-laning 6,736 km on North-Southand East-West Corridors

�Four-laning 20,000 km of NationalHighways

�Widening 20,000 km of NationalHighways to two lanes

�Constructing 1,000 km of Expressways�Constructing 8,737 km of roads,including 3,846 km of NationalHighways in the North EastPower

Additional power generation capacityof about 78,500 MW

LMohammad Asif, COO, High Street Capital, Mumbai


Providing electricity to all un-electrifiedvillages and providing access to all ruralhouseholds through Rajiv GandhiGrameen Vidyutikaran Yojna (RGGVY)Rural RoadsConstructing 1,29,707 km of new ruralroads, and renewing and upgradingexisting 1,77,726 km covering 60,638 ruralhabitationsPortsCapacity addition of 485 million MT inMajor Ports, 345 million MT in MinorPortsRailways

�Constructing Dedicated FreightCorridors between Mumbai-Delhi andLudhiana-Kolkata

�8,132 km of new railway lines; gaugeconversion of 7,148 km

�Modernization of 22 railway stations� Introduction of private entities incontainer trains for rapid addition ofrolling stock and capacityIrrigation�Developing 16 million hectares throughmajor, medium and minor irrigationworksTelecommunications andInformation Technology�Achieving a telecom subscriber base of600 million, with 200 million ruraltelephone connections

�Achieving a broadband coverage of 20million and 40 million internetconnections

Private Equity/Venture CapitalFunds:

Infrastructure companies in India wouldneed equity funding in a big way as the creditfrom the commercial banks, which is theirprimary source of funding, may not besufficient to meet the needs of this fastgrowing sector. This equity funding wouldcome through both in terms of Public andPrivate Equity. Private Equity, which is a sub-set of Venture Capital, is medium to long-term finance provided in return for an equitystake in potentially high growth unquotedcompanies. Private Equity is a broad term thatrefers to any type of equity investment in anasset in which the equity is not freely tradableon a stock market. Categories of PrivateEquity investment include leveraged buyout,

venture capital, growth capital, angelinvesting, mezzanine capital etc.

Rising valuations of IndianInfrastructure companies provides a PEinvestor significant returns enhancementopportunities due to the following:�Demand-Supply gap is large, henceinfrastructure will witness investmentsand growth over the next few years

�A significant number of public-privateprojects across various infrastructuresectors are being offered to privatedevelopers. For example, freightcorridors on Delhi-Mumbai route andmodernization of Delhi and MumbaiAirports are being implemented underPPP model.

�Price inelastic segments, hence notaffected significantly by economicslowdown

�Domestic demand driven, henceshielded from global turmoil

�Underrepresented in the stock marketand hence underinvested, because of lackof options

Most of the PE funds in infrastructurespace have a target IRR of 25% plus. Lifeof the fund is generally 5 years onwards.The funds charge management feesranging from 1.50% to 2 % per annumand a performance fee (carry) of around20% on the profits with a hurdle rate ofaround 10% per annum. The commitmentor drawdown periods normally varies from24 months to 36 months.

The funds look for picking upminority/majority stakes in unlistedcompanies set up as private or public limitedcompanies, backed by a strong managementteam, in the growing infrastructure andrelated businesses (both at the SPV andEntity levels) offering potential for attractivegrowth and earnings.

Exit Options:A Private Equity Fund operating in

infrastructure space has the following exitoptions.�Listing in public markets through InitialPublic Offering (IPO)

�Sale to strategic investors�Management / Company buyback �Sale to other Private Equity/Venture

Capital Funds � to REMFs/REITs, as and when they areestablished

Fiscal Incentives:For a Venture Capital Undertaking

(VCU) engaged in infrastructuredevelopment, Section 80-IA of the IncomeTax allows deduction of 100% profit fromits income during initial 5 years ofoperation and then 30% deduction ofprofit from income during another 5 years.

In order to give further boost toinfrastructure, it is suggested that Section10 (23FB) of the income Tax be amendedto also include infrastructure (as defined byRBI/IRDA) in the specified businesses toclaim exemption under this Section.

Issues & Challenges:PE funds expect to achieve 25% plus

IRR from their investments ininfrastructure projects. The fundamentaldriver for high-return expectations is theunderinvestment in the sector, which callsfor a rapid development in theinfrastructure landscape, and hence,higher returns. In addition, infrastructureassets are characterized with low operatingcosts coupled with predictable cash flows,which provides for a relatively high andstable return on investment.

Despite significant promise ofattractive earnings and returns, followingare some of the constraints that the PrivateEquity funds operating in theinfrastructure space face:-� Infrastructure companies are chased bymany PE funds, and therefore demandunreasonably high valuation, makingthem less attractive to the funds

� attachment of many Indianentrepreneurs to their ventures makesthem reluctant to sell their stakes andaccept minority ownership

� Delays in getting approvals and acomplicated regulatory environment

� Delays in financial closure of projects,non-transparent bidding process &long gestation period of infrastructureprojects

� Delay in land acquisition leads toexecution delays, and this in turn,results in increase in project costs

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t is very well-known fact that from 1stApril 2009 the concept of Limited LiabilityPartnership has been officially recognizedin India consequent to the passing ofLimited Liability Partnership Act, 2009 bythe Parliament. The procedure for settingup a Limited Liability Partnership is reallyvery simple and easy to adopt. Similarly,the procedure for converting the existingpartnership firm into a Limited LiabilityPartnership is also quite simple and easy.

One of the most important and firstcondition for a Limited Liability Partnershipis that every LLP should have minimum twodesignated partners. However, there can bemore than two designated partners in a LLP.It is the duty and responsibility of thedesignated partners to comply with thevarious formalities of the law concerningfiling of the return, submission of thedocuments, intimation of the changes,submission of the accounts, etc., etc. Alldesignated partners of the proposed LimitedLiability Partnership are required to obtain:Designated Partner Identification Number(DPIN). This is available by filling Form No.7. This Form No. 7 is an application which isto be done by an individual partner online toget DPIN. Later on after obtainingprovisional DPIN the said designated partnershould make a physical application to beprinted online and to be sent by hand deliveryor post together with relevant enclosures dulyattested. This physical application should besent to the Office of the Registrar, Ministry ofCorporate Affairs, 3rd Floor, ParyavaranBhawan, CGO Complex, Lodhi Road, NewDelhi – 110003 for obtaining permanentDPIN.

As per Rule 10 of LLP Rules, 2009 theapplication for allotment of designated

Partner Identification Number as mentionedabove has to be in Form No. 7. This Form No.7 is very simple one. It contains routinedetails like name, father`s name, nationality,date of birth, place of birth, Income-taxPermanent Account Number, Voter IdentityCard Number, Permanent ResidentialAddress and the details of present ResidentialAddress. Finally, after filling up Form No. 7,the same has to be signed by the applicant.Together with Form No. 7 proof of identityeither in the form of Passport or ElectionCard or Voter Card is to be submitted.Likewise for proof of residence one cansubmit a copy of Passport or Election VoterIdentity Card or Ration Card or DrivingLicence or an Electricity Bill, a Telephone Bill,a Bank Account Statement etc. Thephotographs of the applicant, the proof of theidentity and the proof of residence has to beattested either by a Notary Public or aGazetted Officer of the Government or apractising professional Chartered Accountantor Company Secretary or Cost Accountant.The common cause of rejection of thisapplication is that the applicant`s name andfather`s name is mentioned in theabbreviated form whereas the names shouldbe expanded even if the ID proof contains thename in abbreviated form. Similarly, DPINapplication forms are also likely to be rejectedif the residence proof in the form of bankstatement or electricity bill or telephone billetc. is older than two months of submittingthe application form. Likewise, if the Passportor Driving Licence or any other Identity Proofwhich is being attached is expired, then thereis no validity of such a document. However, itmust be noted that every Limited LiabilityPartnership must have at least two designatedpartners who are individuals and at least one

of such partners shall be a resident in India.Just like obtaining Director IdentificationNumber similar is the process of obtainingDesignated Partner Identification Number.

Once the formalities of obtaining DPINhave been completed, now comes theprocedure to be started for setting up aLimited Liability Partnership. The first step isto file online Form No. 1 for reservation ofname of the proposed Limited LiabilityPartnership. In this application forreservation of a name you can give up to sixnames of the proposed LLP in order ofpreference. It is also provided in the said FormNo. 1 that the applicant has to state thesignificance of the key or coin words in theproposed name. This Form No. 1 is to beused for reservation of the name specially forincorporating a new Limited LiabilityPartnership. Likewise this Form No. 1 is alsoto be filled up for changing the name of anexisting Limited Liability Partnership. Thus,whenever change is to be reflected in thename of the LLP, the said Form No. 1 is to befiled by the applicant. Form No. 1 alsocontains the details of two designatedpartners. There is also a condition that one ofthe proposed designated partners should be aresident in India. In case the application is forconversion of a firm or a Private LimitedCompany or an unlisted Public LimitedCompany into LLP, in that situation thedetails of the same have to be specificallymentioned in Form No. 1. The detailedinstruction for filling up Form No. 1 arecontained in the website of the Ministry ofCorporate Affairs. All tax payers are advisedto refer to this website namely www.llp.gov.in.All the necessary forms etc. which arerequired to be submitted for the purposes ofsetting up LLP have to be submitted through

Subhash LakhotiaTax & Investment Consultant, Tax Guru: CNBC Awaaz

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this website. After you have obtained Designated

Partner Identification Number (DPIN) andalso you have applied for name of theproposed LLP now then is the time to submitForm No. 2 for incorporation in terms ofRule 11 of the LLP Rules, 2009. Theimportant particulars which are to be filled inForm No. 2 are the name of the LimitedLiability Partnership, the State in which theRegistered Office of the Limited LiabilityPartnership is to be situated, address of theRegistered Office of the Limited LiabilityPartnership, business to be carried on by theLimited Liability Partnership, summary of thedesignated partners, number of individuals aspartners together with their routine detailslike name, nationality, date of birth, PANNumber, permanent address etc. In the saidForm No. 1 details have also to be submittedof form of contribution as well as themonetary value of the contribution. Finallytotal monetary value of contribution bypartners in the LLP has to be mentioned andin the end of the form name of each partnerhas to be mentioned together with signatureof the partner as also name, address andprofession of the witness. The witness is alsoto sign Form No. 2. Finally towards the end ofthe form, Part B has to be filled up which isa statement by a person who has subscribedhis name to the incorporation of the LLP.

Once you have submitted Form No. 2for incorporation of the Limited LiabilityPartnership, now you will be receiving fromthe Office of the Registrar LLP the Certificateof Incorporation in Form No. 16. ThisCertificate will contain the name of the LLPand the date on which the certificate has beenissued. The Certificate in Form No. 16 will besigned by the Registrar after affixing the seal.Generally speaking, if all papers anddocuments are correctly submitted, theCertificate of Incorporation should bereceived by the applicant within 14 days fromthe date of submission of Form No. 2.

Now comes the last simple formality tobe complied with formation of LimitedLiability Partnership. Within 30 days fromthe date of Certificate of Incorporation theperson applying for LLP Registration has tofile LLP Agreement Copy in the Office of theRegistrar. Form No. 3 has been prescribed forsubmission of information with regard to LLP

Agreement. This Form is also to be usedwhenever there are changes in the LLPAgreement. Similarly Form No. 4 has to befiled giving details of the notice ofappointment of the partner/designatedpartner, his consent etc. It may be noted herethat this Form No. 3 as well as Form No. 4may be filed with the prescribed feesimultaneously at the time of filing Form No.2 or the same can also be filed within 30 daysof the date of incorporation. For furtherdetails the applicant can refer to theinstruction kit provided on the homepage ofthe website namely www.llp.gov.in. It is reallyvery interesting to find that the website hasbeen prepared very tax payer friendly and atone go one can expect all the answers to thequery relating to LLP at this website. Thewebsite of the Government also containsqueries relating to Limited LiabilityPartnership as answered by the Ministry ofCorporate Affairs, Government of India. Thepayments for submission of the forms etc. etc.have all to be done online. Part A of Form 3contains the detailed information with regardto LLP Agreement. All persons forming LLPshould carefully note down that all columnsare to be mandatory filled. Always take outtime to see and fill up the forms carefully sothat the work of compliance relating tovarious formalities are done in time. The saidForm No. 3 is also used for filing informationwith regard to changes in the Limited LiabilityPartnership Agreement. These changes couldbe in the form of addition of the partners,omission of the partners or any alteration inthe Limited Liability Partnership Agreement.The said Form No. 3 is to be digitally signedby one of the designated partners. The noticeof the appointment of partners of thedesignated partners as also changes relatingthereto etc. together with the consent of aperson becoming a partner/designatedpartner in the Limited Liability PartnershipFirm have to be submitted in Form No. 4.

From the above mentioneddescription we find that the procedure forformation of Limited Liability Partnershipis very very simple one. In case of anyproblem the applicant can also send theirqueries on E-mail at the following E-mailaddress – [email protected]. TheOffice of the Registrar of LLP has assuredto answer to the queries and problems of

the tax payers relating to any matterconcerning LLP formation etc.

The Limited Liability Partnership issurely a new innovative business modulefor setting up your business enterprises.You cam also convert the existingPartnership Firms into LLP. Similarly, thelaw also provides that the Private LimitedCompany as also unlisted Public LimitedCompanies can also be converted intoLimited Liability Partnership.

Income Tax Aspects of a LimitedLiability Partnership

The provisions relating to Income-taxliability for a Limited Liability Partnership areexactly in tune with the provisions containedin the Income-tax Act, 1961 with reference totaxation of a Partnership Firm. Thus, evenunder the Income-tax Law the PartnershipFirms and the Limited Liability PartnershipFirms are treated at par. Through the Finance(No. 2) Act, 2009 the Government has alsomade its intention clear. It is also clearly speltout by the Government that the Income-taxon Limited Liability Partnership will beexactly on the lines similar to the GeneralPartnership under the Indian PartnershipAct, 1932. It may be recalled here that underthe present Income-tax Law in respect ofPartnership Concern income-tax liabilityarises in the hands of the PartnershipConcern and the income by way of share ofprofit from the Partnership Firm is exemptedin the hands of the partners. Now in view ofthe amendment by the Finance (No. 2) Act,2009 the Limited Liability Partnership andthe General Partnership have been accordedthe same tax treatment. Accordingly changeshave also been made to the Income-tax Act,1961 like (1) the word “partner” to includewithin its meaning a partner of a LimitedLiability Partnership, (ii) the word “firm” toinclude within its meaning a Limited LiabilityPartnership and (iii) the word “partnership”to include within its meaning a LimitedLiability Partnership as the terms have beendefined in the Limited Liability PartnershipAct, 2008 with the inclusion of theterminology “Limited Liability Partnership”in the overall Income-tax Act the intention ofthe Government is clearly spelt out.

Thus, the Limited LiabilityPartnership enjoys a very taxpayer friendly

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tax concept on its income which is exactlyin tune with the present day tax structureof a partnership concern.

The net profit of a Limited LiabilityPartnership would be subjected to income-taxat the rate of 30 per cent. It may be recalledhere that presently the same rate of tax isapplicable for the partnership firm which isformed in terms of the Indian PartnershipAct, 1932. In addition to income-tax of 30percent the Limited Liability Partnership hasalso to pay Education Cess at the rate of 2 percent of income-tax together with Secondaryand Higher Education Cess at the rate of 1per cent of income-tax. For the AssessmentYear 2010-11 i.e. in respect of the FinancialYear 2009-10, no surcharge is payable by theLimited Liability Partnership. The best part oftaxation of the Limited Liability PartnershipTax entity is that once income-tax has beenpaid by the LLP, there will arise no liability ofincome tax of the partner by way of share ofprofit from the partnership firm. Thus,double taxation on the same income isavoided. However, the provisions containedin the Income-tax Act relating to computationof profits and gains of business onpresumptive basis will not be applicable forthe Limited Liability Partnership. Thus, theLimited Liability Partnership even if it has aturnover much lower than Rs.40 lakhs wouldstill be required to keep regular books ofaccount and compute the income accordingto its books of account. Thus, it is very clearthat the Limited Liability Partnership is notauthorised by the Income-tax Act to take theadvantage of the provisions contained insection 44AF or in section 44AD relating tocomputation of profits on presumptive basis.This is one single important differentiatingfactor between the taxation of LLP incomparison with normal partnership firm.

It may further be noted here that theLimited Liability Partnership will be alloweddeduction from its total income in respect ofinterest paid to any partner of the LimitedLiability Partnership. However, such interestpayment will be allowed as a deduction only ifthe same is in accordance with the terms andconditions mentioned in the LimitedLiability Partnership Agreement. Section 40of the Income-tax Act, 1961 clearly speaks outthat maximum interest that can be allowed tothe partners in respect of the capital

introduced by them is at the rate of 12 percent per annum. Hence, for proper planningit is suggested that the document of LimitedLiability Partnership should clearly contain aspecific provision stating the rate of interest tobe payable to the partners of LLP. Please makesure that the maximum interest as written inthe LLP is not more than 12 per cent perannum. Even if higher interest is paid to thepartners of LLP, please do remember that themaximum amount of interest which will beallowed as a deduction will be 12 per cent perannum only.

Another important aspect which shouldbe clearly noted while dealing with thetaxation aspects of Limited LiabilityPartnership is that the working partners ofLimited Liability Partnership can be paidsalary, bonus, commission or remunerationto the working partners of the LimitedLiability Partnership. To claim deduction inrespect of payment of such salary orremuneration to working partners, the mostimportant condition is that in the LimitedLiability Partnership Agreement it should bespecifically mentioned that salary orremuneration will be payable to the workingpartners. Thus, the names of the workingpartners should be clearly spelt out in theLimited Liability Partnership Agreement soalso the amount which will be paid to them byway of such remuneration should specificallyfind mention in the said agreement ofLimited Liability Partnership. In case salary ispaid to the partners of Limited LiabilityPartnership but the document does notspecify such partners as working partners, inthat situation also the deduction will not beallowed in respect of the remuneration sopaid to the partners. Hence, for best taxplanning it is recommended that the LimitedLiability Partnership Agreement shouldspecifically contain the name or names of allthose working partners to whom salary orremuneration will be paid. It is worthwhile tonote that in one Limited Liability Partnershipthere can be more than one working partner.The maximum deduction in respect of salarypayment which can be granted to the workingpartners of Limited Liability Partnership iscontained in section 40 of the Income-taxAct, 1961. The quantum of such deduction asis allowed to the Limited Liability Partnershipis exactly such amount which is allowed as a

deduction to the partnership firm. For theFinancial Year 2009-10 relevant to theAssessment Year 2010-11 in respect of the firstRs.3 lakhs of the book profit or in case of aloss arising to the Limited LiabilityPartnership the maximum deduction that willbe allowed by way of deduction for salary orremuneration to the working partners wouldbe Rs.1.50 lakhs or at the rate of 90 per centof the book profit whichever is more. Inrespect of the balance of the book profitexceeding Rs.3 lakhs the deduction for salaryor remuneration would be at the rate of 60per cent. Thus, very handsome salary orremuneration is allowed to be deducted fromthe income of the Limited LiabilityPartnership and on the net amount of itsincome alone the tax is to be payable by theLimited Liability Partnership.

Although the Income-tax Act, 1961does not contain any specific chapter todeal with taxation of Limited LiabilityPartnerships but the amendment ofsection 2 by the Finance (No. 2) Act, 2009makes the intention of the law makers veryclear. However, consequent to insertion ofnew section 167C the income-tax liabilityof the partners of Limited LiabilityPartnership in liquidation would bedifferent in comparison with the normalPartnership Firm. It is now specificallyprovided in the said section 167C thatwhere any tax due from a Limited LiabilityPartnership in respect of any income whichcannot be recovered, in such a case everyperson who was the partner of a LimitedLiability Partnership during the relevantyear shall be jointly and severally liable forpayment of such taxes unless he proves thatnon-recovery cannot be attributed to anygross neglect, misfeasance or breach ofduty on his part in relation to the affairs ofthe Limited Liability Partnership.

The tax provisions relating to taxationof income of Limited Liability Partnershipare really very taxpayer friendly, they aresimple also and that is the reason in theyears to come more and more tax payerswould shift their business tax entity to theconcept of Limited Liability Partnership.

The author is tax & investment consultantat New Delhi for last over 40 years. He is alsoDirector of M/s R.N. Lakhotia & Associates &The Strategy Group


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AbstractWaste results due to inefficiency in

the use of construction equipment,

materials, labor, or capital in larger

quantities than those required or

considered as necessary in the construction

of a building. Waste in construction

includes both the incidence of material

losses and the execution of unnecessary

work produced by activities. Both generate

additional costs(direct cost and indirect

cost) but do not add value to the building

from the point of the client. Efforts to

reduce, reuse and recycle construction

waste through a significant change in the

level of technological development may

save money, reduce liability, keep job sites

cleaner and safer, conserve valuable landfill

space and help in successful

implementation of viable affordable

housing project. A classification for waste

in the construction industry is reported

based on previous studies concerning waste

management. Based on this classification,

causes of waste at building sites are

identified. This paper aims to highlighting

the importance of waste management,

identifying the causes of waste, their

reduction through change in construction

material and process and to propose

guidelines for waste control at building

sites in Indian construction Industry.

IntroductionIt is necessary to classify the waste in

different categories to understand why they

occur and for taking corrective actions to

prevent/avoid the waste. Waste can be

classified in unavoidable waste or natural

waste and avoidable waste. The investment

required for reducing unavoidable waste is

higher than the cost of waste while in

avoidable waste, the cost of waste is

significantly higher than the cost to

prevent it. The percentage of unavoidable

waste in total waste will depends on job

site, on company and level of construction

technology involved. Waste can also be

classified based on its origin or nature as

follows:

1. Overproduction: It is related to

the production of a quantity greater than

required or earlier than necessary. This

may cause waste of materials, man hours or

equipment usage. It usually produces

inventories of unfinished products or even

their total loss in the case of the materials

that can deteriorate e.g. overproduction of

mortar or concrete that cannot be used on

time.

2. Substitution: It is monetary

waste caused by the substitution of a

material by a more expensive one with an

unnecessary better performance e.g. the

execution of simple task by highly qualified

worker or the use of highly sophisticated

equipment than required.

3. Waiting Time: It is related to the

idle time caused by lack of synchronization

and leveling of material flows and pace of

work by different groups or equipments or

by lack of work place.

4. Transportation: It is concerned

with the internal movement of materials

on site. Excessive handling, the use of

inadequate equipment or bad conditions

of pathways is responsible for this kind of

waste. It is usually related to poor layout,

Prof. (Dr.) A.K. GargNational Institute of Construction Management & Research, Pune

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and the lack of planning of material flows.

Its main consequences are in waste of man

hours, waste of energy, waste of space on

site and the possibility of material waste

during transportation.

5. Storage: waste is because of

inadequate storage space, improper storing

and stacking of materials. Materials are not

given protection against rain or any other

external factor like theft/pilferage etc.

6. Processing: It is related to the

nature of processing activity which could

only be avoided by changing the

construction technology. Waste generation

from different conventional construction

process and method for their reduction are

mentioned below separately.

7. Inventories: It is related to the

excessive or unnecessary inventories

which lead to material waste by

deterioration, losses due to inadequate

stock condition on site, robbery etc and

monetary losses due to capital that is tied

up. It happens due to lack of resource

planning or un-certainty on the

estimation of quantities.

8. Movement of workers: It is

concerned with unnecessary or inefficient

movements made by workers during their

job.

9. Production of defective products:

It occurs when the final or intermediate

product does not fit the quality

specifications. This may lead to rework or

to the incorporation of unnecessary

materials to the building such as the

excessive thickness of plastering. It can be

caused by a wide range of reasons as: poor

design and specification, lack of planning

& control, poor qualification of tem work,

lack of integration between design and

production, inadequate equipment,

ineffective work methods or poor

arrangement of the working place etc.

10. Others: waste of any nature

different from the previous ones such as

inclement weather, accidents, burglary and

vandalism etc.

Waste arising from differentconventional construction processand their reduction1(a) From Building Design

a) Use of material size does not

correspond with the dimensions in

the building.

b) Building components not

standardized.

c) Down-stand beams and columns

detrimental to large panel formwork

system Construction.

d) Specifications exceed the

performance required.

(b) Waste Reduction :

a) With the use of standard modular,

walls and slabs are standardized in

both size and shape and are inter-

changeable between different

building types.

b) Standardized building components.

c) Walls and slabs only with no down-

stand beams and columns.

d) Less design variation.

2(a) Conventional procurement

a) Bulk purchasing leads to increase in

inventory cost and logistics cost.

b) Ordering without ascertaining the

stock leads to wastage in

procurement.

c) Materials received at site with wrong

specification is a potential source of

wastage.

(b) Waste Reduction:

Techniques like just in time,

economic order quantity(EOQ), supply

chain management can significantly reduce

wastage.

3(a) Wastage of materials during

execution stage

a) Wrong specification.

b) Variation/deviation due to faulty

design.

c) Improper supervision.

d) Adoption of traditional methods of

construction.

e) Hiring of unskilled labor/worker.

(b) Waste reduction

a) To hire competent person at site.

b) Change traditional method &

material with new innovative

materials & methods.

c) Oil has to be applied on the surface

for ease in striking.

4(a) Conventional timber formwork

a)Labor intensive for erecting and

dismantling formwork.

b) Longer construction duration.

c) Plastering need for leveling concrete

surface.

d) Reused 8-15 times, several sets of timber

forms needed for a high-rise block

e) Considerable timber waste produce.


a) Change timber formwork with large

steel panel forms, wherever possible.

b) Though initial cost is high but will

covered from the long term savings.

c) It require less labor force for erecting

and striking formwork.

d) It is twice faster than timber

formwork hence efficiency increases.

e) It gives better quality concrete

surface suitable for applying tiles and

paints directly.

f) It can be reused for a longer period

and tower crane is required for

lifting.

g) It can be scrapped for recycling

therefore less waste is produce.

5(a) From In-situ concrete placement

work

a) It is time consuming.

b) Require higher labor cost and gives

poor quality.

c) Plastering is require before placing

tiles and paints.

d) It produce more Waste.


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a) In-situ concrete is replaced with pre-

cast concrete.

b) It require shorter construction time.

c) Though initial cost is high but is

cheaper for large quantity.

d) Better quality control is possible.

e) Elements usually completed with

necessary fixtures and finishes

and require no further finishing

work.

f) It produce 30% less waste than in-situ

concrete.

6(a) Brick wall or concrete block walls

Masonry Work

a) Though material cost is lower but labor

cost is higher.

b) High skill levels are required.

c) Thick layer of plaster is needed.

d) Though wall has better strength but it

is time consuming and more waste is

produced.


a) Brick wall or concrete block walls is

replaced by Internal drywall

partitions.

b) Material cost may be high but labor

cost is lower.

c) It is easy to install and low skill levels

is required.

d) It has smooth surface and no

plastering is needed.

e) Though wall has lower strength but it

is four times faster than brick wall or

concrete block walls masonry work

plus plastering.

f) It produces very less waste.

7(a) Conventional mortar cement

Plastering work

a) It is done manually.

b) It is suitable for rough wall surface

and further leveling is required.

c) It is time consuming and labor

intensive.

d) It generate more waste.


a) It is replaced with mechanically spray

plaster.

b) It is suitable for smooth wall. Surface

and further leveling is not required.

c) It is faster and less labor is required.

d) Less waste generate.

8(a) Timber Hoarding:

a) Material cost is cheaper but easy to

erect.

b) It is less durable about 2 years life

time.

c) It has low re-usability and discarded

after used once.

d) It generate more timber waste.


a) Replace timber with steel hoarding.

b) Though it is expensive and require

more labor force for erection but is

safe for passer-by.

c) It is more durable and has high re-

usability.

d) Waste steel can scrapped for recycling.

e) It produces 70% less waste.

9(a) Conventional Bamboo Scaffolding:

a) Initial cost is lower but labor cost is

high.

b) It is less safe for workers.

c) It produce more bamboo waste.


a) Replace bamboo with Gondola.

b) Higher initial cost but covered by

saving in the long run.

c) Less labor force is required.

d) More safe for workers.

e) It produce 80% less waste.

Guidelines for Controlling WasteThe following guidelines should be

established for strengthen the continuous

process control and improvement

necessary for waste control at site.

1. Monitoring: The following data

should be monitored

a) Data on productivity of workers from

production chart

b) Usage of materials and man hours

spent in the process are collected

from resource usage chart

c) A periodical inventory survey to

monitor the physical quantity of

materials stored on site.

d) Efficiency of construction processes.

e) Quantify and show the variability of

productivity, production and waste

rates using control charts.

Feedback data during monitoring

from the site must be much more

transparent as possible and the people

directly involved in the construction

process must be the first ones to see the

results. As a consequence, those people

could learn from their own experiences

and commit themselves to the reduction of

waste in the construction process.

2. Feedback must be quick and

flexible enough so as to motivate people

and to make feasible the intervention in

the process before it finishes. Whatever the

data collected it must be useful for

improving the process and avoiding further

waste. And

3. Auditing: The tools used in the

audit may be

a) A check list about Site-condition

and Process Performance

Evaluation: It enables a

qualitative evaluation of the

process performance and work

environment. It also pointing out

improvement opportunities.

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b) Process Chart: It is used for

registering improvements in the

process

c) Videotapes and Photos: It helps

in documentation of the process

and the work environment in

order to improve transparency

for the people involved in the

improvement of the process.

d) Additional indicators such as

plastering thickness, concrete

slab thickness etc.: It provide

additional quantitative data help

in identifying the nature of

waste.

Identification of problems or causes

by using audit tools must be followed by

theproposal of simple and flexible

solutions.

One of the important step in this

method are discussions involving the

‘owners of the process’ aiming to motivate

them to learn causes of waste and possible

corrective actions by process improvement.

Conclusions:Waste prevention by reusing building

materials, using new innovative materials

and small changes in construction

methods not only cut garbage and recycling

collection costs but also reduces materials

expenses and add up to significant savings

to the builder, the homebuyer and

environment. It can increase contractors’

competitiveness through lower production

costs, better public image, higher

construction productivity, save in time and

improvement in safety. The extra wastages

take extra time and resources for disposal

that may slow down the construction

progress.

The other non-technical reasons for

waste generation at building sites in Indian

construction Industry are found in the

study are as follows:

a) The waste of building materials

is far higher than the nominal

figures assumed by the

companies in their estimates.

b) There is a very high variability of

waste indices from site to site.

Furthermore similar sites might

present different levels of wastes

for the same material. This

indicates that a considerable

portion of this wastage can be

avoided.

c) Very few company has a well -

defined material management

policy and a systematic control

on material usage.

d) Waste is because of flaws in the

management system and not only

because of lack of knowledge,

qualification and motivation of

workers. Also waste is usually the

result of a combination of factors

like inadequate design, lack of

planning, flaws in the material

supply system etc. rather than

originated by an isolated incident

e) There is relatively little

involvement of people from the

company in waste control

processes.

f) The lack of more reliable and

faster information flows.

g) The lack of a prior definition of

the type of control to be used

(event-driven or period-driven)

h) The lack of integration of waste

control with the planning and

control process.

i) The practice of only verifying and

not to monitoring.

j) Time and cost are the most

important factors in the selection

of construction methods or

technologies for building

projects. The reduction of

construction and demolition (C

& D) waste is the least important

factor in the minds of the

contractor. This can be

attributed to the availability of

relatively inexpensive means of

waste disposal and the generally

low environmental awareness of

the construction industry in

India.

k) Improper planning and

handling, misuse and incorrect

processing are the major causes

of material wastage at

construction sites.

References:Bossink, B.A.G.and Brouwers,

H.J.H.(1996),“Construction waste:

quantification and source

evaluation.”Journal of construction

engineering and management,122(1), P55-

60.

Formoso, C.T. Isatto, E.L.& Hirota,

E.H.(1999),”Method for Waste Control in

the Building Industry”, Proceedings IGLC-

7, Berkeley, California P.325-334.


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55


As part of its objective, National RealEstate Development Council(NAREDCO) is engaged in capacitybuilding in the filed of real estatemarketing, which in the past has beenthe domain of non-professionals. Awell structured real estatemanagement certificate course ofduration 40 hrs has been evolved with

the help of Human SettlementManagement Institute (HSMI) ofHousing and Urban DevelopmentCorporation Ltd. (HUDCO) and GuruGobind Singh Indraprastha University(GGSIPU), Delhi to upgradeprofessional skill and servicestandards and is being delivered byhighly qualified faculty drawn from

industry, Govt., professionals andacademicians. The certificate isissued jointly by NAREDCO, HSMIand GGSIPU. Presently the course isbeing run in Delhi and NCR andapproximately 940 candidates havebeen certified. In future, there is a planto reach out to other part of thecountry.

For details contact:National Real Estate Development Council (NAREDCO)First Floor, 8 Community Centre, East of Kailash

New Delhi – 110065Tel: 011-26225795, 41608570, Fax: 011-26225796

Email: [email protected], Web: www.naredco.org

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Documents

Vol. I Issue III, October - December 2009 · Silver may also rise as new avenues of industrial demand open up for the metal. Base metal demand is also ... in EWS and Low-Income Group