With only two bidders showing any interest in the ongoing auction of the Sahara group’s resort town Aamby Valley, the fate of India’s fledgling private cities is looking doubtful.
The low level of interest in the ultra luxury town is being ascribed to the seemingly high reserve price of Rs37,392 crore set by the Supreme Court for the township spread over 6,761.6 acres. With the auction scheduled for 10-11 October, there is still a chance more bidders could join the fray, but it does seem investors don’t believe the development is likely to offer viable returns.
Besides Aamby Valley, there is Lavasa city near Pune and the proposed Nanocity near Chandigarh. Promoted privately but in partnership with the Haryana government, this last has been a non-starter, while Lavasa, which is owned and run by Hindustan Construction Co. Ltd, has been dogged by problems. In May this year, the Maharashtra state government withdrew its special planning authority (SPA) status, bringing it under the jurisdiction of the Pune Metropolitan Regional Development Authority (PMRDA). This means the state government will now have a say in Lavasa’s town planning. Unfortunately, by making the terms for the resale of properties by individuals in Lavasa unfriendly, the developer has tarred itself with the same brush as did most private builders who have been facing the ire of homeowners and the courts.
Maharashtra was the leader among states in exploring the idea of allotting land to companies in order to set up new cities. In 1966, the state government, under the Maharashtra Regional and Town Planning Act, framed special regulations for development of tourist resorts, holiday homes and townships in hilly areas. The idea was to take the pressure off Mahabaleshwar and Matheran, the two existing hill stations in the state. Sadly, the two cities that came up—Aamby Valley and Lavasa—are both facing an uncertain future.
Far more successful has been Gurugram, India’s first city to be developed almost exclusively by private enterprise. Variously described as “urban hell" and with some irony “the Singapore of India", it could have been a role model in urban planning, but has failed to live up to its early promise. A March 2017 TED piece described it as “a boomtown of millions without a citywide system for water, electricity or even public sewers". While private developers have been quite happy to build the condominiums where they can sell apartments at high rates, they have been under no obligation to build the underlying infrastructure.
By contrast, Jamshedpur, built, designed and managed by the Tata group since 1908, has been a wonderful example of responsible urban development. It is a city where workers and managers have lived with equal ease and stake in its well being. But the Jamshedpur experiment didn’t really take root in the country.
The world over too, there have been very few efforts to create cities owned and managed by corporate houses although American construction companies often place on the market entire towns with their own town halls, police stations, churches and schools. Currently, Eko Atlantic in Nigeria and King Abdullah Economic City in Saudi Arabia are among the handful of private cities, under development. Eko Atlantic being built by dredging up land from the sea adjacent to the Nigerian capital of Lagos, is intended to rev up the entire economy of Africa with its financial district, shopping arcades, besides sky-high residences. But it remains to be seen how it will pan out, given the prolonged recession in Nigeria.
The problem in India has always been that like with other large real estate projects, the motives of the promoters are questionable. Often investments in these projects have been used to mask dubious funds and their accounts have remained opaque since the companies that run them are answerable only to their shareholders.
That’s a pity. A report, World Urbanization Prospects, by the UN Department of Economic and Social Affairs’ population division, suggests that over the next three decades, India will need new urban infrastructure to house an additional 404 million people in its already straining-at-the-seams cities. Without doubt, merely smartening existing cities isn’t going to be enough. New cities, along the lines of a Chandigarh, will be needed. The question is who will invest, build and run them. Given the abysmal record of most municipal corporations in India, it is tempting to look at private capital and management. In principle, private cities with their model of making money by providing public services, should be the logical way to go. Unfortunately, in India, the few efforts in that direction have come a cropper.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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