Friday, December 11, 2015


Reclaiming land after lease period may also pose problems

The Railways aim to monetise their land parcels around stations. But, builders believe that the 50-year lease model is a roadblock, making the scheme unfeasible for real estate development.

The Cabinet had, in July, approved the redevelopment of the Railways’ 400 stations through an innovative public-private partnership model — the Swiss Challenge method. The method allows developers to suo motu submit a station development proposal, which the Railways can make public for inviting better plans from other developers.

Said Getamber Anand, CMD, ATS Infrastructure Ltd, and President of the Confederation of Real Estate Developers’ Associations of India: “The psyche of the Indian home buyer is that he wants the title of the house. The 99-year lease model works like a perpetual lease in this case. I don’t think buyers would opt for a house on a 50-year lease.”

Currently, the most prevalent lease model is 30 years + 30 years in the commercial space, at the end of which the investor hands back the land. “We did flag off our issues at a stakeholders’ meeting recently. We are waiting for the final document that is scheduled to come out in February,” Anand added.

Meeting point

The tenor of railway land lease has been a sticky issue for the Railways earlier as well. Gulam Zia, Executive Director, Advisory, Retail and Hospitality, Knight Frank India, said: “This is a sticky situation, especially in the context of the government’s Housing for all by 2022 Mission. There has to be a meeting point between the developers and the Railways. The Railways need to increase the lease period, especially for properties they don’t see use for in the long term.”

There is also the fear that if the Railways were to provide land on retail use for 80-90 years, it may be difficult to reclaim the land for railway use — if required — from house-owners at the end of the tenor. This explains the Railways’ unwillingness to provide long-term lease of land to any company after it allowed Parsvnath Developers to build residential units in Sarai Rohilla, New Delhi.

That said, for any developer to evince interest, the Railways will have to have the requisite local clearances in place. “For any station development to be planned, the Railways have to have the local bodies on board, such as approvals from States and municipalities. Stations are usually located in crowded areas and providing access to construction is dependent on approval from State or local bodies,” said Rakesh Saksena, former CMD, Mumbai Rail Vikas Corporation.

Local clearance

For instance, the Railways’ move to re-develop New Delhi railway station could not go ahead due to local clearance issues. Also, developing buildings above existing railway stations has its own problems, as the train operations at the station will get impacted. Zia of Knight Frank also suggests that the Railways need to assess their land parcels and could also explore different lease periods for different land uses.

“It makes sense to set up commercial, retail, hospitality or even healthcare facilities at land near stations. Residential may not be the best idea because people may not want to live there, and also because the apartment culture is not prevalent across all areas near these 400 stations,” he added.


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