Land for PPP projects at state level not an issue: Knight Frank executive

Competing supply could cannibalise demand for non-prime land, says Saurabh Mehrotra. His company closed transactions worth 1,03,720 sq metre in private partnership projects during the pandemic.

Real estate consultancy Knight Frank closed transactions worth 1,03,720 sq metre in private partnership projects (PPP) during the Covid-19 pandemic. Saurabh Mehrotra, the company’s executive director, valuation & advisory, spoke to Jyoti Mukul about how making states a stakeholder in monetisation can help resolve disputes on land use and ownership. 

Edited excerpts from an interview.

What are the current challenges in getting land for the public private PPP infrastructure projects?

Land allotment for PPP projects initiated at state level has not been an issue. In some cases, where the PPP project is initiated by a central government body and the land in question was allotted for a specific purpose by the state government, there are challenges faced. For the success of PPP transactions, it is critical for all matters related to land being pre-resolved. There are cases where the purpose of the PPP project is the same as the one for which land was allotted. Part of the land and development rights are being commercialised to cross subsidise the project development so the issue of revenue sharing does not arise in such cases.

In some other instances, which involve commercialisation of land without any development of infrastructure projects, for which the land was allotted, there are issues. They can be handled through equitable sharing of revenues earned between state and central bodies by working out a suitable sharing formula.

A case in point is the recently commissioned Gandhinagar railway station, which has an integrated 5-star hotel. It is a good example of centre-state collaboration. GARUD (Gandhinagar Railway and Urban Development Corporation Limited), a special purpose vehicle, was formed with 74 per cent equity from the Gujarat government and 26 per cent from Indian Railway Station Development Corporation. The SPV redeveloped Gandhinagar Railway Station, a 312-key hotel in the airspace above the railway station besides managing Mahatma Mandir Convention Center and Helipad Exhibition Grounds. The SPV further selected Leela Hotels as the operations management partner for the project.

Do you think creating a portal for a land bank by the Department for Promotion of Industry and Internal Trade (DPIIT) helps in assessing land value?

Creation of a portal with details of land bank proposed to be monetised brings in a definite supply side transparency. It helps market participants prepare their business plans and structure themselves for most suitable acquisitions. However, it also has a disadvantage of non-prime land parcels losing their marketability. Multiple competing supply of similar land parcels would end up cannibalising the demand for some of the non-prime land parcels.

Delhi has eased land use policy but is it still a challenge across various states?

Land use change and zoning change have always been a very big challenge for PPP projects. There are multiple examples of PPP projects failing during implementation. Failure and delay in change of zoning of land from public and semi-public use to commercial use have been the key point of dispute in these failed PPPs.

How challenging is land availability for manufacturing and infrastructure projects in the current scenario? 

Industrial land supply has seen robust augmentation through state industrial development bodies and private sector developers. Greenfield industrial cities being developed by National Industrial Corridor Development Corporation (NICD) in collaboration with various state governments have gone a long way in development of world class industrial infrastructure in the country. Some of these Special Investment Regions include Dholera in Gujarat and Shendra Bidkin in Maharashtra.

How has the creation of these new hubs been unique in land acquisition models?

In all the special investment regions being developed by NICDC in collaboration with state governments, the land is provided by the states as their equity contribution in the SPV. The state government in turn looks at maximising government owned lands with limited requirements of fresh acquisitions. In some cases, like Dholera in Gujarat, the state government followed a land pooling approach. Under this approach, the land required for critical infrastructure is retained by the state, and smaller but developed plots are handed over back to land owners. A win-win for both the sides, as land owners get compensated for lost undeveloped land being taken from them by enhanced value of developed net land handed over to them.