A year after launch, Railways' station revamp plan back to drawing board

“We have the largest captive audience in the world and hence our land parcels have huge commercial value,” declared an emphatic Suresh Prabhu in February 2017 at the inauguration of the ambitious Rs 1 trillion station redevelopment plan. 

The then railway minister’s optimism, it turns out, hasn’t translated into action. A year-and-a-half since the announcement, the national transporter’s plan to monetise its land through the commercial development of 600 stations is yet to get on track. 

Problems with the project started right at the outset. The first phase of the station redevelopment programme covering 23 stations that was launched with much fanfare had to be called off owing to lukewarm response from developers.

Now, a plan to tweak the policy has led to a tug-of-war between the Railways and the ministry of housing and urban affairs (MoHUA). Last month, the urban development ministry red-flagged a Cabinet note, citing technical issues in the revenue-sharing model.   

In the initial plan, the redeveloped stations were supposed to provide amenities like digital signage, escalators, self-ticketing counters, executive lounges, restaurants, malls, theatres and even a Wi-Fi facility. Based on initial estimates, the programme was expected to generate a surplus revenue of about  Rs 100 billion to the Railways annually and benefit more than 100 cities and 16 million passengers per day. 

After Piyush Goyal took charge of the ministry last year in September, a meeting of top real estate majors that included Tata group, Shapoorji Pallonji, GMR, the Essel group and L&T was called to revive the plan. Based on the concerns raised by developers, the Railways made a few concessions. It opted for structural changes in the policy, among them were increasing the lease period from 45 years to 99, allowing companies to mortgage the property and sub-lease it. 

Moreover, the Indian Railway Stations Development Corporation (IRSDC), the nodal agency for station redevelopment, was vested with increased powers to sanction fundraising plans. In addition to all this, the Railways allowed 20 per cent of the overall area to be redeveloped for residential purposes. 

These changes assuaged much of the concerns raised by developers and subsequently, the Railways moved a Cabinet note which was supposed to be cleared on August 9. Then came the ministry of urban development with its objections. 

“Along with issues on revenue sharing, they pointed out that based on the contract with the Railways, the Delhi Development Authority (DDA) land in Bijawasan and Anand Vihar stations were not supposed to be used for commercial development,” said a government official on condition of anonymity.   

The urban affairs ministry in an August 8 letter stated that rather than providing “net surplus revenue” proposed in the Cabinet note, the DDA should be assured “gross receipts”. In the original plan, the Railways was supposed to deduct expenses on operationalising the project and then share receipts with the DDA. The urban affairs ministry, however, says such a plan offers no guarantee of income and does not give any concrete financial model based on which the cash flow to DDA can be assessed. The ministry has put its foot down and wants the proposal to be completely reworked, once again.

  

All this is playing out despite the prime minister intervening in the station redevelopment programme, asking both the ministries to share the revenue. Earlier, the finance ministry too had its own objections about the lease period being extended to 99 years, which it thought was too long. The matter was resolved only after PMO intervention.  

The Railways, sources say, is now reworking the Cabinet note and has initiated talks to renew its existing contract with the DDA, so that the land can be used for commercial purposes. 

The question, however, is: Will this enthuse real estate developers this time around when the projects are auctioned? 

“Commercial real estate for station redevelopment is an outdated model. About 100,000 square metres space is lying unused at metro stations across Delhi-NCR. Probably, this was one of the reasons why companies have shown a lukewarm response in the bidding stage after being upbeat in pre-bid stages,” says an industry expert on condition of anonymity. 

Yet, many think the proposal would get a warm reception in smaller towns where real estate activity is picking up. Low footfall and high rentals in Tier I cities are leading retail expansion in Tier II cities, which may well be an opportunity for the Railways too if the proposal gets cleared, says another realtor. 

Meanwhile, work has commenced at some stations even as the proposal is being reworked. According to sources, Jammu Tawi, Habibganj, Kozhikode, Gomtinagar, Surat, Charbagh (Lucknow) and Tirupati Railway stations are in the process of being modernised. For the remaining stations, though, the signal is yet to turn green.