Institutional Frameworks for New Cities

Vidyadhar K Phatak
Presented at Strengthening Institutions, Enhancing Governance Sixth Annual International Conference on Public Policy and Management December 28, 2011, IIM Bangalore

Definitions
When NEW
It is Real Estate Development

When City
It is no longer NEW

Types of New Cities

New Capital Cities Chandigarh, Gandhinagar, Naya Raipur City Expansion Navi Mumbai, DDA Dwarika, Rohini Industrial / Company Towns Jamshedpur, Rourkela Multi-Product SEZs with 40% non-processing area Private Townships Special Townships, Mega Cities, Integrated Townships

Types Of New Cities

New Towns in Towns Large gated communities New Towns near Towns New Towns away from Towns

The Process
1 2 3

Land Assembly

Planning and Design

Marketing and Sales

Delivery of Services

Arrival of Citizens Democratic Governance

Land Assembly
Eminent Domain or Compulsory Acquisition
Mainly by state e.g. Chandigarh, Gandhinagar, Navi Mumbai, Naya Raipur

Private purchase
SEZ, Special Townships Maharashtra, Gujarat

Land pooling Town Planning Schemes

Gujarat, Maharashtra

Community led cooperative Assembly

Magarpatta in Pune

Business Fundamentals
Land is is required for for infrastructure roads, schools, healthcare, recreation 40% Value of (60%) land in urban use is more than the cost of (100%) raw land + cost of infrastructure rate of return could vary This is true of all types of new town models

Aberrations
In state developed new towns, developing new town is declared as public purpose and powers of compulsory acquisition are used. Compensation is at market value in current use. Expected rise in future use is not considered. In private land assembly land aggregators purchase land without declaring the ultimate intention. The compulsory acquisition and asymmetry of information suppress cost of land and give rise to heartburns.

Aberrations
In publicly developed townships, the lumpiness of land and infrastructure investments create cash-flow mismatch Expectations to cater to poor at affordable prices suppress returns Capturing land value gain through revision of lease rents has not been practical

Off Site Infrastructure

Indivisibility and scale economies of off site infrastructure are important
Water resource development Sewage disposal Mass Transit

Relatively small new towns either piggy back on available infrastructure or provide less than desirable options
Ground water supplemented by bottled water by consumers.

Landuse Planning
Constitution requires Metropolitan Planning Committee to prepare development plan.
Maharashtra has equated this plan to Regional Landuse Plan as envisaged in Town Planning Act

SEZ and New Towns are allowed to be developed outside the framework of landuse plans. This inverts the logic of Plan led development

Real Estate Phase

New Town developers (Public or Private) treat the occupants as clients or customers and not as citizens. Delivery of services is organised to achieve customer satisfaction during the sale phase to get price benefits. But access to services is not seen as citizens right However democratic government as envisaged is not favoured or resisted

Financing Delivery of Services

In normal cities delivery of services is financed through property taxes and user fees. Both enable pricing of services in a progressive way. New Town developers have no powers to levy taxes. During the development stage cash flows are capital. Revenue expenditure has to be managed through capital receipts or lease rents and user fees have to be charged a delicate balancing act. Commercial compulsion may leave out the poor.

The Conflicts
Land purchasers, Land acquirers Land sellers, Land Acquirees

New Town Planners

Regional Planners, Off Site Infra Developers Service Delivery Democratic Governance

Real Estate Commercial Objectives

Clients Customers

Citizens

Governance Issues
Regional framework for site selection for new cities? Land assembly private purchase where regional framework is widely known or compulsory acquisition? Transition from real estate development to Delivery of services and Democratic governance?

Thank you