New Delhi: Of the two flagship projects part of Modi government’s ambitious plan to monetise state-owned land to set up housing for its employees, one finds itself largely dependent on investments by Public Sector Undertakings (PSUs), while the other has found few takers from the private sector, ThePrint has learnt.
It is also learnt that all available spaces at the mega commercial centres in South Delhi’s East Kidwai Nagar and Nauroji Nagar have either been sold or leased out. While it was decided to reserve the space in East Kidwai Nagar for PSUs and government departments, 32 lakh square feet of commercial space at the World Trade Centre (WTC) in Nauroji Nagar was auctioned, according to sources in the ministry of housing and urban affairs.
But the World Trade Centre, located on 25 acres of prime land in South Delhi, failed to arouse the interest of the private sector for a number of reasons ranging from relatively high per square feet cost, cheaper and better options in Noida and Gurugram and the option to buy instead of lease these commercial spaces.
Developed by NBCC, a PSU under the Ministry of Housing and Urban Affairs (MoHUA), the first commercial centre is part of East Kidwai Nagar redevelopment project and the second, part of the 7GPRA redevelopment project.
Having built housing complexes — 4,608 in East Kidwai Nagar and around 20,000 under 7GPRA (in various stages of construction) — NBCC was allowed to use around 10 percent of the total project area to develop commercial and retail spaces to recover project costs.
The Modi government had in its first tenure decided to develop both projects on a self-financing basis to ensure the cost does not burden the exchequer.
In the East Kidwai Nagar redevelopment project, which has come up on 84 acres of land, the commercial complex spans around eight acres, while in the 7GPRA, commercial/retail space is being developed on around 35 acres of land in Nauroji Nagar and Sarojini Nagar.
Having leased out office space in East Kidwai Nagar, NBCC is now in the process of auctioning the commercial space in Nauroji Nagar and retail space in Sarojini Nagar.
According to information provided by NBCC, a bulk of the space at the two commercial centres has either been sold or leased out to PSUs.
In East Kidwai Nagar, for instance, of the 13.45 lakh square feet of built-up commercial area, NBCC has leased out 12.86 lakh square feet to 31 PSUs for a period of 30 years for Rs 4,154 crore. Lease conditions mandate that NBCC will be responsible for upkeep of the building and facilities, according to ministry sources.
The other project, WTC, is a state-of-the-art commercial space developed by NBCC over 25 acres of prime land in Nauroji Nagar. The commercial hub, with 12 towers and 10 floors each, has a total built-up space of 32.81 lakh square feet that is being auctioned.
According to information provided by NBCC, 31.06 lakh square feet of built-up space at WTC has been sold so far. Of this, roughly 71 percent (or 22.10 lakh square feet) has been bought by 45 PSUs and central government ministries for Rs 8,835.11 crore.
These include GAIL Ltd, Power Finance Corporation, Central Registrar of Cooperative Societies, Security Printing & Minting Corporation of India Ltd (SPMCIL), Solar Energy Corporation of India Ltd, Oil India Ltd and Petronet LNG Ltd, among others.
Only 8.95 lakh square feet of built-up space at WTC has been purchased by private companies and institutions for Rs 3,664.59 crore, according to the NBCC. Among private players who have invested are Hamdard Laboratories and HDFC bank.
A source in the ministry said that, unlike in East Kidwai Nagar, the lease agreement at WTC mandates that PSUs and corporates must take charge of management and maintenance of the premises. “The NBCC will be responsible for upkeep and maintenance of the property just for the initial two years after the project is complete,” the source added.
After that, the companies will have to form an association, like a residents’ welfare association, to maintain the property, explained the source.
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Private players prefer Noida, Gurugram
Lack of interest shown by corporates in the Nauroji Nagar project, real estate experts say, is mainly due to high cost and availability of better infrastructure and services at much lower cost in Gurugram and Noida.
Reserved price for space at WTC was around Rs 37,000 per square feet as against prevailing rate Rs 10,000-15,000 in Noida and Rs 15,000-20,000 in Gurugram.
Over the past decade, neighbouring Noida and Gurugram have seen large-scale commercial development with several corporates, IT sector companies, among others, preferring these cities to set up base.
In Delhi, on the other hand, only a handful of large-scale commercial spaces, especially those developed by the private sector, have come up during this time. Development of commercial spaces in the Capital has largely been done by the Delhi Development Authority (DDA), which is the main land-owning agency here.
Besides high property cost, unavailability of large floor plates is another reason for tepid response from private sector companies looking to invest in office spaces in the Capital, say experts from the realty sector.
Floor plates refer to the amount of leasable/rentable area on an individual floor of a building.
Samir Jasuja, founder and CEO, PropEquity, says not many corporates showed interest in the World Trade Centre due to the high cost and NBCC’s decision to sell and not lease out office spaces.
“There are three main reasons why corporates have not shown interest (in NBCC’s WTC project): first, the per square foot cost is very high, and cheaper, better options are available in Noida and Gurgaon. Second, NBCC is selling and not leasing the space; most corporates lease office space and not buy it. Third, NBCC had a lot of captive demand from government PSUs. They did not have the need to sell the space to corporates,” says Jasuja.
He adds that corporates and IT companies prefer Noida and Gurugram over Delhi due to various reasons such as large and efficient floor plates and availability of ‘Grade A’ buildings with good infrastructure at a much lower cost. “Delhi doesn’t have large land parcels due to which it is difficult for large corporates to get large floor plates. Moreover, the cost of land in Delhi is two times more expensive than Noida and Gurugram.”
The other factor, experts say, is the shift in the corporate real estate market — from purchasing office spaces to taking them on lease, especially in the post-pandemic period.
“Corporate real estate market has moved from an outright purchase model of office space usage to a largely lease-only model over the last two decades. Key reason is to keep an asset-light business model particularly in context to non-core assets like real estate, and the need to maintain a flexible and agile office space portfolio in wake of a dynamic business environment,” says Vivek Rathi, Director (Research), Knight Frank India.
Rathi adds that markets like Gurgaon and Noida fit the bill as they offer a wide range of standard lease arrangements, besides coworking workspaces, large floor plates, new sustainable projects, occupant-friendly orientation and come at a relatively lower rental value. “Delhi, however, is a political and economic nerve centre for the country and represents legacy real estate tenets with many redevelopment projects.”
Govt should push for mixed-use development
With most government housing colonies in Delhi constructed over four decades back, the Modi government, in its first term, decided to opt for redevelopment of some of these old, low-rise residential colonies to meet the increase in demand for housing for its employees.
The one in East Kidwai Nagar was the first government redevelopment project undertaken by NBCC followed by 7GPRA, under which it took upon itself to redevelop seven government colonies.
Harshvardhan Bansal, president of Delhi chapter of National Real Estate Development Council (NAREDCO), says mixed-use development at the two redevelopment projects would have yielded better returns.
“It is the high cost that is a big deterrent for corporates to invest in commercial spaces in Delhi. For instance, at NBCC’s World Trade Centre the reserve price was Rs 37,000 square feet, which is almost double of the prices in Noida and Gurugram. The high per square feet price in Delhi can be brought down only if private developers are involved,” says Bansal.
He adds that the government should allow commercial, retail and housing projects as part of the redevelopment plan.
“We recommended to the central government that NBCC be asked to prepare a master plan of the areas and private developers be allowed to develop it. This would drastically bring down per square foot cost due to mixed development and dynamic pricing,” says Bansal.
(Edited by Amrtansh Arora)
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