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Analysis: Leveraging real estate for metro systems

Analysis: Leveraging real estate  for metro systems

City planners in India seem to be looking at metro rail as the panacea to poor and myopic planning and haphazard growth. Sudheendra Bajpai and Aparajita Dutt say integration of systems should include planning the city's real estate around metro rail.

Here is a benchmark if ever there was one: The first line of Paris Metro was operationalised way back in 1900. Between 1900 and 2011, the face of Paris city has changed significantly, but the metro rail system remains the backbone of the city. In fact, Paris Metro has become a symbol of the city, noted for its den­sity (214 km) within the city limits.

In contrast, in India, the metro system is be­ing thrust upon our already congested cities over the past few years, leaving no scope for planning and deve­loping integrated property around the metro systems. Eventually, faced with an insurmountable transport pro­blem, the city turns to metro rail for solution and super-imposes the system and related development on an alre­ady congested city.

India's first metro rail was introduced in 1970 and construction work started in 1973-74. Ten years later, Kolkata metro became the country's first operational metro rail. Construction on Delhi Metro started in 1998 and the first section was operationalised in 2002. It is now time for Bangalore, Chennai, Mumbai and Hyderabad to go metro.

Real estate development is only considered as a mere project funding mechanism or as means of revenue gen­eration and not as urban landscape manager. In the name of property development, our cities have been im­posing more and more random commercial developments in already congested areas. Real estate development do­esn't just mean above-station property development or leveraging price rise of existing property around metro system: It should mean planning and managing the urban land resources around metro system with an int­egrated approach.

Cases in point

In order to elaborate on how metro rail and related property development works have been proposed and undertaken in the recent past, few Indian cases are presented below:

Delhi: The table below presents the details of land and property development undertaken directly by Delhi Metro in two phases already completed and operational.

During Phase I of Delhi Metro, real estate deve­lo­pment was undertaken at stations and adjoining land parcels. During Phase II, despite the fact that the corridor had greater length and more number of stations, resulting in more space for development, an area less than Phase I was developed and that too primarily for retail purposes. Of the total land/real estate development undertaken by Delhi Metro, retail space development comprising food outlets, branded retail outlets, ATMs, kiosks, etc con­stitutes about 70 per cent of the total works und­ertaken. An IT Park at Shastri Park and some residential com­plexes have also been developed, but in isolation.

By the end of Phase II, the total land area developed directly by Delhi Metro excluding retail areas at stations is a mere 150 hectare (considering an average FSI of 1.5). This will be almost negligible even in relation to the size of the network's immediate hinte­rland approx­imately 1 km wide on either side of the network. In esse­nce, the land / real estate development has been with the objective of supporting its fare box revenues.

However, at the time of commencement of Phase III, that Delhi Metro is looking towards integrated Transit Oriented Development (TOD) which would en­courage movement within the developed precincts. The dev­elopment would be a complete community with resi­dential, office and commercial establishments within the premises. It would largely reduce dependency on pri­vate vehicles as access to public transport would lite­rally be right next door for an entire urban pocket.

Hyderabad: A 75 km long Phase I of the Hyderabad Metro is being developed through Public Private Partnership (PPP) and L&T, is the concessionaire of the project. The Government of Andhra Pradesh has provid­ed about 18.5 million sq ft area to the concessionaire for property development activities. Since stations are situ­ated in the midst of already congested areas, there is very limited scope for additional development. The only way to leverage the space in these stations would be in the form of on-station retail / commercial development with rather limited integration with surrounding areas. The aggregate area available at the depots is sufficiently large – 151 acre – and provides the concessionaire some scope for planning and leveraging real estate development for undertaking TOD.

The prime objective of providing such large scale real estate opportunity to the concessionaire was to help it recover the project development cost.

Pune: Pune Municipal Corporation is envisaging development of a 32 km Metro Rapid Transit System (MRTS) network in the next five years. The Corporation has envisaged an enhanced FSI of 4 in a 500 m area on both sides of the metro corridor. Civic activists, town planners and citizens are opposing this proposal as incr­easing FSI in already congested areas would further inc­rease the population which may become untenable as the existing support civic infrastructure will not be able to serve the increased demand and may crumble under the heightened pressure. Moreover, according to a report by Delhi Metro, granting an FSI of 4 along just half the length of the metro corridor, approximately 16 km, will yield Rs 18,900 crore, whereas cost of metro is only Rs 4,700 crore and such a high FSI may not be necessary.

The primary intent of the exercise is again fund gen­eration for project development, and the spirit of int­egrating land use and transport seems to be the effect and not the cause of the action.

Policy backdrop

While on one hand, the Indian examples reflect that we are still far way from achieving planned tra­nsport-land use integration from conceptualisation to imple­mentation in the real sense and on ground realities are not in line with our intent; let us briefly examine what our policies and policy makers envisage in this context.

Urban Transport Policy: The National Urban Transport Policy (NUTP) was released by the Ministry of Urban Development in 2006. The first two objectives of the policy are reproduced below verbatim:

  • Incorporating urban transportation as an important parameter at the urban planning stage rather than being a consequential requirement
  • Encouraging integrated land use and transport pla­nning in all cities.

These objectives clearly underline the significance of planning urban land use and transport networks in an integrated fashion. NUTP also acknowledges the fact that transport planning is intrinsically linked to land use planning and both need to be developed together in a manner that serves the entire population and minimises travel needs and that in developing integrated land use plans, attention should also be paid to channel the future growth of a city around a planned transport network rat­her than develop a transport system after uncontrolled sprawl has taken place.

NUTP also suggests that in order to achieve the obj­ectives, all urban development and planning bodies in the states would be required to have in-house transport planners as well as representation from transport auth­orities in their managements. The Government of India (GoI) would extend support for the preparation of such integrated land use and transport plans, to the extent of 50 per cent of the cost involved in developing such plans, provided the city also dem­onstrates its willingness to act in accordance with them.

GoI would also fully support pilot studies in a few sample cities of different characteristics and in different regions of the country and as a part of this exercise, each city would also be encouraged to identify potential corridors for future dev­elopment and then establish a transport system that would encourage growth around itself.

Draft recommendations of the Working Group: The Working Group on Urban Transport for the 12th Five Year Plan is finalising its recommendations and guidelines for planned, effective and overall development of the urban transport sector. The draft document underlines the fact that a city”s master plan is a broad policy doc­ument or a blueprint for future growth and development of a city/town which needs to accommodate not only future additional popu­lation but also infrastructure requirements, specially tra­nsport infrastructure. The Master plan should strive for achieving a functional cohesion of land use and transport structure of city / town. Such plans should ensure that the existing and proposed transport networks are embe­dded in the spatial framework of the city and that spatial expansion should be determined around major transport corridors. The plans should also allocate future land use in tune with future transport infrastructure so as to ens­ure compact and sustainable development.

While our two principle policy documents clearly emphasise the need of an integrated approach to plan­ning, unfortunately, in reality, transport planning in India has not received the extent of attention it should have in drawing up strategic development and land use plans. Moreover, the role of metro rail implementing authorities is still not clearly defined resulting in a mis­match of expectations and delivery.

While our policy makers have been cognisant of the need of transit oriented development since long, let us examine briefly what actually comprises this concept and how some other developing communicates have tra­nslated this thought into action.

Transit Oriented Development (TOD)

TOD is typically defined as more compact deve­lop­ment within easy wal­king distance of transit stations that contains a mix of land use comprising residential, commercial and retail space. To begin with, TOD is the planning and develo­pment of transit centric communities or neighbourhoods. TOD makes even more sense in today”s fast paced hectic lives.

It will be worthwhile to examine a couple of global benchmarks which have adopted TOD.

Guangzhou: Guangzhou Metro Corporation (GMC), a large enterprise fully owned by Guangzhou Municipal Government, was established on December 1992. GMC not only undertakes responsibility for construction, ope­ration and management of the metro rail system in the city, but also engages in diversified acti­vities that focus on the development of metro-related resources.

Real estate development has long been a core busi­ness of GMC. The launch of a new metro line brings more business opportunities and more value for the land areas nearby. Of late, GMC has been planning and dev­eloping composite properties comprising residential, office, commercial and hotel complexes. During the planning of land parcels alongside metro lines in 2010, GMC put forward its requirement and proposition for development that it deemed favourable for preparing the 2020 traffic network planning. GMC appreciates the fact that composite real estate planning and development is the guarantee for GMC”s sustainable development.

Hong Kong: In Hong Kong, since the very beginning Mass Transit Railway (MTR) has adopted an integrated approach. It not only develops and operates the metro system, but is deeply involved in planning and imple­menting property development projects in the city. In JV with private developers, the MTR has developed over 65,000 housing units in high-density residential est­ates and over 1.4 million sqm of up-market commercial and office projects at 25 MTR stations in Hong Kong (2008 data).

In Hong Kong, the Secretary for Transport and Housing (STH) assumes the office of Chairman of the Housing Authority, implying an active correlation bet­ween transport and housing development in the city. MTRC is the whole sole authority which interacts and co-ordinates with government, real estate developers and commuters.

Thus there is centralisation of authority. Such pla­nned and integrated development of metro system and property development has contributed posi­tively to MTRs business in two ways. First, it provides a major income source to finance construction and sub­sidise ope­ration of the metro projects. Second, well plan­ned pro­perty development projects built near metro stations assembles a critical mass of metro commuters that can possibly enhance metro system”s patronage.

Some successful examples of TOD in the US are Pearl District (Portland, Oregon); Mission Bay (San Francisco, California); and Jackson Square (Boston, Massachusetts). These are typically more compact deve­lopments within easy walking distance of transit stations that contain a mix of uses such as housing, employment, edu­cational, social and recreational and public amenities. The above examples clearly suggest that planning and creating provision for transport systems well in adv­ance of the demand is a judicious proposition towards avoiding transport problems. From the developmental stage of any city, metro authority needs to be an integral part of city planning and development for ensuring tra­nsit oriented optimal real estate development. Moreover, in both the above cases, a single authority governs transit and real estate planning and development.

Having a central agency trims down the scope of overlapping of responsibilities and jurisdiction, causes of conflict and enables better coordination amongst member stake­ho­lders such as town planners, transport authorities, comm­uters, real estate developers etc.

Transport and Land Use integration: the Way Ahead

Our country”s metro rail systems have not been able to shape urban landscapes in their environs to their full potential. While the reasons may be varied and the past may not reflect a great case, it is time we take corrective action and take the next steps to bring thought to action. Currently, the requirement of integrated land use tran­sport planning is not expli­citly stated in any of the exi­sting State Town and Country Planning Acts, Municipal Acts or Urban Development Acts.

A key learning from global benchmarks and an important aspect of achieving planned integration is to have an appropriate institutional set up such that both transport and land use planning and development functions become the responsibility of a common city agency. The NUTP recommends setting up of Unified Metropolitan Transport Authority (UMTA) in all million plus cities such that the resp­onsibility for integrated land use transport planning be assigned to UMTA. It would be provided with inputs on land use plans by urban development authority and work in close cooperation with it. The present multiplicity of agencies coupled with limited role of MRTS authorities in planning future land use configurations does not do justice to the need of the hour.

These statistics reflect the opportunity that lies ahead and how transport land use integration can play a role in transforming the country”s urban landscape and lead to sustainable development.

TOD is not just development near transit. It is development that also:

  • Increases “location efficiency” so people can walk, bike and take transit;
  • Boosts transit ridership and minimises the impacts of traffic;
  • Provides a rich mix of housing, jobs, shopping and recreational choices;
  • Provides value for the public and private sectors, and for both new and existing developments

The authors are with the Transportation Advisory & Engineering
Division at Feedback Infrastructure Services, Gurgaon, Haryana. Bajpai
(left) is Deputy General Manager while Dutt is Senior Associate.

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