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TIME RIPE FOR Greenfield!

TIME RIPE FOR Greenfield!

A greenfield smart city is a clean-slate approach towards urban growth, something that helps prepare for a new future. Two main issues that need to be addressed today a coming-of-age population that needs employment, and a place for them to live while they work. INFRASTRUCTUE TODAY digs in more to understand why India need more greenfield cities than 100 brownfield smart cities, as envisaged by the Modi-led government.

For the Government’s 100 Smart Cities initiative to succeed, India needs to build new smart cities urgently. If the Central Government and other State Governments fail to give enough attention towards the creation of new urban areas to decongest the existing cities and to accommodate the new migration, the 100 smartened cities will lose its sheen and smartness in the near future under the pressure of the ever-growing population.

The existing cities, facing over-population and scarcity of land, will not be able to absorb new investment. This, according to urban planners, will certainly impact the Make in India initiative, and job creation opportunities. India needs to quickly build 10-12 new smart cities to decongest cities and to accommodate new migrants. Urban experts are of the view that in the next 10-20 years, there is an urgent need for developing greenfield smart cities around the top big cities, which are facing the maximum influx of people.

This story puts forth the argument that Greenfield Smart Cities are required in India to positively transform its urban landscape, to turn future urban challenges into opportunities, and to actualise Prime Minister Modi’s vision of smart cities in the true sense.

Why greenfield smart cities?
While the Smart Cities guidelines mention the creation of the greenfield smart cities with a minimum area of 250 acre, the thrust of the policy is on retrofitting the existing cities with smart solutions. Except Amravati, Naya Raipur, eight new cities in the Delhi-Mumbai Industrial Corridor (DMIC), and a few privately held developments in this connection, there are no greenfield smart city projects being planned in the country. The necessity and importance of improving the infrastructure and quality of life in the existing cities cannot be emphasised enough. However, there are three things worth noting about the peril of focusing only on the upgradation of the existing cities. Firstly, the challenges and complexities of brownfield projects are enormous in a country like India, where most cities have grown in a haphazard, and not a planned manner. Secondly, one needs a blank canvas to create a masterpiece. While brownfield projects may succeed, a true smart city can be created only with a master plan that incorporates all green, smart, sustainable features from the design stage itself. And lastly, the efforts and investments in retrofitting the existing cities with smart solutions will not be fruitful in the long run, as with the ever-increasing population and rural to urban migration, these retrofitted cities, no matter how smart, will face congestion and strain on its infrastructure in the very near future.

The rapid urbanisation of this scale needs to be supported and managed by creating new cities, especially around the top 10 cities, which are to face the maximum influx of migrants. Some experts peg the number of new urban areas required to nearly 500. If new cities are not created in the next 5 to 15 years period, the increase in the existing cities’ population will badly impact their liveability and competitiveness. By 2030, urban India is expected to contribute to nearly 75 per cent of India’s GDP and 70 per cent of new employment. If the present cities lose on competitiveness due to urban gridlock, Indian growth story will languish.

Finally there is also an economic upside. According to Nikhil Gandhi, Group Chairman of SKIL Infrastructure, a company that has developed many first-of-its-kind infrastructure projects in India, "Investment of one US dollar in greenfield infrastructure projects brings investments worth fifteen US dollars. Thus, creation of greenfield smart cities will give a major boost to the nations economy. Such developments will also generate huge employment opportunities and will transform the socio-economic landscape of the surrounding regions.

Gandhi’s point is well corroborated by the Korean government’s offer of investing US $ 10 billion in infrastructure in India including a smart city with Kalyan-Dombivali municipality. If simple connectivity by good quality road corridors can propel economic activity as it has been witnessed in case of Mumbai-Pune expressway, Jaipur-Ajmer expressway etc then one can well imagine the economic acceleration that can take place as the city becomes secure and begins to attract talent around the opportunity it offers.

In view of the above, it is extremely important to take meaningful steps to channelise the urbanisation process in the right direction and to evolve a policy environment that focuses on building new smart and sustainable cities.

The economic engine
Indias working age population (15-59 years) will rise to 962 million in 2030. At the same time, the share of the primary sector in the total workforce is likely to decline to 37 per cent by 2030. Thus, the secondary and the tertiary sectors will be required to absorb a large number of workforce, failing which, there will be a significant rise in unemployment, poverty, urban slums, popular discontent and crime. India, therefore, needs to build not just smart cities, but Smart Industrial Cities, which can generate employment for millions of people.

In this context, Make in India gains tremendous significance. Manufacturing is one of the most vital cogs in the wheel of development, as underlined by the contribution of manufacturing sector in the growth of China and South Korea. The "Make in India" initiative envisages further industrialisation of the nation, increase in the FDI and creation of millions of jobs. However, the existing cities in India, especially the metros, are bursting at seams, and are incapable of absorbing mega investments in the manufacturing sector, and thus may fail to realise the real meaning and value of this visionary policy.

As Alkesh Kumar Sharma, Chief Executive Officer and Managing Director, DMIDC, puts in, Greenfield cities will help in reviving the economy and boosting the GDP growth. Manufacturing sector, coupled with other emerging sunrise sectors, will surely spur greater revenue generation in the current scheme of investments.

The greenfield smart industrial cities with high quality living and business environments will be ideal for domestic and foreign investors and companies. According to experts, such greenfield smart industrial cities, if strategically located close to a Tier-1/Tier-2 city, with excellent national and international connectivity for easy movement of people and goods, will serve as the economic engines of the nation. Jagdish Salgaonkar, Senior Vice President and Program Director, AECOM, cites an example that one cannot ignore. According to him, although Dholera Industrial City is going to be the world’s largest greenfield city with a footprint of 920 sq km. "When you start a project as big as Dholera, from where do you start?" asks Salgaonkar.

He poses some valid questions: Do you start it close to an existing community, existing metropolitan area or start it in hinterland?
He gave some pros and cons of the project. Salgaonkar says, If you start it closer to an existing community or a city, land is very expensive which means you have to put a lot of fund for acquisition, and if you opt for hinterland where land might be cheaper, then the question is how do you get connectivity there.

Salgaonkar is right in his capacity by raising these question. There has to be a balance between how much fund that needs to be spent on land acquisition and connectivity. In case of Dholera, the authorities went about 100 km south of Ahmedabad to somewhat of a hinterland where productivity of the land was low and was quite inexpensive, but putting it all together the connectivity part was a challenge.

Positive impacts
Stake holders need to think smartly with the head of a businessman and tap what is needed immediately. By using long-term strategies, private players need to develop a balanced approach in the regional specialisation of industries to create a niche as well as interdependent industrial clusters to drive growth. If truly successful, the economic plan for a smart city will be just as dynamic and flexible as the physical plan, based on true agility. Here, Nirup Jayanth, Managing Director, Jurong Consultants (India), a Member of the Surbana Jurong Group, Singapore, points out, "The selection of industrial clusters will be based on the availability of local industry, driven by what is there now-be it agro, leather, mining, or other industry built on local context – and on the services, delivery models, supply chain integration, and upscaling of related business opportunities." Agility planning ensures that you are not stuck on a single horse carriage but have multiple drivers to ensure risk mitigation and management in case of long-term economic, climatic, and other unpredictable market forces to ensure sustenance of the economy. GDP growth is envisaged no matter how it plays out; but, securing the risk by planning a consistent, sustainable, and balanced economy is critical to success.

Planning and administration
Creating a smart city is important. Managing a smart city, and keeping it smart in the long run, is even more important. It is worth noting here the examples of upcoming cities in DMIC, the GIFT City (considered as a model smart city by the GoI) and most importantly, Jamshedpur.

Jamshedpur particularly is an excellent case in point. It is one of the best-governed cities of India, has some of the top-notch infrastructure in the country and ranks high amongst the Indian cities in quality of life. The Jamshedpur Utilities and Services Company (JUSCO) is considered a model service provider. Water quality, to give one example, is high enough to drink water directly from the tap – something unusual in India. World over, when the urban planners talk about private cities, they give example of Jamshedpur. The success of a private township like Jamshedpur over the decades is because of single ownership and later, a single service provider. In India, where even hi-tech cities like Bengaluru and Hyderabad do not have 100 per cent sewage connection coverage, and the city management is more often than not characterised by conflicts between multiple agencies providing various services, it is about time private city management and operations is allowed for.

Meanwhile, Ashish Mathur, Managing Director of JUSCO, is proud about what

Jamshedpur has achieved over the years and counts many firsts the city has implemented. "Jamshedpur is the first city to use waste plastic to build roads, and has become India’s first zero liquid discharge city, treating 40 million litres of sewage per day," he says.

Mahindra World City in Jaipur has also set an example by reusing sewage water for industrial purposes. However, Siddharth Bafna, Business Head (IC & IC West), Mahindra Lifespace Developers, cites New York and Detroit as an example to follow. this is mainly because, these cities, with providing multiple opportunities are attractive for the population to live in. A similar case is with Mahindra World City, who chose to replicate the New York model wherein the city is not only attractive to live in but also provides employment opportunities services and manufacturing sector, with social infrastructure in-place.

Improving life
By providing top-notch infrastructure, connectivity, efficient transportation and work opportunities, greenfield smart cities improve the overall quality of life for its residents. Efficient public transport, ICT, e-Governance, safe drinking water, sanitation, and good social infrastructure are some of the key elements of these emerging smart cities. Smart cities are great places to live and work; hot spots for innovation and socio-economic progress.

GIFT City is a live example of how greenfield smart cities will provide superior quality of life to the people working in the city with concepts such as ‘walk-to-work, walk-to-school and walk-to-most-places, etc’ have been implemented in its design and operations. Ajay Pandey, Managing Director & Group CEO, GIFT City, says, ‘Urbanisation includes people migrating to India’s smart cities are primarily young and economic migrants who expect everything to be connected and integrated.

Broad parameters
The three parameters that are inseparable needs for greenfield development include policy to drive development, government support for seeing it happen, and the ability to finance it.

Long-term debt financing is a must. It is critical to have infrastructure development funds set up to support greenfield cities, just as the government has set up power finance, urban finance, and other finance corporations as safe investment opportunities for the public to invest their funds in, opines Jayanth.

The ability to finance, secure, and gain from economic activities, such as greenfield cities, should also be created. Financing has to be done by pooling resources. Having set up the Jan Dhan Yojna, created the GST-based uniform-playing field, and shown the ability to control through implementation of the demonetisation scheme, the system is proven to work. Infrastructure and opportunity are available to bring people to the financial inclusion framework -and this would give the potential to crowd fund from the second largest population in the world.

Investing in the next generation’s success is critical for the older generation to survive. Today, Temasek, the Canadian Pension Fund, and a multitude of foreign wealth funds are investing in India to finance long-term gains and growth in their local markets, where it would not be possible to reap such returns.

The earnings of the previous generation cannot support them through the next phase of their lives. It is important that we create opportunities for them to gain from the next generation’s success and build frameworks for interdependence and support by creating opportunities for investment today with strong gains in the future. "If every State were to be set up with wealth funds to drive interest through investment across the country, they can create opportunities for themselves by earning in lucrative markets today to invest in future markets in their home state," Jayanth adds. This will also help in the development of some less-advantaged States, where they do not have a lot to start with.

The chicken-and-egg story is the first challenge in a greenfield development: Invest first or sell first? Investor first or people first? Jobs first or homes first? Maintaining the criticality here is as important as that in a nuclear reactor. The chain reaction is inevitable at all costs, but it cannot get out of hand.

Being able to scale while conserving capital at the beginning, and ensuring quick on-ground action is essential for success.

Financing and tie-ups should be in place. But, it is repeatedly witnessed that the development and infrastructure industries in India have been performing badly with respect to long-term business sustenance while also having issues with debt financing. "It is important to understand that long-term projects are real, and so expecting returns in the short term like we did a decade ago is a myth," adds Jayanth. Greenfiled cities need to plan for a strong baseline consistency, while some quick wins may help us celebrate from time to time.

Many early adopters of greenfield city development, like the Jaypee Group, have not been able to carry forward their initiatives, given political support issues, financial positioning, and long-term strategic approach to development. The agility aspect of the business came in late, while the drivers were primarily purely real estate in nature. Meanwhile, the ability to drive economic activity and industrial activity is what will ensure sustenance. Though it may be low-yielding compared to tier-1 real estate, nation building will have to take precedence over short-term gains. Long-term yields will be much stronger. Keeping the portfolio rich for the long term is as important as the short-term establishment metrics and key performance indicators (KPIs) that should be achieved to ensure that the project takes root and garners local and regional support.

Spending, as a KPI for greenfield municipality or smart city development under the government, against funds received or promised by the Centre is harder to drive. This is because allocation is based on a generic SOR that may or may not be comprehensive in its ability to cover all new approaches to space planning, technology inclusion, and even business models where PPP solutions are expected to drive development. Their predicament is based on the need to create value and serve people. This will have new impact measurement metrics associated with it, in addition to just the spending as a metric, which would provide better-defined opportunities for technology, soft interventions through applications, and other intangibles.

The private investor in utilities is pretty much seeing red, as there is 100 per cent risk associated with investment, when there is no one to pay for the utilities in a greenfield site. It is important to create avenues for alternate revenue generation in an integrated utility model. This would help meet operational and financing costs at a minimum, so it is at least operational on day one when investors begin their work. A co-generation plant can produce power and sell to the grid even when no consumers are there, and external purchase agreement or an external source-based treatment agreement for surrounding development could fund the early phases of water treatment facilities, especially for industry.

Way forward
The need to create new cities in India is urgent and pressing. The Government can ill-afford to wait for the existing cities to get more congested or for the new cities to evolve on their own. Government resources are stretched thin, and it requires the drive, investments, and the land banks of the private corporations to lead the new smart urbanisation process in the country.

Anuj Puri, Chairman, Anarock Property Consultants, outlines the major beneficiaries of greenfield cities. According to him, citizens would be primary beneficiaries of greenfield cities. The other stakeholders would be construction and real estate industry, and infrastructure, IT-ITeS and industrial sectors.

To facilitate and encourage such private sector-led smart urban development, which will not only generate massive revenue for the nation but also create huge employment opportunities for its people, the Government needs to realise the importance of the greenfield smart cities and act quickly to provide a supportive policy framework and incentives for the same. About 10-15 greenfield smart city developments across India at strategic locations, have the potential to put the Indian economy on a fast track, and make India a global benchmark in smart urban development. Such developments will generate tremendous goodwill and appreciation for the Narendra Modi-led Government for resolving the current as well as the future urban challenges, and for propelling India into the 21st Century in the actual sense.



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