Why invest in MPD 2021, and Where?

Ramesh Menon, Director, Certes Realty ltd.

How often have we heard that the prices in Central & South Delhi are either at par, or much higher than the tony areas of Tokyo, London & New York? Chances are that you are amongst 9 of the 10 surveyed. 

The ‘Aam Aadmi’ is just a word bereft of the benefits of the free market world.  In the first place, it is common sense that the prices are determined by a basic principle of “Demand Vs. Supply” and how in the world does the policy maker assume that a meager supply of 8-10,000 dwelling units a month created by DDA would try to erase the deficit of almost half a million houses in Delhi? There is evidence that almost 75,000 families migrate to Delhi every year, and that it adds to the pent up demand for housing units in the affordable category.

Under the new team at the helm of affairs since Mid 2011, a lot of progress is being made on the Delhi master plan MPD 2021, more noticeably on the visible pragmatism of the minister in charge, Mr. Kamal Nath. Mr. Nath has been a vociferous advocate of the “Vertical Growth” of Delhi, and rightfully so.

“Land in Delhi is finite, only 1483 sq. kms, and just about 30% of the same is available for new supply of housing units. The limited opportunity window is open only for a short period, and the upside far too high for investors to ignore this opportunity”

In a recent meeting of the policy makers, it was proposed that Delhi relax the FAR norms, so that modern structures can be built soliciting international expertise & investments.  If information from the sources can be believed, Delhi is planning to up the ante by increasing the FAR to a whopping 400 – 600, a break from the current conservative norms of 200. Please note that Gurgaon which is highly prices currently has the allowed FAR of 175.

What does this mean though, for the investor? Firstly, land prices in some areas of Delhi would be as low as Rs. 100/- per sq. feet. (Unbelievable, isn’t it?) . That exactly is the ‘short-lived’ opportunity that needs to be encashed at the earliest.

The revised FAR norms need to be included & notified under the MPD 2021, which is under review currently. It might be pertinent to mention that ‘Nay’sayers’ do exist, who cite Infrastructure, aesthetics, archaic norms and historical monuments in Delhi to scuttle path-breaking policies. That brings us to the question of where would these revised norms be applicable, if & when?

 

To avail of the price benefit today, three critical factors need to be considered.

 

1)                 Demographics – Demand for housing

2)                 Availability / Cost of land today

3)                 Impediments to FAR like ASI norms / Airport authority etc.

 

A quick review of the notified Master plan MPD 2021 and the Zonal plans notified in Mar-June’ 2010 would indicate favorable tilt of the policy makers towards Zone-N of the master plan, based on the above parameters. The Zone N has the potential to develop high-rise zones, with clear defined existing connectivity by Highways, Urban Express Roads, arterial roads, metro & interstate rail network. For those who aren’t too sure on the location, Zone N is north of the NH-10 (Rohtak Road) and abutting the new sectors of Rohini. It houses two large indstrial pockets of Bawana (for hard industries) and the proposed Knowledge based Industrial park proposed in Kanjhawla-Sultanpur by Delhi state Industrial development corporation )DSIDC).

The study of the last census of India in 2011 shows that the population of Zone N is only about 3.5 lakhs (approx.) while the land mass available for urbanization is approx. 35,000 acres. That shows a healthy holding pattern of land by the farmers, and the probability of fragmentation & litigation being the least. What adds to the attraction is the availability of land directly from the farmers, at prices cheaper than some other attractive zones.

The announcements regarding some of the path-breaking policies in Delhi are likely within the first half of this year, and that leaves little time for two distict category of participants in the real estate industry.

 

1)                 Investors in land, including developers, HNIs & domestic funds

2)                 Developers & investors in Gurgaon, NOIDA, Faridabad etc.

 

The former for their investment would yield the highest returns in “India’s most lucrative Real estate opportunity”, and for the latter to reconsider their “Pricing & Inventory strategy”. Developers beware, sales & pricing are a function of the Supply & demand and the Delhi supply has the potential to upset the gullibility apple-cart of the NCR markets.

Prudence demands that the Opportunity in hand, namely Buy land under the N zone of MPD 2021 be encashed, before the upward movement of pricing makes the opportunity vanish, soon.

A word of caution though, be sure where & whom you partner to buy the land, coz, “Expertise is the only virtue not marketed under Premium”

 

 

The author is a Director with Certes Realty Ltd, an expert research & transaction organization focused on the Delhi NCR markets

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