Real estate funds Metro



Urban planning given a miss
 

 
Last Updated: Sunday 28 June 2015

Real estate funds Metro

imageComputing profit and loss of Metro projects is tricky. Such projects all over the world are known for running into a loss. These capital-intensive projects cost between Rs 110 crore and 210 crore per km of elevated corridors.

Cost of underground Metro is three times. There are over 130 projects in the world; they all require government financing. There is nothing wrong with that, said Tiwari; Metro projects should be viewed as a public service, like water supply, electricity and sewerage.

Dayal claimed Delhi Metro is one of the few that are making an operational profit. “Our operation ratio is 0.52, which means of every Rs 100 that we earn, we spend only 52 paise on operating and maintaining the Metro,” he said. But this has become possible because of the property development activities that DMRC is into. Thirty per cent of its revenue comes from land development activities, Dayal informed. For example, Shastri Nagar IT Park, McDonald’s outlet at Kashmere Gate, Big Bazaar store at Inderlok and ATMs at other Metro stations.

Urban planners claim this is akin to real estate money funding a city’s transport project. The Delhi government handed over 350 hectares of land to DMRC at a subsidized rate. This land is now being exploited by the corporation to raise revenue. “DMRC is operating more like a real estate broker. It gets land from government agencies like Delhi Development Authority at their base acquisition value and then it sells it to developers at the market price,” said Kuldip Singh, senior architect. RTI applications filed by a Delhi non-profit Chetna exposed how a plot acquired at Rs 4 crore was sold for Rs 194 crore. DMRC claimed such property development kept the ticket cost low.

A first of its kind in India, Mumbai opted for public-private partnership (PPP). Mumbai Metro One Private Ltd, a joint venture, is building this privately financed project (see box, ‘Mumbai Metro’ on p27). Transport planners are uncertain how this will work. “A private firm will build the Metro only if there is profit. And this profit comes from real estate,” said Tiwari.

Private companies agree. Roshan Singh, spokesperson of Mumbai Metro One Private Ltd, admitted 60 per cent revenue will come from property development and advertisements. The company is also banking on a higher floor space index (FSI) to carry out commerce on Metro premises. “FSI around Metro stations would be increased to 4 from the current 2 by way of legislation,” informed Roshan Singh. FSI indicates the maximum construction allowed on a plot in a particular area.

According to Kuldip Singh, FSI is being increased without a thought to the city’s master plan and carrying capacity. It may also lead to land grab. DMRC is already demanding change of land-use along Metro corridors to make it financially viable. The government has demarcated 500 m-wide strips of dense commercial activity along the Metro network. There are plans to increase FSI and change land use from residential to commercial. This will partially offset DMRC’s initial capital investment and increase ridership.

But there are associated risks. The Rs 12,132 crore Hyderabad Metro, a PPP project, had to be scrapped in July last year. Being built by Maytas-led consortium, a sister concern of Satyam, it not only refused government’s financial support, but also proposed to pay the government Rs 30,311 crore in three instalments by the end of a 35-year lease. The source of its revenue was not the Metro project, but the 92,903 sq m space along the Metro. “It was a real estate project and Metro was only incidental,” said Tiwari.

The deputy chairperson of the Planning Commission, Montek Singh Ahluwalia, wrote to the prime minister suggesting the same model be adopted in other cities. The Satyam scam then came to light and the project was dropped.

The Metro, feels Kuldip Singh, is no longer focussed on increasing mobility. “Rather than Metro serving the city’s existing land use and traffic demands, the principles of urban planning have been subverted to serve the Metro,” he added. Where does that leave the daily commuter?

Inputs from Rajil Menon in Mumbai

Carbon credits for Delhi

The Delhi Metro is the world’s first railway project to be registered by the United Nations Framework Convention on Climate Change under the Clean Development Mechanism. It has claimed carbon credits, amounting to Rs 1.2 crore annually, for the use of regenerative braking system in its trains.

It reduces electricity requirement by 30 per cent. Whenever a train applies brakes, the kinetic energy released starts a machine known as converter-inverter. This machine acts as an electricity generator, which supplies electrical energy back to the overhead electricity lines. The regenerated electrical energy that is supplied back to the overhead lines is used by other accelerating trains.

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