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DDA’s Land Pooling Policy: Is it a big opportunity for buyers?
Financial Express  |  February 18, 2019

Ashutosh Kashyap

With the launch of DDA's land pooling portal, the authorities have finally managed to take the first step towards land pooling, which might turn out to be a turning point in the real estate landscape of Delhi and its satellite cities.


With the launch of DDA's land pooling portal, the authorities have finally managed to take the first step towards land pooling, which might turn out to be a turning point in the real estate landscape of Delhi and its satellite cities. The policy, which was touted as the game changer for Delhi&rsquos real estate landscape for better part of the decade, is finally taking shape and paving way for new age development options in Delhi.


# The urban extension comprising of the five zones namely (K-I, L, N, P-II & J) would add another approx. 56,000 Ha, which is approx. 38% of the total area of Delhi.


# Sector plans are available for 4 zones (Zone K-I, Zone -L, Zone-N & Zone P-II) while the sector plan for Zone J is yet to be notified.


# At present, total vacant land shown across 4 zones admeasures 19,074 Ha, with the addition of area from Zone J is expected to be around 25,000 Ha. In perspective of the extent of Delhi, this is 20% of the total area of Delhi.


# Zone L with gross area of 11,690 Ha and vacant area of over 8,000 Ha presents the largest chunk of development opportunity.


Impact & Implications


# The extent of land being available for the development would create a potential for an influx of supply of over 6 lakh housing units, which will redefine the supply and pricing dynamics of the entire region, including Gurgaon and Noida.


# Additional FSI (15%) and density permissibility would also imply massive opportunity especially in affordable housing.


# The biggest impact of the new urban zones will be the availability of land for commercial development. With the availability of commercial-use land parcels, the extent of the commercial supply is expected to be to the tune of over 75 Mn sq ft, which is expected to put pressure on the commercial clusters of satellite cities.


A lot was expected from the land pooling policy ever since it was notified for the first time in the year 2013. However, numerous flip-flops and perpetual delays have taken the sheen out of the opportunity to a large extent. The essence of policy making lies in its continuity and pace of execution, which certainly has been a missing aspect of this policy. Over years 2013 &ndash 2014, the upcoming urban extensions witnessed many developers and investors taking position in the upcoming new zones only to be struck for over 5 years. In addition, initially proposed FSI (400) and density (800-1000 pph) has now been moderated only to lower the lucrativeness of the opportunity for these first movers.


What to expect?


When the policy was first notified in 2013, the buzz word was the availability of houses in sub 1 cr budget segment in abundance. However, the same might not happen owing to value erosion because of holding cost, since in 2013-14, moderated FSI and density norms as compared to the proposed initial plan. With a relatively higher FSI cost and lowered density norms resulting in larger unit sizes, the ticket sizes would be considerably higher.


In addition, the overall sluggish demand scenario in the residential real estate would imply lower appetite to absorb the supplied units falling in a higher ticket segment. In such a scenario, even if authorities try to expedite the process, the inability of the market to absorb the product especially in higher ticket sizes would define the pace of emergence of these areas.


Execution is the Key


With so much of delay and hither and thither on the policy, the authorities should get the act together to ensure that an enabling environment is created to provide the necessary impetus to the entire process. The success of the entire concept lies in land owners&rsquo interest in pooling their land. The faster the process of pooling, the quicker will be the turnaround time for the land owners.


Zone in Focus


Of all the new zones, the sector level planning of Zone J is yet to be notified. Out of the remaining Zones, Zone L is the one, which is expected to witness significant interest given its proximity to commercial hubs of Gurgaon. The zone also happens to be the largest of the 4 with notified sector plans, which would mean a higher likelihood of quick achievement of threshold pooling (70%) of any given sector.


The process of opening of development options within Delhi would offer more new age developments with the &lsquoDelhi address&rsquo, which is likely to put pressure on the real estate demand in satellite cities more specifically in Gurgaon. With the availability of more options in Delhi, the micromarkets of adjacent to the new zones are expected to witness stagnation in prices.


The good news is, a step had been taken and despite its pace of execution, it will create a disruptive impact on the real estate landscape of Delhi and its satellite cities. With more options across Delhi, in the coming times, end-users have a lot to cheer about and look forward to.


(By Ashutosh Kashyap, General Manager, Valuation & Advisory Services at Colliers International India)