Needs of the Knowledge Based Economy

Knowledge based industries require high end commercial and residential real estate along with high quality infrastructure. Since these sectors are manned by the younger population, availability of good quality health services, educational institutions and modern entertainment facilities will drive such development. Increasingly it is becoming clearer that these industries are looking for sustainable integrated townships of an economic size capable of supporting businesses and homes, with adequate physical and social infrastructure. Yet, these should be compact enough to enable high quality living environments where it is possible to walk-to-work, walk-to-school and take public transport for other activities. In the regional context, these townships must be well connected to other urban centers through regional transport infrastructure such as airports, railways, and highways. The townships must also have access to trunk infrastructure such as high-quality drinking water and reliable power supply.

Strategic Response

To attract investments in knowledge based economic activities in a manner that directly benefits the state, there are several initiatives required. Gujarat should take the lead in promoting the development of integrated townships with high quality real estate property. Along with this it is necessary for the government to ensure that the townships so developed have access to reliable trunk infrastructure. It is also important to attract high grade developers with long term commitment through systems for rating their performance and to set adequately high standards for them in terms of infrastructure provision and service delivery. In order that such townships don't become future liabilities for the state, the infrastructure should be designed such that they are zero impact in terms of waste management and adequately self sufficient in terms of facilities for education, health and other aspects of social welfare. To make the infrastructure sustainable and to ensure their continued operation and maintenance, new service sectors such as Facilities Management and Integrated Waste Management need to be promoted. The state also has a responsibility to ensure that these townships are inclusive for the urban poor through norms for provision of Economically Weaker Section housing and integration of informal service providers. It is now acknowledged that urban centres are unsustainable without such informal service providers.

Gujarat's Approach to Developing Townships

Consistent with the overall approach of the Gujarat Government to be a facilitator rather than be a provider, it is proposed that the development of integrated townships be done through private, real estate market initiatives. The Government's role will be to support and facilitate the real estate market operations and regulating it only to the extent required to realise public policy objectives.

Needs of the Real Estate Industry

Government recognizes that only a mature real estate industry, well supported by government can respond effectively to the demand for high quality real estate that is emerging from knowledge based industries. The real estate industry needs government support on several counts. The first and most important support is the provision of reliable trunk infrastructure (road, water and power) at reasonable cost in a predictable and reasonable timeframe up to the threshold of the township. The proposed ‘Township Policy' aims to provide a framework for ensuring that this happens in an efficient manner in predefined areas for township development.

It is equally important to ensure fast clearances for a variety of regulatory regimes ranging from land related clearances and building/ development permissions to environmental clearances. The ‘Township Policy', thus responds to this by creating a Green Channel for fast clearances through third party verifications and/or self certification by high-rated developers.

While most developers would be willing to pay market price for the land, they would need some government support for purchasing bulk land. Domestic real estate developers would be able to do most of the land purchase themselves, but would need support to purchase the parcels that are left out at the end of the process of putting together a stretch of land big enough to support an integrated township. Foreign investors on the other hand, may be averse to undertake retail purchase of land and may look to the government or to local partners for providing ready-to-build large plots.

There are many specific sectors of the economy such as education, health and tourism, which are of strategic importance in supporting knowledge based economic activities. However, these need higher levels of support to get established. This higher order support includes additional private land being procured or sale of additional Government land as well as incentives such as exclusivity to offset entrepreneurial risk in the case of tourism ventures. All these forms of support are envisaged in the proposed ‘Township Policy'.

Public Policy Objectives to be Achieved

Government's regulatory role will be limited to the realization of public objectives. To illustrate, to fulfill the objective of employment generation, norms for minimum allocation of built-up area for economic activity area are required. The quality of the living environment needs to be ensured by adopting town planning norms providing for adequate open space, road network, density norms, and quality of building construction.

To ensure that the residents and businesses are adequately served and the townships are ‘zero-impact', re-cycling norms are required that necessitate high quality capital infrastructure and performance criteria for continued delivery of the required level of services. To protect the interests of the consumers buying property in the townships and to enable monitoring by the authorities, a high level of transparency needs to be established in property transactions, specifications for town planning and building construction and levels of infrastructure service delivery. This can be accomplished by setting norms for compulsory disclosure of such information by the developers. All the above is realistically achievable by ensuring that developers with good track record and quality management systems are encouraged to participate in township development through this policy. This strategic objective is sought to be accomplished by a rating system for developers and their projects, the long term effect being an ongoing process of streamlining the real estate industry.

Proposed Government Support through the Township Policy

In response to the perceived needs of the real estate industry and the imperatives of public policy, the government proposes to provide primarily five (5) types of support activities. The (1) first form of support is the provision of trunk infrastructure in the areas where the policy will apply in a phased manner. This will be undertaken through para-statal bodies and companies of the government such as Gujarat Urban Development Company, the Gujarat State Road Development Corporation, the Gujarat Water Infrastructure Limited, and the Power Distribution Companies for various regions. The provision of infrastructure will be on a cost-plus basis with long term contracts and minimum consumption criteria.

The (2) second form of support will be in the procurement of land. Government support will be provided for procurement of parcels that are left out at the end of the process of putting together a stretch of land big enough to support an integrated township. The maximum extent of this facilitation will be determined on the basis of public policy objectives and the rating of the developer. In the case of townships for education and health infrastructure, a higher degree of facilitation will be extended. The specific details as contained in the Gujarat SEZ Policy, and in the Gujarat Industrial Policy 2003 will be incorporated here!

The (3) third form of support will be the establishment of a Green Channel for statutory clearances related to land, development permissions, environmental clearances and such others. This will be accomplished through simplified regulations and procedures, third party verification and self certification methods. The level of Green Channel support will be linked to the rating of developers.

The (4) fourth form of support is in terms of special benefits under the policy. This includes giving exclusivity to tourism projects to offset entrepreneurial risk through a buffer zone for green-field projects and higher land procurement support for education and health infrastructure townships. Another special benefit is a provision to allow clusters of townships of similar nature. These clusters can then comply with infrastructure norms as a cluster rather than independently.

The (5) fifth form of support is a system for rating of developers and projects to be mandated by the government. Initially the CRISIL-NAREDCO rating will be used, which examines the developer's track record, organizational risk and financial risk. The rating of a developer will determine the level of support and degree of flexibility offered to a developer in the township development process.

The Government proposes to provide an “Early Bird Advantage” in terms of higher degree of facilitation be provided to the first few developers who come forward with unique township concepts and high level of investment.

The Government will prepare also prepare and implement Master Plans for the areas to be covered by the Township Policy to ensure that while integrated township development happens in these locations, the surrounding areas are regulated to ensure that haphazard development does not happen. The periphery of Township Policy applicable areas will be kept under strict ‘Green Zone' controls.

Finally the government will establish a mechanism for monitoring the township development process to ensure compliance with all the norms under the policy.