Impact of Delhi's updated land pooling policy
The land pooling policy has the potential to change the dynamics of the residential market in NCR by boosting the supply of affordably priced apartment units within the geography of Delhi City.
By Rohan Sharma, Associate Director - Research & Real Estate Intelligence Service, JLL India
The Lieutenant Governor of Delhi’s notification of 89 rural villages to urban areas has again brought to the fore the Land Pooling Policy of Delhi, which has been gathering dust for nearly two years now. The Delhi Development Authority (DDA) had approved the policy in the last week of July 2013, and thereafter it was notified by the Union Ministry of Urban Development in Sept of the same year. The operational rules were also approved by the Ministry in May 2015.
The dispute between the Delhi Government and the DDA on certain rule amendments saw the policy go nowhere, while unscrupulous elements announced projects and collected monies from naïve buyers with the promise of a house in Delhi.
The policy in its concept still remains a novel idea as it aimed to solve the issues faced by the nodal body in acquiring land in the prime city, due to fragmented land holdings and higher compensation payable in the wake of increased land valuations.
The DDA has created two categories for land pooling – above 20 hectares and second for land between 2 and 20 hectares.
The enhanced ground coverage of 40 percent under this policy, as against the existing 33 percent, is to promote private sector participation with land consolidation and development being the domain of private players, while DDA assumes a larger role of a facilitator.
The landowners would receive between 48-60 percent of the pooled land for development purposes back from the DDA in lieu of compensation, and they can use that developed land in any way they desire. The DDA would use the remaining portion of the pooled land for creating the associated infrastructure as well as for public and semi-public areas.
This policy is likely to result in residential development projects across the prime city, which has an acute shortage of housing and where most of the housing needs are fulfilled by the DDA. This policy is likely to lead to an increase in private participation in housing development across the city.
The last amendments made to the policy by the Ministry in 2015 are:
1. In case DDA delays the development of the pooled land, it will pay penalty to the landowners/farmers of 2 percent of the External Development Charges (EDC) for the first two years and 3 percent for the period thereafter in case of delay beyond the completion of the project or five years, whichever is later.
2. If farmers/landowners are unable to pay the EDC, they can give up a larger portion of the land to the DDA, and in this case they shall get 35 percent of the land back for their use.
3. The Development Companies shall have to compulsorily construct houses for the EWS (Economically Weaker Sections), which will amount to 15 percent of the FAR over and above the permissible FAR of 400.
4. Transparent system for prioritising the allocation of returnable land based on a computerised monthly-grouping system.
5. Complete utilisation of the FAR meant for residential purposes.
The policy is estimated to unlock around 20,000-25,000 hectares of land across Delhi, primarily in the urban villages and smaller towns at the city’s peripheries. Such development is likely to result in a healthy availability of residential dwelling units, which will also help control residential prices.
With RERA notified for NCT of Delhi, it will however be advisable for buyers to understand that projects cannot be launched without complete approvals and sanctioned plans and project registration with the regulatory authority. Since the policy involves surrendering of land, fresh allotment of land and only then can the developer go in for project approvals, buyers should be careful in committing any money to project announcements under this scheme by private development companies.This policy has the potential to change the dynamics of the residential market in NCR by boosting the supply of affordably priced apartment units within the geography of Delhi City.