Magarpatta: A Dream Town Worth Emulating

Pune, Aug 29 | Updated: Aug 30 2004, 05:30am hrs
It takes ingenuity to conceive a project that at one stroke does away with the ubiquitous middlemen, yields rich dividends to the landowners and improves their standard of living. And all this without having to let go total ownership of the asset. Seems like an implausible plot but 120 families comprising 800 people in Pune are living this dream and beginning to reap a good harvest.

Doing away with middlemen has been an insurmountable challenge for the farmer anywhere in India. Middlemen/land sharks have been gnawing away at the farmers income. Large chunks of urban India is built on the deception picking up land at dirt cheap rates from clueless farmers and selling them at a huge premium with little or no value added.

Original landowners find themselves hopelessly ill-equipped to handle even this little money. Much of the cash goes down the drain in wasteful consumption and penury is at their doorstep. Unauthorised constructions and haphazard development on what was once their land leads to a steep fall in their standard of living and the degradation is complete.

All agrizones around urban areas are fragmented and sold in small pieces. There are no sanctioned roads or basic amenities and the illegal constructions make matters worse. This leads to poor living conditions. This is a genuine problem for the people, says Satish Magar as he thought of ways to address it and came up with the Magarpatta Township project.

Mr Magar conceptualised the project for consolidating fragmented land holdings, added value to it and turned it into a lucrative business proposition for the original land owners.

Magarpatta City has taken a while all of 10 years to fructify. But the way it has shaping, Mr Magar is confident that his ambitious project has potential to be a reference point for future development of townships. It is also credit to the 120 families that they hung on.

The idea was to use the 400 acre of land pooled by the landowners to create a well-planned township which would house close to one lakh inhabitants, he said. Mr Magar who belongs to the Magar family that owns close to 40 per cent of land in the project.

The Magars were also for generations a dominant political force in the region and this closeness to the powers that be definitely helped in navigating through the bureaucratic red tape, Mr Magar admitted. It could have taken a few more years or would never have taken off, he stated.

He conceptualised the project in 1993 but it was only in 2000 that it actually started on the ground. To execute the project, Mr Magar created a special vehicle, the Magarpatta Township Development and Construction Company Ltd.

This company would bypass brokers/ developers and transform landowners to entrepreneurs. The entire project is estimated to cost about Rs 850 crore and the target is to complete it by end of 2008. Cumulative investments till now has been Rs 176 crore.

Mr Magar heads the company and has representatives from the other contributing families on the board. Their share in the company is equivalent to the land contributed which means ownership of the company in proportion to their holdings, he explained.

What was unique, Mr Magar informed, farmers did not have to sell their land upfront as they only had to transfer it to the company. Till the land is not developed, farmers were also free to continue farming and earn a living. Of the 400 acre, the company is now focused on developing 125 acre. About 100 acre would go into the basic infrastructure such as roads, water lines, drainage systems and plantations.

The centerpieces of this project has turned out to be the Cybercity Magarpatta, the software technology park in the township. The success of this park has made the entire project hugely viable. The IT park, among the biggest private STPI development in India at the moment, is home to EXL Service, Avaya, Sybase, Aviva, EDS, Amdocs, Cymbal and Mellon.

These companies are housed in the first two towers of the IT park. A third one will be ready soon. There will be 10 towers with 40 lakh sq ft space that could house a workforce of 40,000. This project has just received the Maharashtra governments award for the best IT infrastructure in the state. Magarpatta City also has 12,500 residential units that will be home to 50,000 people.

The company has already constructed 2,400 flats of which 80 per cent has been sold at about Rs 1,200 to Rs 1,300 per sq ft. A 25-acre garden, an ICSE school, a 200-bed hospital, two playgrounds across seven acres and about 10 lakh sq ft of commercial space for food courts and shopping plazas are part of this project to make it a completely self-sufficient city.

Original landowners have already started getting returns for their investment thanks to the inflow of lease rent for three lakh sq ft space which will be for nine years. Negotiations for leasing another three lakh sq ft tower are in the final stages, Mr Magar noted. Similarly, after a sluggish start, sales of residential flats too has picked.

He explained that because of the IT park many of the landowners have ventured into providing support services to the park. The original owners have bagged most of the contracts for services such as construction, maintenance, transport, material suppliers and provided them ample opportunity to turn independent entrepreneurs, Mr Magar averred.

About 250 residential units have been picked up by families and are being rented out to the IT company employees. So landowners have returns on capital investments, revenues from turning service providers and rents from tenants. This has led to a quadrupling of their income.

There is just no comparison to what the farmers were earning before. A two-acre plot with the profitable sugarcane crop would have at best earned the farmer a minimum of Rs 50,000 and about Rs 1,00,000 in an exceptionally good year.

The average holdings was less than four acres and in some cases the holdings was barely 10,000 sq ft, which would have made viable agriculture impossible. But transformation of the same land into a hitech IT park with a township and the equation changes dramatically. There is a complete social transformation, Mr Magar observed.

A vendor who manages the landscape gardens at Magarpatta City runs up a bill of close to 50,000 to Rs 60,000 per week and an average turnover of about Rs 20 to Rs 22 lakh a year. What the project has achieved is turn lot of the farmers and their next generation into entrepreneurs, Mr Magar revealed.

To ensure long term sustenance of the Magarpatta township a part of the lease rental will be set aside and used for maintenance of the entire township. The project envisaged returns on investment from the sixth year onwards. Mr Magar expects a minimum 11 to 12 per cent return on investment. He is keen on keeping in a closely held company.

The company has entered into a rent securitisation deal with HDFC for funding the project. There is a lot of demand coming and we have to get the buildings ready before the demand comes in as companies do not have the time to wait, Mr Magar added. For the IT companies, the shared campus leads to lot of savings and keeps overhead costs low, Mr Magar indicated.

The added attraction is the availability of a massive residential complex in the same campus offering the walk-to-work concept, Mr Magar said. Keeping in view the BPO operations requirement a womens hostel is also coming up in the complex. Service apartments too are coming up.

Also, the project offers scalability options. As the companies operations grow and more towers come up they will find it easy to grow at the campus itself. For instance the EXL BPO started with 40,000 sq ft but now has touched 1,30,000 sq ft and has the option to go up to 1,70,000 sq ft within a year.

The project risks has reduced thanks to most of the clientele being captive BPOs, which makes them more stable occupants, Mr Magar pointed out. Others are software development outfits of companies such as EDS which are here for the long haul. What made it an attractive destination was that the land was located within city limits. The IT park component will alone be valued at Rs 180 to Rs 200 crore.