Urbanisation must get top priority, land use reforms critical: DLF chief

Written by Rishi Raj | Rajat Guha | Rajat Guha | New Delhi | Updated: Feb 16 2012, 12:59pm hrs
KP SinghKP Singh.
When the former army man from Bulandshahr who single-handedly built the gleaming city of Gurgaon from farm lands in the 1990s without a whiff of litigation talks of urbanisation in the era of agitations, it is time to listen.

Reforms in urbanisation and land acquisition policy should be the biggest focus area for the government, feels KP Singh, 82, chairman of the countrys largest real estate firm DLF. Gurgaon, sporting the headquarters of top-notch domestic and multinational companies, boasts of the countrys third-highest per capita income, behind Chandigarh and Mumbai.

How does he view the governments land acquisition Bill, which aims to solve the problems in land purchases by the government and corporates Singh is not happy. It has some good features but unfortunately, if enacted in the present form, it will lead to more chaotic conditions particularly developing urban townships involving the private sector, Singh told FE in an exclusive interview.

The Bill should be thought through carefully. The private sector should be totally kept out of it. The private sector does not need government to acquire land for them. Public sector deals are always between a willing buyer and willing seller, is Singhs candid answer.

So, did the government seek his views before drafting the Bill, considering he runs a company which has acquired 3,500 acres without hassles The Parliamentary standing committee has sought my views now. I will be replying to them, he tells us, showing the dossier containing the communication from the committee.

How does Singh manage to buy up land when many others run into serial hurdlesThough he ranks among Indias top 10 richest, the model Singh followed in early 80s was socialistic at heart. My upbringing in a rural and army background helps me establish an emotional connect with farmers. After all, land is an emotional issue for Indian farmers. When I started the business, there was no concept of rehabilitation or resettlement. Still, I could identify with the farmers and become part of their families. This is because I involved myself directly in land deals without intermediaries and gave them a fair value

and rehabilitation measures, says Singh.

The Singh model: Buying land from farmers and staying by them afterwards. The farmers ploughed back the money they received into DLF as fixed deposits. On his part, Singh took care of all their needs marriage of daughters, education and jobs for children and community development. There would not be a single marriage in the community or death in any family, which I would not have attended, he says. If I gave them money, I also followed the use of money by them and if their children needed any counselling, I gave them as a family elder, he adds.

Singh traces the roots of todays land-related issues in the nationalisation of urban land development business to the early 1960s, when government agencies were made solely in charge of land and urban development, keeping private players out.

This policy, he says, led to some operators controlling 70-80% of the market. This breed of developers, he says, brought a bad name to an

important sector of the economy, which provides housing for all categories of the population. Consequently, the image of real estate firms took a beating, becoming something like a bootlegger during prohibition. But now, that the sector has been opened up and a new breed of good companies are coming, the sector should be seen as a sunrise industry. The government should reduce interest rates and make money available to them, says Singh.

Singh feels with rising interest rates and banks not lending, the real estate business has become difficult.

Singhs recipe for developing Indian cities - unplanned, crowded and bursting at seams - is something the government should urgently take note off.: Urbanisation, if not tackled properly and on time, will pose a big problem. Theres going to be colossal migration of people from rural to urban areas, so urban development should be seen differently, with foresight. Today, there are only 42 cities with more than 1 million population. In next 20 years, we need 68 such new cities. No large-scale city is being currently developed in India. We are a young country - the average age of Indians would be 29 by 2020 and 70% of our GDP would be driven by urban areas, he points out.

What, then, is the way forward Abolish the floor area ratio (FAR) concept, which bars building beyond a stipulated number of floors. The government should adopt the role of enabler, facilitator and monitor, but get out of development. It should ensure infrastructure like parking, roads and sewage; then the developer should be free to build as many floors as he wants, commensurate with available infrastructure facilities, suggests Singh.

What about the huge debts of real estate firms, including DLF For us, debt is not a problem. For a real estate company, land bank is the raw material and until raw material is converted into finished goods, debt is not a problem. A good real estate company should have a 10-year land bank and the ability to hold it. Simply put - If access to capital and holding power is there, and the same is converted into making buildings and selling them, then debt is self-liquidating and thats the case with DLF. This debt, as seen by an analyst, is in fact a great asset for future development and consequently, profitability of the company, asserts Singh.