Unlocking defence land to serve India’s cities

In just 4 cities—Bangalore, Pune, Lucknow and Chennai—it can provide for 29 lakh housing units, 15% of India’s total affordable housing requirement

Urban transformation in India requires more than boilerplate schemes and missions of the central government. The total potential outlay of the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the government’s flagship urban schemes is R2 lakh crore. Adding the 14th Finance Commission grants to cities of R87,000 crore and estimated R3 lakh crore for ‘Housing For All’ over seven years, the investment in cities would aggregate to R1 lakh crore per year, and if assumed to continue at the same rate, to Rs 20 lakh crore by 2035.

Even after factoring in state schemes, this amount is only half of the estimated Rs 40 lakh crore of capital investment in cities required for the period 2012-2032. Land-based financing lies at the core of raising monies at
such a scale. Optimum utilisation of defence land in cities is an idea which if nurtured can make a significant difference to financing infrastructure needs of our cities.

When Army cantonments were established, they were located on the outskirts of urban settlements. However over time today’s cities grew around them and defence establishments have now come to occupy prime real estate in large cities such as Delhi, Mumbai, Bangalore, Chennai, Pune and Kolkata and even smaller ones such as Ambala and Trichy.

The Parliament’s Public Accounts Committee on Defence Estates Management, in its report of December 2013, points out that by applying the defence ministry’s land requirement norms to 39 existing stations, defence has excess land-holdings of 81,815 acres (330 sq km), an area equivalent to that of Surat, a city of over 4 million. Two of the more significant observations of the report are that, as of March 2010, 2,500 acres of defence land valued at Rs 11,000 crore were leased out for an annual rent of Rs 2 crore and close to 15,000 acres of defence land were encroached upon.

By that estimate, at Rs 4.4 crore per acre, the excess land holding of 80,000 acre would be worth around Rs 4 lakh crore. Clearly, defence land in cities is worth a lot but not receiving the required attention.

Given that defence areas are largely self-sufficient and have minimal engagement with the rest of the city, relocating them to outside city limits through strategic and collaborative land exchange mechanisms between the central and state governments and municipalities will unlock land values which in turn can be used for affordable housing and infrastructure development. There will be enough funds available from such an exchange to also finance the construction of state of the art facilities for defence establishments and personnel in new locations outside the city.

The same is true of large pockets of port land and railway land across our cities. They lie unutilised or encroached upon, and yield far less in value than market potential.

The crisis in affordable housing exemplifies the case for strategic use of defence land in cities. The report of the technical group on Urban Housing Shortage, released by the ministry of housing and urban poverty alleviation estimates the housing shortage in urban India to be around 19 million units in 2012. A KPMG and NAREDCO report on the housing challenge in India estimates a capital requirement of about $2 trillion (R120 lakh crore) with land requirement of 2,000 sq km. In a real estate project, land cost can consume 20-60% of the total project cost. As land becomes more scarce and exorbitantly expensive in urban areas developers are forced to develop projects away from urban centres, making it less attractive due to poor transport facilities to job locations. Availability of land at reasonable prices is a huge challenge confronting affordable housing in cities. Strategic exchange of defence land in city centres can help meet this challenge.

An analysis of defence land in just four cities—Chennai, Bangalore, Pune and Lucknow— shows that utilisation of defence land (of 16,490 acres) in these of cities can provide for 29 lakh housing units, 15% of the total affordable housing requirement of India. Just tapping the excess land holding could result in 5 lakh housing units.

Even if the land is taken on lease from the defence ministry, it will yield significant benefits. There will also be downstream benefits such as lower average travel time, reduced carbon footprint, higher property tax collections, and overall higher return on assets.

An opportunity exists for policymakers to take a holistic view of defence estates and implement solutions for cities that can help meet simple quality of life aspirations of ordinary citizens just by making good use of land. There have been enough number of instances of cities squandering away valuable parcels of land in cities without tangible returns for citizens. Not all land-based financing needs to be public private partnerships. Partnerships between ministries and between governments can be innovative and impactful too.

The author is senior manager (advocacy), ARC team, Janaagraha

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