Sunday, November 18, 2007

Redeveloping inner city areas

When the Delhi Metro Rail Corporation was given the land at Shastri Park for real estate development, the idea of creating a global quality IT park at a C grade destination seemed a far cry. There was a deep excavated area which needed tones of soil to fill to ground level.
The neighbourhood was a low profile resettlement colony which could never aspire to a premium commercial tag. But the first building constructed by L&T Infocity group for the DMRC actually found takers.
A premium IT-ready building with superior specifications, management and power and water back-up converted the boon-dogs area to a place where the multinational GE located its call centre. A competitive pricing structure made sure that the occupants got the property for rates well below those in preferred suburbs such as Gurgaon and Noida.
Today its second block has been taken up by consulting firm Accenture. “The fact that we are one of the safest buildings conforming to the National Building Code 2005 has worked in our favour,” says a spokesman of Delhi Metro.
A survey of corporate users in 2003 had clearly revealed that they would not opt for Shastri Park as an IT destination.
However, after the metro lines to the North and West Delhi have been commissioned and the University link too is up and running, today the users such as Heritage Solutions maintain that a majority of the staff prefers to use the metro links to come to work. Even in the GE call centre, a large number of staff uses the metro links to commute and the company has now started shuttles to the metro station and back from the office complex rather than to individually drop employees back home. This results in substantial savings as well.
This is a classic example of quality real estate dramatically changing the profiles of city localities. The DLF group did this in the 1990s in Gurgaon, when the country’s economy had opened and all global business houses were looking for good quality space in Delhi. Available office space was of weak quality and extremely overpriced as well. DLF benchmarked its office buildings against global standards and created a office destination out of Gurgaon where connectivity, power and water supply was weak. But DLF offered good quality back-ups which later became the norm in the industry.
Similarly, the then Andhra Pradesh Chief Minister Chandra Babu Naidu used the hi-tech city in Madhapur as a magnet to attract premium offices to a suburban hub. Once the office complex filled up private residential development followed in Madhapur in Hyderabad and Gurgaon in the NCR. Real estate developer, Rohtas Goel of Omaxe developers says “There is scope for a township on the edge of every Indian city.”
New real estate meets the requirements and aspirations of newer generations of users and once a landmark has been created and occupied, it then creates an aspirational demand in the neighbourhood. This results in a new office and residential destination being created.
While these two examples were of greenfield developments where barren or vacant land was converted to premium office hubs by constructing good quality real estate and providing back-ups for the lack of facilities such as water and power, cities such as London and Shanghai have used existing wharf areas to redevelop into premium office destinations.
In the Pudong region of Shanghai, IT companies were given incentives to relocate and create swank offices and consolidate financial operations in the district. The city Authorities of Shanghai provided the offsite infrastructure to make financial operations easier.
In London, the Canary Wharf was identified for redevelopment and given over to private consultants for execution. After the redevelopment, today it is a premium office destination.
Today after the redevelopment thrust of the NCR masterplan, there are a host of properties in Jhandewalan, Paharganj and other areas adjoining the Central Business District of Delhi which are considering repositioning their properties as Grade A office buildings. The Videocon Tower in Jhandewalan was a classic example of a neglected radial from the CBD which grew on the back of good quality real estate. Currently it is occupied by media houses such as the India Today group and the ICICI bank.
The metro connectivity has been a major trigger for such redevelopment and both Shastri Park and Jhandewalan have benefited from these links. “This type of transit corridor always triggers redevelopment of real estate,” explains V Suresh, urban specialist and former CMD HUDCO.
In most cities, this transit corridor link between new office destinations that are easily accessible by high-speed transport is usually exploited by the city authorities by giving more Floor Area Ratio along these corridors to allow greater densification along the transit corridor. But in the Delhi Masterplan this has been grossly ignored and the FAR along the corridor has been reduced to 1.
This experts maintain is a major error as greater commercial densification along transport corridors yields greater income to city authorities which are in turn used to enhance the profile of the entire neighbourhood, This has happened in Maryland in the US where the commercial income has been used to provide better facilities to the residential areas.
The Delhi development Authority could well learn from these examples. While globally the link between quality real estate and its impact on neighbourhood profiles is well known, this trend has started catching on in India as well. The Delhi metro may well have the opportunity to capitalise of such projects in other localities along its corridor in Dwarka, Gurgaon, Najafgarh or even in Mundka.


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