PPP in Affordable Housing with specific reference to JNNURM

1. PPP in Affordable Housing with specific reference to JNNURM Rakesh Bangera Head – Analytical Team CRISIL Risk and Infrastructure Solutions Limited 28 January, 2010

2. PCNTDA’s experience on… • Developing a 53 hectare township to; • Cater to all sections of the society • Provide social and physical infrastructure services • Utilizing support from JNNURM for constructing 5040 BSUP housing units and making PCNTDA area slum free • Providing PCNTDA with 2275 units of affordable housing stock for EWS and middle income sections of the society • In addition to schools, hospitals and public amenities • Protecting PCNTDA from conventional construction contract risks • All packaged in one contract through a unique PPP structure

3. PCNTDA is a Development Authority • Established in 1972 by Government of Maharashtra • Mandated to develop 43 sq kms of peri-urban areas towards the north of Pune Metropolitian area • Till date it has actively acquired and developed about 11 sq kms in a planned manner • Has developed infrastructure integrated seamlessly with neighbouring Pimpri Chinchwad Municipal Corporation

4. PPP Structure Outcome The Project Process Adapted The Project

5. Project Highlights • Area: 53 hectares • Located in a prime area, adjacent to auto and auto ancillary establishments • Well developed by internal roads and with a proper laid water network • Allowable FSI is 1 as per Development Control Regulations

6. Genesis for conceptualizing this project • In normal course, PCNTDA would have constructed BSUP units through conventional construction contracts; exposing itself to • Cost overruns – escalations and variations • Delayed decision making – time overruns • Other issues like QA and QC for limited capacities within its system • JNNURM and Govt of Maharashtra’s support enabled this PPP project • MoUHPA funds for 5040 tenements • Increase in plot FSI from 1 to 2.5 to exploit real estate potential from Govt of Maharashtra • In addition, PCNTDA addressed its mandate of construction of affordable housing stock aimed to stabilize the real estate market prices

7. Project Objective and why private sector • Plot had good real estate potential to attract interest from private sector • PCNTDA wanted private sector to • To bring in project construction and management efficiencies • Implement the project on a fast track basis • Generate funds for PCNTDAs contribution for BSUP through exploitation of real estate • Provide social and physical infrastructure towards integrated development • All packaged in one contract to reduce the risk of exposure to multiple contracts and fine tuning of cash flows between them

8. The PPP Structure PPP Structure Outcome The Project Process Adapted

9. Project scope for PPP developer • Master planning for 53 hectares • Construction of common physical and social infrastructure • Development, construction and marketing of 7.95 lakh square meters of integrated real estate space • Handover a part of it as affordable housing to PCNTDA [Bidding Parameter] • Construction and hand over of 5040 housing units under the BSUP scheme to PCNTDA, • PCNTDA shall pay Rs. 225 crores as grant linked to housing units handover schedule

10. GoI GoM Beneficiary Rs. 75 crs Rs. 148 crs Rs. 13crs • Lease Rights for 99 years on completion of development milestones Grant of Rs. 236 crs • Grant of Rs. 225 crores on completion of development milestones for BSUP units • Development Rights after approval of Master Plan PCNTDA Developer • Rs. 50 crores upfront payment and Rs. 100 crores performance security Revenues • Completion of 5040 BSUP units within 2 years • Completion of affordable housing units units within 4 years Sub- Lease • Completion of Social and Trunk Infrastructure within 5 years Occupant Contract Structure

11. Developer’s Key Obligations • Upfront payment of Rs. 50 crores • Submission of Performance Security of Rs. 100 crores • Master Planning and obtaining its approval from PCNTDA • Development and handover of affordable housing units and infrastructure as per the contract timelines • Construction as per Master Plan and Specifications specified in development agreement • Undertaking eco-friendly initiatives part of the agreement • Rain water harvesting, use of solar power, environment-friendly materials and vermi-composting

12. PCNTDA’s Key Obligations • Payment of Grant of Rs. 225 crores as per schedule linked to handover schedule • Accept BSUP Facilities/ Affordable Housing units on its completion; subject to quality specifications as laid out in development agreement • Transfer of Lease Rights in phases linked to construction milestones • Facilitate clearances of Govt. agencies on reasonable effort basis

13. PPP Structure Outcome The Project Process Adapted Process Adapted by PCNTDA

14. Partnered with Transaction Advisors • CRISIL Risk and Infrastructure Solutions Ltd. • In association with Creations and Omkar Associates • Project development stages comprised of • Market feasibility studies • Project conceptualization • DPRs for JNNURM • PPP project structuring • Drafting of development and lease agreements • Transaction documentation; RFQ and RFP • Managing the bid process • Overall strategic support to PCNTDA and Marketing the project to the private sector

15. Making the process transparent and attractive to the private sector • CRISIL adopted a three stage process; • Assessment of technical and financial capabilities • Detailed presentation of bidders to Evaluation Committee on master plan • Committee comprising of Divisional Commissioner ( Pune Division), Collector (Pune ) and Commissioner PCMC • Selection of successful bidder on an objective bidding parameter • Highest Carpet area of developed affordable units to be transferred free of cost to PCNTDA • Successful Bidder quoted a constructed carpet area of 1,30,599 square meters of affordable housing units to PCNTDA i.e. 2275 housing units

16. The Project Outcome PPP Structure Outcome The Project ProcessAdapted

17. The Project Outcome

18. Other benefits • Covered cost escalation risk of about Rs. 65 crores • Variations and other engineering risks • Developed physical and social infrastructure of about Rs. 120 Crs • Getting land parcels slum free and making it available for future exploitation

19. Key takeaways • JNNURM funding was utilized not just for constructing BSUP units but leveraged for developing an integrated township • With schools hospitals and all sections of the society living together • PPP helped bridge the funding requirements • PPP was enabled by increasing plot FSI from 1 to 2.5 for the Project • PCNTDA will handover affordable housing stock for other EWS and middle income groups • All risks of cost-overrun, delays, variations and price escalations were transferred to the Developer through an efficient contract

20. Stakeholders’ Experiences Mr. Dilip Band, Divisional Commissioner, Pune Division says: “…. This project has elicited valuable private participation and will be instrumental in providing affordable housing to the poor. We appreciate the efficient and transparent manner in which CRISIL has executed this process, right from project conceptualization to selection of the private developer”. Mr. Rajendra Chourse, Senior Vice- President (Projects), D B Group says: “…. Being one of the bidders, we can say that the PCNTDA tender was well-researched, planned and structured. The process of PCNTDA tendering from offer to finalization was well-coordinated, efficiently executed and above all transparent”. Ms. Anita Arjundas, Managing Director & CEO, Mahindra Lifespaces says: “… The project concept was interesting. While PCNTDA’s specifications aimed to ensure that high quality houses are built, higher FSI entitlement aimed to reduce costs, enabling developers to offer quality affordable housing options to people. The low amount of upfront payment also helped in view of the current real estate market. CRISIL managed the bid process efficiently. They were highly responsive to our queries which helped us in putting our bid together in record time”.

21. Thank You