Progress at stake in Greater Noida property crunch

GREATER NOIDA Sat Jul 30, 2011 3:07pm IST

A man walks inside a tent that was formerly used by builders for residential apartments bookings at Greater Noida, India July 26, 2011.  REUTERS/Adnan Abidi

A man walks inside a tent that was formerly used by builders for residential apartments bookings at Greater Noida, India July 26, 2011.

Credit: Reuters/Adnan Abidi

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GREATER NOIDA (Reuters) - On the eastern fringes of teeming New Delhi, construction sites criss-cross vast tracts of cleared farmland in Greater Noida as a stampede of developers rush to build cheaper, suburban apartments for India's swelling urban middle class.

But this is India, a nation struggling to modernise, and the building boom has become entangled in a lot of the same problems that have often held back the breakneck growth of Asia's third largest economy: corruption, political meddling, haphazard development planning, and a shifting legal landscape.

Greater Noida's land woes are also a microcosm of a broader dilemma facing India: balancing the livelihoods of villagers with the need to maintain economic growth, revamp shoddy infrastructure and acquire enough land to build mass housing for urban dwellers.

Like in many other parts of India, the development projects in Greater Noida have collided head-on with legal challenges by farmers, and some have succeeded in halting multi-billion dollar projects and regaining land acquired years ago.

Greater Noida is part of Uttar Pradesh, India's most populous state, and while acquiring the land, the state government invoked so-called "urgency" clauses which allow it to buy the land swiftly and in bulk from the villagers, as long as it would be used for infrastructure or industrial projects.

Urgency clauses are contentious at best, and the Uttar Pradesh government made matters worse by selling the land to real estate developers, who would have likely paid more to the villagers than the state did.

Scores of villages are now embroiled in land disputes, putting at risk at least 50,000 apartments, developers in Noida say. In addition to the legal petitions, farmers are digging up roads and staging marathon vigils to block projects.

"We will become a stronger force with the support of more villagers and claim what is ours," said Surender Nagar from Bisrakh village that won a court case to recover land.

Rajesh Kumar, 38, is also happy that his village won a court case to recover land. The village Sabheri is ringed by building sites, many of which have been silenced by the court orders.

"The most important demand by us farmers is to get our land back so we can regain our source of livelihood," he said, his spectacles covered by construction dust.

POLITICS HIJACKING DEVELOPMENT?

Land acquisition has long been a politically charged issue in this country of 1.2 billion, where hundreds of millions of poor farmers are a vital voter base for politicians gearing up for the next national elections in 2014.

But in addition to requiring land for industry and infrastructure -- protests by villagers have already stalled major projects such as a steel mill by South Korean firm POSCO and halted the development of key highways -- India also has a shortage of 26.5 million housing units according to government data, with millions more streaming into cities from the countryside each year, creating a property crunch.

A third of India's population live in urban areas versus almost 50 percent of China's, official figures show. The number of Indians in cities will almost double to 590 million by 2030 from 340 million in 2008, according to consultancy firm McKinsey.

The ruling Congress party has pledged to overhaul archaic land acquisition laws, but a slew of corruption scandals have distracted the government from any broader development goals, and a land reform bill has yet to come up for discussion in an increasingly fractious parliament.

With elections in Uttar Pradesh due next year and national polls in 2014, any change in land policy, like any other key policy, is likely to be dictated by the desire for re-election rather than broader development goals.

"There is an atmosphere that farmers' interests should come first and public interest is not as relevant," said D.H. Pai Panandiker, president of RPG Foundation, a private think tank.

Signs of battle for farmers' backing in Uttar Pradesh, which is home to 200 million people -- a population bigger than Brazil -- are already emerging.

India's ruling Congress party wants to wrest support in the state from popular chief minister Mayawati, called the "untouchables' queen" for her championing of poor, low caste Indians.

Rahul Gandhi, the scion of India's most prominent political dynasty who is seen as a prime-minister in waiting, has seized on the land disputes to support farmers.

Not to be outdone, Mayawati last month unveiled a new land acquisition policy that makes it easier and more lucrative for farmers to sell land directly to developers by removing the government middleman and pricing the land at market rates.

In the longer term, experts say India needs to draft more transparent, equitable land management policies if burgeoning satellite cities such Noida can lift and sustain economic growth to a level that could rival fellow Asian powerhouse China.

The upside is potentially huge.

China, by systematically freeing up vast areas of farmland in special economic zones like the coastal Pearl River Delta for factories and new cities to take root, fostered a "workshop of the world" industrial region and a powerful engine for growth.

PROPERTY GRIDLOCK

The stalling of projects in the Noida region has raised the risks of major Indian mortgage lenders such as HDFC, who have frozen loans to home buyers, denting investor sentiment in a market already hit by rising prices and mortgage rates.

"At the macro level you're sending a very confused signal to the outside world and at a micro level, you're shaking the confidence of stakeholders, builders, buyers and investors," said Pranay Vakil of property brokerage firm Knight Frank.

So far this year property stocks in India have underperformed the broader stock market index, while poor market sentiment has frozen $4 billion dollars worth of real-estate IPOs.

Anil Kumar Sharma, the chairman of Amrapali Developers, a major developer in Noida, says court orders have put at risk capital outlays of at least 15 billion Indian rupees ($340 million) by developers so far.

"Buying land from the government was seen as the safest bet, but the court order has changed that," said Sharma.

It is not only the villagers who are complaining.

Hundreds of disgruntled middle class homeowners recently held a protest near Sabheri village, brandishing banners with slogans such as "Where will we get affordable homes now?" and chanting "We want justice".

"We hope that the court can provide us with the right solution so that nobody has to face any losses," said Shanta Rana, 51, a buyer of a flat in Supertech's Ecovillage, a gated complex of landscaped gardens.

Ultimately, the resolution of Greater Noida will boil down to money, some say.

Many of the farmers, whose villages are little more than warrens of dingy homes linked by rutted roads, bordered by fetid gutters and garbage heaps, have spent their initial compensation money and now want more.

"Farmers want higher compensation and we are trying to mediate between farmers and the government so that projects can be saved," said R. K. Arora, chairman of Supertech, which has around 1,000 half-built apartments in Greater Noida.

($1=44.40 Rupees)

(Additional reporting by Annie Banerji; Editing by Paul de Bendern and Miral Fahmy)

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