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PPP in Affordable Housing with specific

reference to JNNURM
Rakesh Bangera
Head Analytical Team
CRISIL Risk and Infrastructure Solutions Limited
28 January, 2010

PCNTDAs 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

2.

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

3.

The Project

4.

The Project

PPP Structure

Process Adapted

Outcome

Project Highlights

Area: 53 hectares

Located in a prime area, adjacent to auto and auto ancillary


establishments

5.

Well developed by internal roads and with a proper laid water network

Allowable FSI is 1 as per Development Control Regulations

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 Maharashtras 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

6.

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

7.

The PPP Structure

8.

The Project

PPP Structure

Process Adapted

Outcome

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

9.

Contract Structure
GoI

GoM

Beneficiary
Rs. 75 crs

Rs. 148 crs


Rs. 13 crs

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
Completion of 5040 BSUP units within 2 years

Revenues

Completion of affordable housing units units within 4 years


Completion of Social and Trunk Infrastructure within 5 years

Sub- Lease

Occupant

10.

Developers 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 vermicomposting

11.

PCNTDAs 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

12.

Transfer of Lease Rights in phases linked to construction milestones

Facilitate clearances of Govt. agencies on reasonable effort basis

Process Adapted by PCNTDA

13.

The Project

PPP Structure

Process Adapted

Outcome

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

14.

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

15.

The Project Outcome

16.

The Project

PPP Structure

Process Adapted

Outcome

The Project Outcome


Type of housing unit created

No. of units

BSUP housing

5040

Affordable housing [Carpet area 53 sqmtr]

1917

Affordable housing [Carpet area 73 sqmtr]

358

Total

7369
1 School and Hospital for BSUP

Other Infrastructure

1 School and Hospital for general public


Physical infrastructure
Development of public amenities and reservations

17.

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

18.

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

19.

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 wellcoordinated, efficiently executed and above all transparent.

Ms. Anita Arjundas, Managing Director & CEO, Mahindra Lifespaces says:
The project concept was interesting. While PCNTDAs 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.

20.

Thank You

21.

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