Mega concessions become mega scandal

Money can buy a lot. Even the sanctity of master plans. In a recent decision, the Akali-BJP government in Punjab announced a host of concessions for promoters of super mega industrial parks in the state. These include an appalling concession. If the industrial park project is large enough, even the draft master plan of the area can be changed to suit the needs of the industrial park promoter.

Sources allege that the decision is scandalous and “tailor made” to suit certain promoters, and the windfall of concessions for the large promoters has left many medium and small-size promoters highly discontented. On the face of it, the concession policy goes all out to encourage the establishment of huge industrial parks spread over hundreds and thousands of acres. But a close reading of the concessions hints that it has been largely designed to “help” only a handful of top promoters.

This special package of incentives for the development of integrated industrial parks includes reducing the area under industrial component for these projects while increasing the commercial component.

The super mega projects have been divided into three categories. The projects, which are spread beyond 750 acres, fall in Category A. A project spread across 500 to 750 acres is category B and the one which spreads across 250 acres to 500 acres fall in category C.

Category A projects need to keep only 40 per cent of the area as industrial and can use a maximum of 25 per cent area as commercial. The rest can be developed as residential. Category B projects would have 45 per cent as industrial, 20 per cent can be commercial and the rest residential. Category C projects can have a commercial pocket of 15 per cent, but 55 per cent of the area has to be industrial.

For a normal promoter, only 10 per cent of the land can be used commercially, while 30 per cent can be used for residential purposes and the rest 60 per cent has to be used for industrial use.

Promoters of these ‘super mega projects’ have also got a concession on the external development charges (EDC). The EDC, had been reduced substantially early this year and now with further discounts, these project promoters would get with paying peanuts to the government.

A 50 per cent concession in the EDC to category A projects has been announced. For category B projects, the EDC concession is to the tune of 37.5 per cent concession and 25 per cent concession in EDC to category C projects. Similarly, a 75 per cent concession in license fee to category A projects would be given, 55 per cent concession in license fee to category B projects and 35 per cent concession to category C projects.

The most shocking of concessions is the government having made the master plans subservient to the plans of the super mega projects. In case of Category A, the project would be approved irrespective of its land use position in the draft master plan or the local planning area till the master plan is finalised. The master plan prepared would be amended keeping in view the approved project.

This move has immediately benefited a project promoter in Chandigarh’s periphery who was facing a host of problems in getting approvals. Some part of this project’s land fell within the municipal limits and some part was falling within the jurisdiction of the Punjab Capital Periphery Control Act.

There is another eyebrow raising concession. If a promoter proposes to implement a lower category project, for example 250 acres project (C category), he would entitled to the benefits being granted to the promoter of that size of the project. If, however, he adds another 250 acres of land he would be granted incentives of B category of project. Similarly, for additional 250 acres, he would be granted the incentives for A category project for the entire area of the project. These benefits would be extended only if the additional land is contiguous to the already implemented/ sanctioned project.

If the developer sets up another project on a different location, he would be allowed concession on license /permission fee as applicable to the project of one category higher than the project proposed, but no extra concession on the EDC of one category higher would be given. For example, if a developer has set up a project in A category anywhere in Punjab and he also sets up a project C category elsewhere in Punjab, then in case of category C projects, he would be get the concession on license fee for category B but on EDC he would get the concession of category C only.

This move has also benefited a mega project group, which has already set up 1000 acre plus project across the state. This concession has saved several crores of the promoter, which on the flip side means a major loss to the state exchequer.

“The whole list of concessions has been put together with certain promoters in mind. These benefits have been given to those who can pay. The rules remain unchanged for a majority of the promoters who are setting up projects on 100 to 200 acres,” said a promoter.

The government has also allowed floor area ratio (FAR) three to category A projects, FAR 2.5 to Category B projects and FAR two to category C projects. What is unheard of is that the government has allowed the calculation of FAR based on gross acreage of the project and not just the plotted or ground coverage area, which is the norm.

The project promoters have been allowed to sell all or part of the area they develop in various pockets. The promoter would have to construct on a minimum area specified within five years from the approval of the project. Category A projects would have to build a minimum of 25 lakh square feet of industrial space within five years category B project would have to build 17.5 lakh square feet industrial area in five years and category C projects would have to build 10 lakh square feet.

The super mega projects have also been exempted from the payment of stamp duty and registration charges on the first sale of developed area and build-up spaces. No CLU charges would be taken for the industrial component. The developer would have to pay these charges for the commercial and residential components.

Published at: http://www.indiarealestateblog.com/

By: Johnparker

John Parker , the author of many articles regarding India Real Estate and India Real Estate Buying Selling Tips is a Realestate advisor and giving assistance to the people for indiarealestate and providing information on Real Estate Market in India.

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