Haryana’s New Policy To Create Cheaper Homes: Top 5 Takeaways

The Haryana Government has delivered a policy master stroke with its new Integrated Licensing Policy for Residential and Commercial projects. Developers in Haryana, especially in property hubs like Gurgaon and Faridabad are describing the new licensing norms as progressive and a game-changer for the housing industry in the state. And they expect it will reignite the slumped property sector of Gurgaon and other development nodes of Haryana. So, what’s so ground-breaking about the new Integrated Licensing Policy? And will anything even change for the home buyer in Gurgaon? Here are the key takeaways.

1. What prompted a new Licensing Policy?

The old licensing regime limited group housing development to just 20% of the net planned area of a residential sector. In the rest of the 80%, one could build a plotted residential colony. But for that the minimum land requirement was 100 acres. Given the stratospheric land prices, not every developer could afford buying such a huge parcel of land. This created an artificial scarcity of urbanisable land in markets like Gurgaon, where property prices have become unaffordable to the average home buyer. This explains why in many new residential sectors of Gurgaon, barren fields surround residential projects. It is this unutilized land in urbanisable areas that Haryana’s Department of Town and Country Planning is attempting to unlock.

2. What’s new in the Licensing Policy?

(a) Thumbs up to Smaller Projects
To start a housing project, developers will now only need to consolidate a minimum 25 acres of land. This policy will be applicable on land beyond the already licensed 20% in residential sectors under the previous policy. Density has been fixed at 250 persons per acre (PPA) and Floor Area Ratio (FAR) at 1.0. The policy does not distinguish between group housing or plotted projects. Colonisers are free to build group housing, plots, row housing as long as they can aggregate 25 acres. P. Raghavendra Rao, the additional Chief Secretary at Haryana’s Department of Town and Country Planning explains the state Government’s intent. “We wanted to simplify the whole thing. And we said that if somebody opts for an integrated licensing policy for residential sectors, we will only govern them by 2 factors. One is FAR and second is density. They are free to go in for a project which is market driven, which meets the requirements of the local population.”

(b) Every Acre of Gurgaon now Licensable with TDR
For land owners whose land is located within residential sectors but do not meet the minimum criteria of 25 acres, now even they can monetize their land. They will be eligible for Transferable Development Rights (TDR). And they can obtain TDR Certificates that come with an FAR of 1.0. They can trade this TDR with a colonizer or with the Government for a fair market price. So in Gurgaon for example, every land parcel has an element of TDR attached to it. Pankaj Bajaj, Managing Director at Eldeco Properties and Infrastructure says “this means a huge increase in supply of buildable land, of FSI in Haryana and a huge increase in number of apartments in Haryana in the coming years.”

(c) No more Land Disputes with Farmers stalling Infrastructure
Development Authorities usually encounter land acquisition roadblocks with farmers unwilling to part their land for public-purpose projects like roads, water and sewage lines. But now because every acre of land has inbuilt FAR because of the invocation of Transferable Development Rights, their land is worth a lot. They will be more willing to part with their land falling on a proposed road or community facility because their TDR Certificate will fetch them the market rate.

3. Gurgaon’s Real Estate Market will get Democratized

With this policy, unutilized land parcels in Gurgaon’s new developing sectors of 55 to 110 are going to get unlocked. And now because developers can get a license for projects as small as 25 acres, they will find it easier to raise money. That means new entrants, more competition and a better priced product. The old players with historical land banks will no longer dominate the markets in Haryana as land will be accessible to all. Pankaj Bajaj, Managing Director at Eldeco Properties and Infrastructure helps estimate the potential supply. “We have done back of the envelope calculations and the numbers look huge. If we take sectors 55 to 110 as the areas where there is some land lying unutilized… so that makes it roughly 50 sectors in which this policy will become operative in Gurgaon. And each sector has 350 acres of land. Let’s us say only 200 acres is lying unutilised in every sector and the balance is already given in licenses. So 50 multiplied by 200 gives us 10,000 acres. Let’s assume only 50% of that land comes through this policy, we are still talking about 5000 acres which translates to about 2.5 lakh apartments and a huge amount of supply and this is really good for the middle class buyers of Gurgaon.”

4. Creation of Cheaper Homes in Gurgaon

Developers expect that because there will be so many options in the market, property prices will get rationalized. In Gurgaon especially, developers predict fresh housing priced between `40 lakhs to `60 lakhs will enter the market. Rohit Raj Modi, Director at Ashiana Homes says the new integrated licensing policy will enable the creation of smaller units, more affordable units. “Till now density restriction was there. And that compounded with 1.75 FAR would essentially force a developer to make apartment which would be 1900 sq ft or 2000 sq ft in size on an average. Now under this policy, FAR is 1.0 with density of 250 PPA. This means a developer can build apartments sized 1200 sq ft which suddenly brings the ticket size within the reach of the buyer. And 2BHKs will be in plenty.” Not just private developers, even the state Government will create low-cost homes. One stipulation in the policy is that developers have to return 12% of the land free of cost to the Government. And the estimate is that some 1200 acres of land will be transferred to it by developers, which it will take up for affordable housing projects.

5. Haryana’s New Licensing Policy to eclipse Delhi’s Land Pooling policy?

Delhi’s Land Pooling Policy was being touted as the death knell for overpriced property corridors close to the Delhi border like Dwarka Expressway in Gurgaon. But now the Haryana Integrated Licensing Policy is likely to eclipse Delhi’s Land Pooling policy, which is still locked in political differences and years away from implementation. Developers say the Haryana Policy is more palatable and attractive to North Indian audiences because with an FAR of 1 in Haryana and 4 in Delhi, we are comparing buildings 3-4 stories high versus buildings 25 stories high.

Vasudha Sharma, Anchor & Correspondent- The Property Show


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