Real Estate

As the Centre and State Governments are sharing an equal amount of monetary funds for the development of Smart Cities, the National Building Construction Corporation (NBCC), the listed Central public sector undertaking has decided to partner the developmental projects in 15 to 20 cities. The NBCC has expressed their interest and shared their plan in writing to all 98 cities about their proposed plan. The total grant of Rs 1 lakh crore, from the Centre, state and the urban local bodies (ULBs), will account for merely 20 percent of the required funding for the mission that is aimed at better use of technology in basic service and infrastructure provision in 100 chosen cities.

Each ULB (Urban Local Bodies) is expected to form a Special Purpose Vehicle with the State Government and Centre Government as both share an equal amount of equity. Stakeholding for the remaining half can be with private investors. Anoop Kumar Mittal, NBCC chairman & managing director, said that the agency is looking for a share in the 50 percent component that will be part of the private investors’ kitty. “Many foreign investors might find it safer to partner with a governmental company,” said Mittal.

NBCC is listed on the Bombay Stock Exchange and the National Stock Exchange has been one of the key beneficiaries of the Smart Cities project with the government company’s shares rallying the day the mission was announced.

According to the Officials, a project consultant can also be introduced where it is unable to be part of the SPV, which requires each partner to invest some equity. In such cases, its focus would be mainly on New Delhi Awas Yojna projects that look at a redevelopment or retrofitting models. The NBCC has tie-ups with Government bodies such as Korea Land & Housing Corporation and Construction Industry Development Board in Malaysia along with technology solution provider IBM which aims to extend to its involvement in the mission.

Mittal said that the list of partner cities will be selected once the detailed project reports of the Smart Cities are submitted to the Ministry of Urban Development (MoUD) by the end of the year. Based on the merit of DPRs, the ministry is expected to choose a maximum of 20 cities for priority funding. “Since our target is at least 15 percent of the total cities, to begin with, we will take up about three cities from amongst the ones that are chosen in the first phase. We estimate that each Smart City will require an investment of Rs 20,000 crore to Rs 30,000 crore. The way to generate this money is not through user charges or taxes but through land monetization,” said Mittal. The much talked about urban land as has so far involved auction of public land to private developers or allowing them additional construction rights in exchange of the government charging a premium amount. The NBCC has in recent past resorted to monetization land in its Delhi-based redevelopment projects as Delhi Gate Dwarka, Delhi CGHS Yojna, Housing Scheme, etc.