August 03, 2020
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The Satellite Kingdom

Priced out of Delhi's property market, a growing tribe is opting for the Great Suburban Experience

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The Satellite Kingdom
  •  When 65-year-old Mrs Batra's husband died three years ago, she decided to rent out her 500-sq yard ground floor bungalow in Maharani Bagh, south Delhi. The chosen one was a Dutch manager with an Indian firm, who had to cough up a neat Rs 35,000 every month after a security deposit of Rs 5 lakh. Two years down the line, she discovered that the neighbour's bungalow was rented out at a neater Rs 80,000 per month, plus a Rs 12 lakh security deposit. So when the lease came up for renewal, a wiser Mrs Batra upped her rental demand to Rs 1.5 lakh a month. With this caveat: only transnational corporations need apply. For three months now, her house has been lying vacant but she would rather wait for the 'right' rent than compromise.

  • Mr and Mrs Sharma built their house on a 1,000-sq yard plot in West End, south Delhi, in the '70s. Since 1990, when the youngest of their children flew abroad for a Harvard degree, the couple have been giving out their bungalow on a two-year lease. Just two conditions. First, the tenant should be a 'white man', not even an NRI with a US passport would qualify ('emotional' bonds with India may make them want to remain). Second, only one-third of the rental value is payable by cheque in India; the remainder should be remitted to their offshore account in London and New Jersey.

  • Mr Jindal, an ex-serviceman, built his house 35 years ago on a 325-sq yard plot in Defence Colony. His chartered accountant son, who doesn't like the idea of letting 40 per cent of the rental income go to the income-tax department, has thought of a solution. His father is now an export-import consultant with the firm whose executive is his tenant and charges a tax-free consultancy fee from the company along with a nominal rent from the residential premises.

    WELCOME to the chaotic property rentals market in Delhi where avaricious landlords and archaic laws are combining to create an unnatural constraint of supply in the face of escalating demand. For long, the Delhi landlord has been an object of sympathy. The typical stories are of protracted legal battles to win back own premises, of being denied market escalation of rental values etc. The reality: liberalisation, with the advent of transnationals (TNCs) who see Delhi as a good locus for their globalising plans, has empowered the landlord to a bizarre degree. Now he can dictate unilateral terms, place outrageous demands, defy tax norms, misuse titles, refuse any kind of tenancy improvements and yet get double or treble the rent he got two years back.

    "Some of these landlords could put hawala ministers and corrupt bureaucrats to shame. They want underhand deals, cash payments, know the nitty-gritty of remittances, legal loopholes, how to avoid the tax net and worse," says a south Delhi broker.

    And so, the inevitable is happening. A whole gamut of people and institutions are catching the first train out to the roomier satellite townships in the abutting districts of Uttar Pradesh and Haryana. And Gurgaon, whose population is expected to grow from the current 2.5 lakh to 1 million by 2000, is emerging as the king of Delhi's suburbia. Apart from the TNCs in flight, professionals and businessmen working in Delhi find the trade-off between cheaper and better accommodation and spending more time and money on commuting seems fair. For this growing tribe, priced out of Delhi's air-borne property market, Gurgaon has become the most attractive option. The upshot: everyone is getting ready for the Great Suburban Experience.

  • "Oh God, Dad's brought us to the jungles." That was how American Express executive and Wills model Rajiv Bathla had reacted. Moving en famille from Greater Kailash in south Delhi to Garden Estate, a newborn address in Gurgaon, in the early part of the decade was the kind of experience many went through—profitably. And now, when photographer and garment designer Bonnie Hazuria goes shopping to the Gurgaon editions of Delhi's Nanz and Crossroads supermarkets she looks back in amusement at the days when her family "had to buy even bread and eggs from Delhi". Today, the Hazu -rias, who moved to the DLF enclave a year before the Bathlas shifted camp, are "glad" to have moved to a greener, cleaner, more amiable environment.

    Ever since the '60s, Haryana has been marking time. For this once sleepy satellite, just 30 km south of the capital, proximity is final-ly paying more than reflected glory. Over the next decade, the small town with a 'village' suffix is poised to transform into a major residential and corporate hub with American-style condominiums and Californian-sounding addresses. Property prices, like the people coming in, are upwardly mobile. They have doubled in the last one year and have multiplied four to 10 times in different sectors since 1994. Plots in Sector 15 are currently going for between Rs 6,000-10,000 per sq yard while three-bedroom flats in cooperative housing societies in the same sector are priced in the range of Rs 14 lakh-Rs 21 lakh. Plots in Sushant Lok and DLF, which were priced at Rs 1,500 and Rs 3,000 per sq yard in 1994, are currently selling at Rs 9,000 and Rs 20,000 respectively. The annual increase in the average land value is now over 50 per cent. For built-up apartments, prices are zooming up by 75 per cent annually. The 1,500 property agents in Gurgaon attest to the fact that the gold rush has just begun.

    The Haryana Urban Development Authority (HUDA) is carefully creating conditions for a sustainable boom. The result: a judicious mix of exclusive, non-polluting, industrial and commercial zones in various prenatal stages. A direct contrast to Delhi, the world's third-most polluted city, with its perennially outdated plans overtaken by a deluge of unplanned factors. However, the emergence of rivalling mini-centres around it is yet to tell on Delhi's landlord.

    Delhi is the only city in Asia, barring perhaps Singapore and Manila, where the rentals market shows no signs of bottoming out. In Hong Kong, Bangkok, Tokyo, Jakarta, Shanghai, Guangzhou, Hanoi and Ho Chi Minh City, rental values have touched either a downslope or a plateau—created by a glut of new properties, vacancies in older ones, an overall negative take-up situation and poor stockmarket performances. Even in Bombay, the world's costliest city (land value-wise), rentals have crashed in some areas—the result of a 'price correction' for the bloated market. In Bangalore too, rentals and capital values of property have stabilised. What then makes Delhi the odd one out?

    Several things—TNCs, Indian corporates and government employment. Says Sunil Nagpal of KPS Investment: "Bombay is key to financial services, Bangalore to software. Delhi figures in the plans of all as the centre of politics, bureaucracy, government and diplomatic activity. In terms of infrastructure, it's perceived as better than other metros and many companies are relocating to Delhi—Coca-Cola being the most recent example." As for government employment, a study by Richard Ellis India says the rate of growth of government employment is higher than the rate of growth of Delhi's population! Trouble is, there's no corresponding increase in the supply of accommodation, even as the rentals kiss the sky.

    The combination of factors is such that even TNCs want out. "Today if a TNC wants a 10,000-sq ft plot, it means negotiating with 10 to 20 landlords," notes Christopher J. Steel, director, Richard Ellis India. The Delhi Rent Control amendment is creating more knots, says Rajesh Ahuja, director, Cosmos Developers. "Which tenant would pay one year's advance, plus one year's security, spend six months to set up office and then bear the uncertainty of being thrown out after three years?" he asks. So, strangely enough, there are office spaces and residential houses lying vacant on hypothetical demand—for want of takers at the asking rate. Up for grabs, but never at throwaway prices.

    How does this paradox come about? "Because Delhi's property values are not the product of normal market forces but the result of an unnatural constraint of supply," explains David Fowler, general manager, Colliers Jardine. This shortage of supply, which is real and artificial at once, can be traced back to a set of factors. Firstly, the Urban Land Ceiling and Regulation Act, 1976. Limiting the ownership of sites to prevent the concentration of property in a few hands, it ties the hands of developers who may want to consolidate vacant sites.

    Secondly, the Delhi Rent Control Act. This provided for inheritable security of tenure at artificially low values. Which, shorn of jargon, means this: Papa has a flat on a Rs 75 rent, Papa passes away, Son inherits flat on a Rs 75 rent. In 1988, landlords were given more muscle, but this only generated more controversy. Now a revised act, seeking to restrict tenancy inheritance and matching rent with the wholesale price index, is awaiting notification.

    Thirdly, the Floor Space Index, dove-tailed with a ceiling on height, which restricts the covered area vis-a-vis the plot size to a maximum of 150 per cent. And then the Delhi Development Authority, with its unproductive monopoly over anything above 500 sq yards, cramps private developers. Against a current shortage of 5,00,000 and a demand for 80,000 units a year, the DDA has rarely managed to deliver over 8,000 units.

    "The fuzzy psychology of the landlord very often makes him equate commercial and residential rent," says Steel. Thus, a landlord on Hailey Road in Connaught Place (residential area) feels justified in asking for Rs 90 per sq ft per month on the logic that one km away the rent for a commercial building is Rs 125 per sq feet, points out Ahuja. Steel sounds a warning: "If the landlords get too greedy, the market will simply stop paying. Bombay demonstrated this." But in the short run, the Delhi rentals market looks poised to go one way—up, up and up. A goodly part of the clientele, however, is going another way—out.

    That's why Gurgaon is no accident. Says IAS officer Vijai Vardhan, HUDA's administrator in Gurgaon: "It's a planned town whose destiny is linked to Delhi. It's pollution-free, it has vast green spaces. Unlike Ghaziabad and Faridabad, which also adjoin Delhi, polluting industries are banned in Gurgaon and it will soon be a power cut-free town. Already, in a record three years, we've completed a 70-km canal to tap Yamuna water from Sonepat. Gurgaon is perhaps the only Indian satellite town with surplus drinking water. " If factors favour, Delhi University may even open a branch there.

    "HUDA has gone about its task in as ambitious and forthright a manner as any private enterprise. There's even direct dialling to Delhi," says Tarun Mehrotra, sales manager, Malibu Estate, the promoters of Malibu Towne. Though business is yet to move into high gear, many a farsighted Delhi businessman, like hotelier Rajiv Khanna, are planning ahead and buying up commercial space. Says Khanna: "I run two schools in Gurgaon and have bought several commercial properties. I plan to bring in quality fast food chains like Pizza Hut. Today, it's time to buy property and wait, the business has to come."

    "The infrastructure is excellent. And there's no land-grabbing or and no organised crime," Khanna adds. In fact, law and order is one thing Vardhan is personally proud of: "The Haryana government has worked very hard to provide a secure environment. Unlike other satellite towns, there are no mafia gangs in Gurgaon nor has there been any major crime." Ghaziabad and Noida pale in comparison in several other ways: poorer infrastructure, civic amenities and recreational facilities. Says K.S. Payala of Payala Properties, Noida: "For every 10 properties sold in Noida, 50 are sold in Gurgaon which means the demand there is five times higher." And Gurgaon's lack of pollution and proximity to Indira Gandhi International Airport are genuine advantages. Another reason why the TNCs are headed south.

    Of course, it's not just a business-linked boom. Private residential projects are thriving in Gurgaon. Take Malibu Towne. Spread over 168 acres on the Gurgaon-Sohna road, 40 km from Delhi, its 380 condominiums, 910 bungalow plots, with roads named Pine Drive and Maple Avenue, an American-style shopping centre, country club, hospital and schools expect to have their first high-profile inhabitants and users by 1999.

    As with South City, Sushant Lok, DLF and others, a chunk of Malibu Towne's residents are expected to come from the ranks of corporate bosses, executives and engineers of leading Indian firms and TNCs that will be housed in Echelon, the exclusive corporate office zone where already 150 office sites have been allotted, the Gurgaon Industrial Technology Park and the Electronics City, by the turn of the century. In anticipation, HUDA is promoting a 460-acre city centre—"the biggest in Asia"—and will shortly allocate a site for a five-star hotel to start with.

    "People moving here are from educated, salaried classes who could neither afford a place in Greater Kailash nor had the black money needed to buy property anywhere in Delhi. Here people have paid 100 per cent cheque money, and therefore, are cleaner," says DLF resident Ashok Mehra. Self-sufficient, cultured, green and the ideal party zone, Gurgaon is evolving a distinct subculture of its own, and its denizens are finding that they can let the good times roll right in the neighbourhood.

    Half-a-dozen exclusive clubs, five golf courses (including the currently underway ITC Jack Nicklaus green), a tennis academy, the Wet 'n' Wild waterslide complex, the Rajasthani haveli-like Sita Heritage Village resort and the 32nd Milestone motel, restaurant and discotheque complex offer a range of recreation options. All of them, within 15 to 30 minutes by car from Delhi airport, were developed as an elite service apparatus parasitically dependent on Delhi. Now many of them are looking around themselves and seeing some genuine business.

    There's a big blot on the horizon, though. Beginning July 1, anyone drinking in Haryana will be liable to a straight six months in jail, plus a Rs 3,000 fine. Prohibition was the last thing on anyone's mind as Gurgaon developed its half-dozen private clubs, resorts, motels et al. Will populist politics bust the boom? Riding on the first flush of the boom, nobody cared till now.

    Spread over 12 acres in Manesar village, 43 km from Delhi on the Jaipur highway, the year-old, picturesque, Sita Heritage Village resort is already a favourite conference venue for SAIL, Reliance, the Dutch Embassy, British Council, American Express, Lufthansa and such like. "Companies often book all our 80 rooms and virtually take over the entire hotel. We have an average occupancy of 60 per cent," says resort executive Pooja Bakshi.

    Come July, at least some plans will be overtaken by history. The 32nd Milestone (named after the highway sign: Delhi 32 km) was just beginning to eye the resident clientele apart from the night-riders from Delhi. With its discotheque, Fire Ball, fully automated four-lane bowling alley, First Bowl, Indian and Chinese restaurants and 20 motel rooms meant exclusively for corporate clients, this was the place where it was all happening. Plans are under way to add more rooms, a banquet hall, a 24-hour coffee shop, health club, swimming pool, beauty parlour, billiards and a new 16-lane bowling alley. Says Debashis Ganguly, a manager at 32nd Milestone: "What had been originally planned as a getaway resort is adapting itself to the needs of a fast-changing Gurgaon." Adapting to prohibition, no doubt, will be the cruel part.

    The born-again 'suburbanites', too, are still learning. Sapna Taneja, a merchandising manager with a German firm who followed her entrepreneur parents to Gurgaon's Defence Colony in February, is just about coming to terms with the daily drive to work in Con-naught Place, the heart of Lutyens' prodigal baby. For Standard Furukawa Batteries Vice-President V.K. Bakshi, from Garden Estate to the peak-hour madness of Jhandewala, north-west Delhi, is a mini-culture shock every day. But worth going through.

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