Magarpatta - History, Benefits and Implications

What would happen to the Indian infrastructure if there were no land acquisition problems and no socio-political issues? I am sure the answer would be a resounding yes. What would this imply?

No Government intereference
No Political infulence
Inclusive Growth (for the land owners)
Employment
Increased number of large projects
No Singur, Kalinganagar and Wagholi

Most of us think this would be true in only a utopian world but its true in Magarpatta too. Magarpatta is a township near in Pune and in its model lies the solution to India's land problems.

What is Magarpatta?
123 farmers pooled about 400 acres of land and set up a private limited company that developed a large commercial cum residential project, complete with IT offices, Shopping Centers, enough parking spaces and extremely orderly development. The farmers own shares in the company to the extent of their share of land in the pool. The Magar clan owned about 40% of the land and hence the name. In late 80s, they realized that Pune was busting at its seams and rapid urbanization would claim their agricultural land. Hence they decided to develop the land themselves. They requested Hafeez Contractor drafted a private township plan after converting the entire pool of 400 acres to non-agricultural land.

How did Magarpatta come into existence?

In late 1990s, the farmers registered Magarpatta Township Development and Construction Company Limited. The company was run by the managing director and technical director in consultation with eight board members drawn from the shareholding families. Every family was an equity shareholder of the company. Each share was equivalent to 1 square metre of land and cost Rs 100, in 1998. The current price per share is approximately Rs 1,000. Shares could be sold only to member families.

The approximate price of an acre of land that was Rs 1.20 crore in 2000 rose to Rs 5 crore in 2007. Thirty per cent of the total cost of each construction was earmarked as cost of land at the current price and paid to the shareholders. The family has the option of reinvesting the amount in the company, in the form of a term deposit at an appropriate rate of interest (12.5% for three years, 11.5% for one year, and 10.5% for three months).

There were two kinds of shares initially -- a preferential share and an equity share. The preferential share was short-term, where the rights of shareholders in the company and over their lands were redeemed at the end of the term. The equity share, on the other hand, endowed shareholders with permanent rights in the company and over their lands. Later, preferential shares were abolished and only equity shares that offer lifelong security to the families retained.

Benefits to the stakeholders?

The most important feature of the model is that the land pattas (registrations) remain in the name of these families, safeguarding their ownership over the land. Thus the farmers are still the land owners and they get a regular stream of income from the company as and when newer developments, either commercial or residential, occur.

In addition, these families also benefitted from the commerce that resulted out of the developmet of the project. For instance, the farmers have benefitted immensely from raw material, labour and construction contracts, road maintainence, security services, landscaping, beautification etc. These activities also provide jobs to the local people in thousands.

Thus the farmers not only get fair prices for their land, but also dividends proportional to the shares they hold in the company, lease income, contractual work, labour, and they now live in plush homes lavishly. In 1990, a farmer with 6 acres of land would have earned Rs. 25000 a year. Compare this with his income in 2007 - Rs 40,00,000! The farmers also derive handsome incomes from renting out the apartments/bungalows to IT professionals working in Cybercity Magarpatta - the 4 million square feet officespace.

The Government intereference is at a minimum; only limited to permissions. This makes life easy for both, the developers and the owners.

Implications for National Development?
The opposition to development hubs (SEZs and industries) is primarily because of land issues. The owners fear being left out of the pie; they feel their sacrifices are disproportionate to the gains. The Magarpatta model had allayed these fears and shown that development can be truely inclusive. The model is a subject of study by planners and developers across the country. It is surprising that an idea with potential as this originated in the minds of the illeterate farmers!

The Videocon SEZ at Wagholi is also planning to model its development on the lines of the Magarpatta City. In addition, many groups of farmers have approached the company on seeking guidance and advice on following the Magarpatta model. In my opinion, we have found the panacea to all the land problems that India has faced, and will face!

Contributed by my friend Jindal Haria from FMS