FDI (Farmers Direct Investment) in development of Magarpatta City

This is an amazing paper/case study by Prof. Amit Gupta, Sucheta Dalal, Debashis Basu and Amita Joseph.

Someone asked me what FDI means given all the furore over the  FDI in retail issue. This paper shows FDI could have a very different meaning as in the paper it stands for Farmers Direct Investment. If we could have more such FDI schemes, there might be more support than the usually understood FDI or Foreign direct investment.

So in this case we have India’s farmers who built a township named — Magarpatta City — on their land holdings. The township is in Pune and succeeded despite many apprehensions over farmers taking up the project:

Magarpatta City covers 430 acres3 of land that was owned by about 120 farmer families with 800 individuals. These farmers joined together to form the Magarpatta Township Development and Construction Company Limited (MTDCCL) and developed the city, thereby realizing their dream of converting their land into a value-added finished product that gave them benefits and returns in perpetuity. Satish Magar is the de-facto leader of the group because of his educational accomplishments, political connections, largest land holding and the trust that the Magar community has in his leadership and ability to take them collectively to a point where all of them collectively benefit.

Magarpatta City was conceived as an integrated planned township with multiple commercial zones, residential neighborhoods, school, hospital, shopping malls, hotels, restaurants, and recreation areas.4 These were designed to be contemporary with futuristic features and included a state-of-the-art IT Park called Cybercity that provided international facilities to leading global IT giants. Being encompassed by verdant greenery and pollution free environment has added to the townships allure. The city has its own rain water harvesting, garbage segregation and waste management, biogas plant, vermiculture, plant nursery and solar water heating arrangements that creates a self sustainable system and ensures further enhancement of the environment. A walk to work-home-recreation lifestyle is at the core of Magarpatta. All these facilities came with complete support to run new cutting edge information technology infrastructure, full power back up, ample parking, stringent security, and strict adherence to fire safety norms.

The case describes the process that the farmers went through to convert the raw material that they possessed (land) to a finished product, namely the Magarpatta Township. It illustrates the changes that the real estate sector is going through in India, issues related to getting government permissions for a township, conceptualizing, designing, planning, and constructing the township, marketing and financing the township, benefits that the township had for the farmers, residents, Pune city, business environment, and developing an organization that can carry forward the process of replicating the success of this model of real estate development.

Superb reading. Perhaps Mahatma Gandhi would have highly approved of such FDI..

On a different note, the returns on real estate in India are staggering:

The above model also ensured that the farmer got the appreciation in value of the property in the township. In the initial years of 2003, property in Magarpatta City was sold for about Rs. 1000 per square feet. In 2011, the same property was sold for Rs. 5000 per square feet. There had been a tremendous value appreciation for the farmers land. In the year 2000, the land rate around the area was somewhere between Rs. 30-35 lakhs per acre. In 2011, the same land is worth in excess of Rs. 3.5 crore per acre. This means that in 11 years, there had been an appreciation of more than 900 per cent in the land value alone. This appreciation in property prices had come back to the farmers as dividends from the company as per their joint development agreement. The farmers continued to receive this dividend as various properties in Magarpatta City had been developed over the last 11 years starting in 2000.

I mean urbanisation has just begun in India…We already have property prices beyond reach for most Indians..Most middle class also need cash transfers from the government..

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