TRANSIT ORIENTED DEVELOPMENT (TOD) FINANCING S. SIVAMATHAN - - PowerPoint PPT Presentation

TRANSIT ORIENTED DEVELOPMENT (TOD) FINANCING

• S. SIVAMATHAN

GM/FINANCE

Features of Metro Financing

• Rail Based MRTS projects are:

Highly capital intensive, Long Gestation Period, Low Financial IRR since it cannot increase the fare beyond a point (FIRR of Phase-III: 1.59%), But having High Economic IRR (Social Benefits, EIRR of Phase-III: 17.15%).

• So far the funding has been made mainly through

Budgetary Support from GOI and State Government as well as loan from multilateral /bilateral agencies.

Features of Metro Financing

• Experience all over the world reveals that both

construction and operations of a metro are highly subsidised and funded by the Government.

• Hong Kong:
• 78% for the first three lines and
• 66% for the subsequent 2 lines.
• Singapore Metro:

– Government provides full infrastructure including rolling stock and another agency operates the system. – Difference in replacement costs and historical cost of assets is met by the government.

• Others run on Governmental support and subsidies.
• Sao Paulo, New York and Paris metros have access

to tax levies.

OBJECTIVE OF INFRASTRUCTURE FUNDING

• Main
• bjectives
• f

infrastructure funding excluding capex are:

– Long term financial sustainability of the system by:

• Setting

fares and having fare revision mechanism from time to time will minimise dependence on subsidies

• Providing

an environment for the MRA to generate alternative sources of revenues i.e., the difference in the EIRR and FIRR is captured.

• Recovering return from both direct and indirect

beneficiaries

DMRC’S (O&M) Financial Overview

• Fare fixed by Regulatory Authority headed by a retired Judge of a High

Court.

• Fare from Rs. 8/- to Rs.30/- lowest in the world except Kolkata.
• Last fare revision in Sep-2009.
• So far, 3 FFC were constituted.
• GOI is in the process of notifying 4th FFC for revising the fare structure.
• The system is making Operational Profit from Day One (EBITA).
• About 25% revenue is from Non-Fare Box Collection.
• DMRC is able to service and pay back the JICA loans without asking

any subsidy from the Government.

• Till date DMRC has paid Rs. 2869.50 crore to GOI towards JICA related

payments: -

• Interest Rs.1837.32 crore & Repayment

Rs.1032.18 crore.

• Operating Ratio is decorating:
• FY 2014-15 67.22%.
• FY 2013-14 60.04%.

TRANSIT ORIENTED DEVELOPMENT (TOD) For Financing of Infrastructure Projects

NEED FOR TOD IN MRTS

• MRTS projects i.e., Rail and Bus based, are high

capacity MRTS.

• The

projects are amenable to TOD as well as densification along the MRTS corridor through additional FAR.

• To improve the financial sustainability of the MRTS

projects, it is important to have:

• As many MRTS users to live within walking distance of

stations,

• Because of MRTS projects, there is a huge spurt in

the prices of property (sale as well as rental).

• The increase in the prices of property go primarily to

the private parties even though the same is caused

• nly on account of government investment.

TRANSIT ORIENTED DEVELOPMENT

• Activity centre's established around a

transport/transit node.

• Medium to high density housing.
• Mix of retail, employment, commercial

and civic development.

• Enhanced accessibility via:
• Walking,
• Cycling, and
• Public transport.

NEED FOR TOD IN MRTS

• Government to encash the increased property

value (sale/rental) in the catchment area of MRTS corridor as well as increased FAR along the MRTS corridor.

• The fund so generated can be used for the

following:

• To part fund the project cost,
• To provide interest subsidy so that loan to the SPV is

available on a very concessional rate.

• To provide operational subsidies, if any
• The above will improve the debt service coverage

ratio (DSCR) of the SPV .

DMRC – PART FUNDING FROM PD

• DMRC contributed funds towards capex

from IA & PD:

• Phase-I

Rs.728 crore (7%) of the capex

• Phase-II

Rs.1050 crore for Phase-II

• Phase-III

Target is Rs.2505 crore from PD.

• How it was generated?

– Land leased

• ut

to private developers against payment of fixed upfront amount and the balance in monthly rentals.

Dedicated Urban Transport Fund

• For

Phase-III, GNCTD to set up Dedicated urban Transport Fund to create a pool of resources to:

• Replacement of assets,
• Providing interest subsidy and
• Providing operational subsidies.
• Yet to be set up.

Innovative Financing Mechanism by BMRCL

• Govt. of Karnataka, while sanctioning Phase-

II of Bangalore Metro decided to mobilize funds through Cess/TDR:

– Levy of Cess and Surcharge @ 5% of the market value of land or/and building in future developments, to be credited to Metro Infrastructure Fund and to be shared between BMRCL, BWSSB and BDA @ 65%, 20% and 15% respectively. – To extend the benefit of 4 FAR for all properties lying within a distance of 500 meters from the Metro alignment. – Levy cess @ 10% in r/o residential buildings and 20% in r/o commercial buildings on the additional FAR granted and to share the same among BMRCL, BBMP, BWSSB and BDA @ 60%, 20%, 10% and 10% respectively.

FUNDING OF HYDERABAD METRO

Particulars Amount (Rs./Billion) Total cost 141.32 Less VGF by GoI 14.58 Less VGF by GoAP 0.00 Concessionaire cost 126.74 Concessionaire Debt 99.08 Concessionaire Equity 27.66

HYDERABAD METRO - PD

• The concessionaire was allowed to commercially

develop real estate in 18.50 million square feet areas.

• Revenue form the real estate shall constitute 45%
• f the total revenue generated from the project.

– Concessionaire would be allowed to undertake real- estate development at and above the first floor level

• f all depots.

– The total land for depots is 212 acres. – Concessionaire also to have access to 20% of the floor area

• f

each station for commercial development.

• In addition, concessionaire can undertake real

estate development

• ver

the parking and circulation areas at station as well.

TOD IN DELHI

WHY TOD

• DMRC eagerly awaiting for the approval of

Transit Oriented Development (TOD) policy as it has to raise Rs. 2505 Crores from PD for the Phase-lll:

• TOD Policy gives higher FAR .
• TOD means Money
• TOD shall promote use of public transport:
• Which will reduce congestion and pollution in the

city.

• Increase the ridership of MRTS system.

Barriers to equitable and inclusive TOD

• Achieving FAR 4 is some time not possible,

because of encumbrance like:

• Height restriction due to air funnel,
• Structure design of existing or under construction

buildings,

• Acquiring FAR involves cost.
• Exemption is available for GOI & GNCTD,
• DMRC should be included in the list.
• TOD should be permitted in Monument Regulated

Zone subject to guidelines of NMA.

Barriers to equitable and inclusive TOD

• DMRC’s few stand alone plots are complying with

TOD conditions:

• Malviya Nagar, Jantar Mantar,
• Janakpuri West, Mundka etc.
• DMRC’s plan to have residential development:
• GOI directions prohibits DMRC to lease out land for

residential purpose (normally).

• Some plots are designated under Industrial

Use:

• DMRC can take up residential development only in

30% area.

• Some plots (Mundka) are located on existing roads

with a width of less than 18 m ROW.

RISKS IN FINANCING OF TOD

• Residential & Commercial may not go together.
• Bhikaji Cama Palace:
• A PSU is being approached to have office space on

long term lease basis by paying about 30% of PV of expected rental value over a period of 45 years.

• The balance rentals shall be paid on month to month

basis.

• Jantar Mantar & NS Place:
• In the process of floating tender to assess the

marketability of office space.

• DMRC don’t have fund for undertaking TOD.
• Will try to rope in few MNCs, big corporate houses to

pay upfront money and balance through monthly rentals.

Thank You

• www. delhimetrorail.com