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 objectives of 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 4 th 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 only 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 out 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 Amount Particulars (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% of the total revenue generated from the project. – Concessionaire would be allowed to undertake real- estate development at and above the first floor level of all depots. – The total land for depots is 212 acres. – Concessionaire also to have access to 20% of the floor area of each station for commercial development. • In addition, concessionaire can undertake real estate development over 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.

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