Integrated Townships are self-sustaining mixed-use developments with residential as the predominant use along with a mix of other complementing uses such as commercial, retail and social infrastructure such as hotels, clubs, schools, parks and hospitals.
In India, mixed use developments have been an established concept. Most Indian cities have traditionally developed around this concept where trade and residences co-existed. The concept of segregated uses gained prominence post industrialization. In 2005, Government of India (GOI) announced the Integrated Township Policy and several integrated townships were developed by private developers. We can classify mixed use integrated townships mainly into three categories:
- Small scale developments spread across 5 acres to 10 acres; with a minimum of 3 uses in the developments. These developments are generally located in city central or suburban locations. Key examples are UB City, Bangalore; RMZ Galleria, Bangalore; Manjeera Trinity in Hyderabad.
- Medium scale developments spread across 20 acres to 50 acres; having 4/6 uses in the development; located in suburban or peripherical locations. Key developments include Brigade Gateway, Rajajinagar, Bangalore; Prestige Shantiniketan, Whitefield, Bangalore; Bhartiya City, Thanisandra, Bangalore.
- Large scale developments spread across 100 acres+ and has 3 to 6 uses in the development; located in peripheral or emerging locations such as Wave City in Ghaziabad; Magarpatta City, Pune and Mahindra World City, Chennai.
Key advantages of Integrated Township developments:
- Integrated townships provide the much needed live, work and play environment reducing travel time and dependence on private transport
- Integrated townships allow social mix by catering to the housing requirements of different income groups and age groups
- Mixed land use along with social mix provides for healthy social networks and create 24X7 communities
Based on our analysis of completed integrated township projects, the degree of success of these projects varied based on design, implementation, location and overall adaptation of the market.
- The most successful ones fueled growth of the location and prices appreciated between 20% to 40% in subject micro-markets. A key example is the impact of Brigade Gateway on the location. Post completion of this project this location is perceived as a high-end residential location.
- As per our research, price appreciation in a mixed-use development is higher than single use development by 15%-30%.
- For the developers, these developments provide higher returns due to differentiated tenant mix and greater risk mitigation.
- Integrated townships that had sizeable office space/industrial development have been more successful as against ones which have limited or no commercial development. For example, Magarpatta City in Pune and Mahindra World City in Chennai are examples of the above.
The challenges faced by developers while developing integrated township projects include:
- Land Assembly
Assembling large tracts of litigation free land is one of the biggest challenges in Integrated Township development. While some states as part of their integrated township policies assist developers in land assembly, however, not all states have these policies.
- Careful long-term planning
The success of these projects also depends on careful long-term planning as the conceptualization, approvals and implementation of these projects takes anywhere between 5-10 years or sometimes longer depending upon the scale of the project. Project development timelines and strategies have to be aligned with market cycles.
- Complex Funding Requirements
With a mix of 3 or more uses, funding requirements for these projects are complex. While funding for land acquisition is mostly through PE funds, construction financing models vary for different land uses.
Integrated Townships are a successful global phenomenon and in India these projects have got a better response due to the lack of physical and social infrastructure in the peri-urban areas of cities.
The small-scale developments (5-10 acres) will be witnessed along the Metro Rail corridors in cities like Bangalore and Hyderabad on the Transit Oriented Development concept.
Industrial land parcels in the inner-city area will continue to be redeveloped as mixed use integrated developments.
With the central government's push for Smart Cities, several developers are eyeing the greenfield smart city projects which are basically smart integrated townships on a minimum 250 acres of land. We expect several smart integrated townships to develop especially along the various economic corridors by 2025. Some of the large-scale smart cities under development are GIFT City and Dholera Smart Investment Region, Gujarat and Amaravati in Andhra Pradesh.