Price of making DND Flyway free to use amounts to Rs5,000 crore

This piece originally appeared on


The New Okhla Industrial Development Authority (Noida) will have to pay Rs.5,000 crore to the company operating the DND Flyway connecting Delhi and Noida if the government entity terminates a 30-year contract at its mid-point and takes over the toll road.

Last week, the Allahabad high court barred Noida Toll Bridge Co. Ltd, which operates the flyway, from collecting toll. The 117,000 vehicle owners using the 9.2km toll road every day save money—cars pay Rs.28 for a one-way trip.



But Noida Toll Bridge, which is promoted by IL&FS and is a listed company, is losing Rs.30 lakh a day and its market capitalization has eroded by about 30%.

The first memorandum of understanding to build a New Delhi-Noida expressway was signed under the public-private partnership (PPP) mode in 1992, a year after India initiated economic reforms. The toll road started operations in 2001.

This is a 30-year build-own-operate-transfer (BOOT) contract, where Noida Toll Bridge would operate the flyway for 30 years or until it recovered its investment.




Further, it was promised an assured return of 20% on its total cost, which included the initial project cost, the running cost and the shortfall in profit.




The result: the road cost Rs.378 crore to build, but this unmet assured return of 20% has led to the total cost under the agreement spiraling to Rs.5,000 crore in 15 years.

After a slow start, DND Flyway is now reporting healthy profits with three-fourths of toll revenue coming in as profits. In 15 years, Noida Toll Bridge earned Rs.1,052 crore via toll collection and a cumulative net profit of Rs.348 crore.




Nearly eight out of 10 vehicles crossing the toll booth is a car, probably fuelled by development of residential areas in Noida and Greater Noida. Total number of vehicles crossing has increased by nearly six times in the last 15 years.


Read More

The common ground between Greater Noida, Gurgaon and Goa

This piece originally appeared on


Two of these districts, Greater Noida and Gurgaon, are concrete, practical outgrowths of the National Capital. The third, Goa, is a laidback corner by the western coast. What binds them here is real estate—more specifically, housing as an investment. According to Census 2011, these three are among the 37 urban areas (districts or other civic units) in India where the percentage of vacant houses exceeds 20%—roughly twice the national average in urban areas.

Most such houses have been purchased not with the objective of living in them, but from the standpoint of investment. Such is the volume of investor interest and the nature of Indian real estate that even supply gluts don’t have the effect of hammering down prices. It poses the larger question: as India urbanizes, how will it provide affordable housing to its teeming migrants?

Greater Noida, Gurgaon and Goa are housing-investment hubs




According to Census 2011,more than 20% of houses were lying vacant in the urban part of 37 districts or other, smaller units of urban geography. In order to level the effect of a small sample size in identifying areas that draw above-normal

interest in real estate as an investment, we excluded areas—21 in all—where the number of vacant houses was less than 10,000. The 16 urban areas left with the highest rates of vacancy were led by Greater Noida, where more than half the houses lay empty. North Goa and South Goa were ranked four and six, respectively. In terms of number of vacant houses, Navi Mumbai Panvel Raigarh was the highest, followed by Gurgaon.

Empty houses don’t translate into lower prices




Conventionally, vacant houses in an area should be an indicator of oversupply, and should lower prices there. But that’s not the case in the Indian real estate market, where people who want to invest in a house—as opposed to those who want to live in it—hold greater sway. Thus, it can lead to a peculiar situation like Greater Noida, which has delivered the highest price appreciation in the two-year period to June 2014 despite half its houses lying empty. Comparing price appreciation in 23 cities tracked by the National Housing (NHB) Bank Residex index with their respective vacancy rates shows there’s little correlation between the two variables.

Vacant houses exacerbate India’s housing shortage




High levels of investor and speculator interest in real estate exacts an economic and social cost. It increases housing prices and elbows those who cannot afford it further to the periphery. In 2012, India’s housing shortage in urban India—comprising the homeless and people living in crumbling and congested houses—was estimated at 18.78 million houses. Around the same time, 11.09 million houses—60% of that housing shortage—lay built but unused in urban India, mostly because investors were playing the waiting game for a return.



Read More