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Why the airport project may not give Jewar the intended urban magnet tag

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Delhi has a suburb on every side of its map. Noida, Faridabad, Gurugram, Rohtak, Sonipat and Ghaziabad dot the entire 360-degree landscape. Every resident of the city knows which ones have succeeded and which have not. As work begins on the Jewar airport in 2020 in South West of Delhi, it is important to figure out if the answers cohere with what urban economists have often figured as the key reason for the success or failure of satellite towns. It is that transportation costs are a fundamental determinant of both, the population size of cities and their patterns of land use.

In other words, will Zurich Airport, which has won the bid to develop the second airport in the National Capital Region—to be spread over 5,000 hectares, with the first phase scheduled to be ready by 2023—ensure that the airport and its surrounding will serve as a population magnet and make the region viable with economical transportation costs to and from Delhi? The answer to this question is important because it will also set the trend for pricing strategies for real estate, not just for builders but for millions of Indians who will decide whether or not to invest in NCR, possibly the most important land parcel in the globe for the next few decades.

Zurich Airport won the right last week to build and manage Jewar airport in Uttar Pradesh, beating competitors like GMR, which runs the Delhi airport, and Adani Enterprises, which is becoming one of India’s leading airport concessionaires. Once commissioned, Jewar airport will be about 80 km from the city centre of Delhi.

The trade-off for urban residents is clear as an OECD paper shows (Diego Puga, 2013). The further a resident moves away from the city centre, the greater the dip in the cost of her current housing consumption, and the greater the rise in her commuting costs. She will demand a finer house to make up for the cost of paying more for her travel. This is where Jewar could fall short, as Anuj Puri, CEO of Anarock Consultants points out. “Although a few big developers did purchase large tracts of land of around 2,000 to 3,000 acres close to the airport, development remained subdued due to farmers' agitations. Add to it, nearby markets such as Noida, Greater Noida and Yamuna Expressway were already brimming with real estate activity, but incessant project delays, coupled with stalled construction activity here halted growth prospects”.

This is what makes it difficult for Jewar to break the jinx of the region as a no-hopper investment zone. And this also has a lot to do with political questions about Uttar Pradesh. The state has historically never been able to attract investors even while Haryana, Punjab and Rajasthan have succeeded. Compare the region with what has happened just across the river Yamuna, but in another state, Haryana. Faridabad has a smaller population than Ghaziabad in Uttar Pradesh, but has a far denser arterial connection with Delhi (as the map shows). Those transportation costs have plummeted even more with the metro reaching out to it, in addition to its rail linkage with Delhi. Gurugram has a similar set of advantages. The cost of transportation has a weight of 8.59 per cent in the Indian consumer price inflation. It rises fast as the economy develops. Greater Noida and Jewar, located even further afield, will have to deepen these networks before they offer competition to even smaller towns on the other end of Delhi, like Sonipat. 

There is, of course, economic literature about how airports often build cities around themselves. The pioneering work in this respect was of John D Kasarda, who coined the term 'aerotropolis' that became popular at the turn of this century. Can Jewar be one such?

Of course, there is an early-mover advantage for both Faridabad and Gurugram. The latter reaped the advantage of the establishment of Maruti Udyog Limited in the early 1980s. The region has become India’s biggest auto hub. Not only are Gurugram, Faridabad and Manesar established industrial zones, Gurugram is also a major corporate base with a large number of MNCs operating out of the city. Noida, on the other hand, has been a pale shadow despite being closer to central Delhi than Gurugram, as it never had an anchor industry work for it the way Maruti did for Gurugram. It also helped that the latter had the advantage of being closer to the IGI airport. If Jewar has to grow as a commercial hub, it might need a similar anchor investor.

Else, given the huge distance from Jewar to Delhi as the OECD paper shows, there would have to be a sharp rise in the attractiveness of house prices in the region, for it to compensate for transport costs. But as Puri points out, this seems unlikely.

Competition, meanwhile, has become even more intense. The Delhi-Mumbai industrial corridor will pass through Haryana and Rajasthan. It has made the region to the south and south-west of Delhi grow as one of India’s most important industrial zones. Real estate action has shifted further south of Gurugram to Manesar and in the near future, these two towns will be connected by metro as well. At the same time, the Regional Rapid Transit System (RRTS) will connect Delhi to Alwar via Gurugram, Manesar and Rewari. This will further improve the connectivity in this part.

If the second airport were to be located at Sonipat or Rohtak, the commuting distance would have been shorter, but these too being “very farmer-densely populated regions”, housing prices are unlikely to be appreciably better. The Haryana government had also floated a proposal to develop an international cargo airport between Rohtak and Hisar in the past. The plan was abandoned, however, after the BJP came to power in the state in 2014. “Jewar has an advantage as it will boost tourism in major cities like Agra and heritage cities like Mathura and Vrindavan," says Puri.

The dense road network from cities in Haryana, such as Gurugram, Sonipat and Faridabad, have begun to pay back in other ways too. All of these towns have become dense sponsors of educational and professional institutions. The Kundli-Manesar-Palwal (KMP) expressway that lies to the west of Delhi, passes through an area that has a number of educational institutions that are in the process of development or have come up in the last few years. The Rajiv Gandhi Education City in Sonipat now houses some of the top institutions in India, including Ashoka University, OP Jindal Global University and an extension of IIT Delhi. IIM Rohtak now operates from a new campus in the city, while XLRI, Jamshedpur will start its NCR campus in Jhajjar in 2020, barely 30 minutes from Gurugram. With the National Cancer Institute at AIIMS-II in Jhajjar already set up and the National Defence University coming up in Gurugram this region is also establishing itself as a major educational hub. Haryana has also decided to develop five greenfield cities along KMP expressway (Panchgram project) that will only add more economic muscle to this region. One of these will be a 56,000 acre city next to Faridabad and may not be far from Jewar airport itself.

As things stand today, there is a wide gulf between the east of Delhi (Noida, Ghaziabad, Greater Noida) and the west, south-west of Delhi as far as industrialisation, corporate investments and development of educational hubs is concerned. In the past, UP has pushed major infrastructural development in this region to be able to catch up. This includes a fully-planned city in the form of Greater Noida and a world-class expressway from Noida to Agra. Successive governments have expanded the expressway network in the state. The union and state governments now also want to establish a defence-manufacturing corridor through the state that perhaps help it bridge the gap and make Jewar a success story.

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