Magarpatta City: The Harvest of ‘Farmers’ Direct Investment’ (FDI)
– Sarthak Gupte
SY BSc. Economics (2023-27)
Estimated Reading Time ~ 7 minutes
Image source: Dall-E 3
India’s transformation from an agrarian economy to an urban landscape is a story filled with challenges and complexities. The increasing population, the large-scale migration to urban areas in search of opportunities and the subsequent development of housing and public infrastructure to cater to the needs of this growing population are crucial topics that need to be studied in order to understand the urbanisation of Indian cities. As per the 2011 Population Census, India had 31.16% of the total population of the country residing in urban areas, the second highest after China.
The IT-Business Process Outsourcing (BPO) industry was one of the major drivers of the Indian economy in the post-liberalisation phase which was heavily concentrated in big cities like Delhi NCR, Bangalore, Hyderabad, Chennai, Mumbai and Pune. Economic growth was seen to be uneven in different parts of the country, with the rural hinterlands experiencing declining economic opportunities. This naturally led to the ambitious youth to turn towards metropolitan cities which had promising career prospects. With the agricultural sector becoming less attractive and contributing decreasingly less to the GDP, the shift towards the service and manufacturing sectors significantly changed the settlement pattern in the urban cities. These few urban nodes started spreading spatially; the locus of economic activities began to move towards the peripheral areas of the cities.
IT businesses and Special Economic Zones (SEZs) were found to be set up in the fringe areas of the metropolitan cities. Their presence led to the urgent need for the development of residential townships, apartment complexes and other amenities for the educated middle class workforce. These urban spaces came up in the form of private gated enclaves. The greatest example of suburbanisation where the peripheral city has overtaken the core city is that of Gurgaon which is situated near Delhi. Similarly, the areas near the Eastern Metropolitan By-pass along with Salt Lake township and Rajarhat New Town in Kolkata, Electronic City and Whitefield in Bangalore are examples of fringe areas around big cities that have emerged as prime economic hubs.
One such urban area is the Magarpatta City in Pune. However, what distinguishes it from other satellite cities is the way it was planned and executed. Magarpatta City is a planned township spread across 430 acres of land on the eastern fringe of Pune city. This land was owned by the farmers of the Magar community, a close-knit clan who had been living in the area for more than three hundred years. ‘Patta’ essentially means belt, thus ‘Magarpatta’ refers to the place inhabited by the Magar community. This area, a part of the erstwhile village of Hadapsar, came under the boundary limits of the Pune Municipal Corporation (PMC) from 1960 onwards and was designated as agricultural land. The 1982 Draft Development Plan of the PMC noted that it could be urbanised in the future. The Government had decided to acquire the land if the population of Pune reached 2 million. It could do so under the Urban Land Ceiling Act and would pay the land owners a meagre compensation which was usually below the market rates.
After the economic reforms in the 1990s, gleaming office towers and premium housing projects started sprouting up all over the nation. Urbanisation seemed inevitable. It was when the wave of new development projects reached the surrounding Hadapsar village that the Magar community feared losing their ancestral land – either to the Government or to the private developers who were ready to grab the land. The private developers might have paid slightly better but it was a one-time return which was not financially viable for the peasant community. These were urban farmers; selling their farmland located near the city and buying land 100 kms away from the home town made no sense. Besides, there was a fear of them squandering away all the quick earned wealth and living in poverty again for the rest of their lives.
Satish Magar, who was one of the most educated individuals of the community and belonged to the most influential family, came up with the idea of developing the land themselves. He convinced the farmers of the rapid urbanisation phenomena and the need to have an alternative source of livelihood. Bringing all the 120 families together, he asked them to pool in their land holdings into a joint stock company named ‘Magarpatta Township Development and Construction Company Limited (MTDCCL)’. The farmers were given shares in proportion to their land holdings. The obvious question that one would ask: How did all the community members agree to this? Mr. Magar’s family owned the maximum land in the entire community and the family had powerful political connections, his uncle was a Member of Parliament. People trusted his reputation and decided to pool in their resources.
There were myriad obstacles that MTDCCL faced, the foremost being getting approval for the conversion of agricultural land to urban usage and overcoming the land ceiling regulations, which restricted the land sizes that could be held under a single ownership. From 1993 when the idea was conceived, it took the group a total of seven years to get approval from the regulatory authorities. This was an abstract albeit herculean struggle. Financing the project was also a big task. Fortunately, HDFC granted two crores as a start-up loan (though the original ask was for 100 Crores!).
The IT Park, also called Cybercity.
The construction work started in the year 2000. Mr. Satish Magar and Mr. Prakash Deshmukh, the architect of the project, visited Bangalore, Mumbai, Chandigarh, Delhi, Singapore, Kuala Lumpur in Malaysia and San Jose in the US and understood the best practices of building a sustainable eco-friendly township. For instance, the ‘Walk to Work’ culture seen in San Jose was incorporated in the project. Multi-storied residential apartments built taking into account the ‘Vastu Shastra’, schools, hospitals, shopping malls, auditoriums, lush green parks, playgrounds and even IT-SEZ were constructed. Indeed, the advertising line “Buy a Flat, Get a City Free” used by them in their initial marketing campaign turned out to be the reality! The state-of-the-art IT Park named Cybercity attracted many IT companies which directly boosted employment opportunities in Pune. The city has its own rain water harvesting, garbage segregation and waste management systems, biogas plant, vermiculture, plant nursery and solar water heating arrangements. All these facilities are fully backed to run new cutting edge information technology infrastructure, full power back up, ample parking, stringent security and adherence to fire safety norms. From the high-end Seasons Mall to Noble Hospital which has all the modern medical facilities, Magarpatta city is truly a city within a city!
But did this model benefit the farmer families? Absolutely! The shareholders were entitled to dividends which were a percentage of sales proceeds in proportion to their land holdings. The formula ensured that the farmers received the appreciation in value of the property. Besides, they were encouraged to buy at least one residential property within the township which made them eligible for tax benefits. These were then rented out to generate a regular source of income. Moreover, the non-residential commercial spaces were leased out to firms, thereby ensuring income for farmers in perpetuity. With agriculture out of the question for the new generation youngsters of this community, they were given aptitude tests and were encouraged to learn a trade pertaining to the building and construction industry. This made them financially independent, they were able to live off their entrepreneurial earnings alone. The Magarpatta project helped the economy of Pune grow tremendously as employment in the IT sector rose greatly. This real estate project is the only one of its kind in the entire country that was successfully built through a community initiative.
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