Case study on: Why Lavasa Project failed

Introduction

Lavasa is an independent India’s first planned hill city. The under-construction town is just an hour’s drive
from Pune, India in the Mose Valley and the backwaters of the calm Warasgaon dam area. Billed as India's
first hill station since independence, this private city is being constructed by a unit of Ajit Gulabchand. The
architectural team responsible for the design of the town wants it be an imitation of an Italian hill-side
town Lavasa is developed by HCC, the city is one fourth the size of Mumbai. Based on the principles of
New Urbanism, it brings together all the components essential to daily life in a more organized manner
thus creating spaces within walking distance from each other. It has many firsts to its credit – technology
leadership, e-Governance; the first Indian city developed using Geographical Information System (GIS),
use of Bio-mimicry as a science in use of innovative techniques and town planning like hydro seeding in
environment management. The city has a wide range of residences, to fit any budget across socio-
economic classes. Aimed to be a 365- day economy, Global leaders in the fields of Health, Hospitality and
Education, Wellness, Tourism are setting up their institutions at Lavasa. This city offers diverse work
possibilities designed to appeal to the IT and biotech industry, KPOs and R&D companies, as well as the
world of art, fashion and animation. Lavasa is planned for a permanent population of3 lakh residents and
a tourist inflow that is envisaged to be 20 lakh per annum. Concept of Lavasa Project is - Full of Life, i.e.
live, work, learn and play in harmony with nature. Lavasa is one of the largest urban infrastructure project
in India and has significant economic benefits to the region.

This as-yet incomplete city has been controversial for multiple reasons including: procurement of land,
harm to the environment (water usage), and loans acquired through political corruption. Till November
25 ‘2010, the construction work at Lavasa was in full swing when the Union Ministry of Environment and
Forests (MoEF) issued a stop-work order and notice to Lavasa Corporation Limited (LCL).The reason given
was that the company had failed to obtain environmental clearance from the Union ministry and had
proceeded on the basis of a clearance from Maharashtra’s environment department. The ministry’s
Expert Appraisal Committee (EAC), constituted in response to the public interest petition moved by the
National Alliance of People’s Movements (NAPM), formed by activists and NGOs, in the high court of
Mumbai for new infrastructure projects and Coastal Regulation Zone, said that planning and development
of the whole project should be reworked as it violated environment laws, including haphazard cutting of
hills. Lavasa challenged the ministry’s order in the high court, saying it had taken the requisite clearances
from the state and the ministry had no jurisdiction over the project. LCL later applied for post facto
clearance from MoEF for the first phase of the project, on February 1; Lavasa is being developed in two
phases of 2,000 ha and 3,000 ha.
 Lavasa: About the project

Lavasa Corporation Limited (LCL) is developing a hill station township project located 65 km from Pune in
the Mose Valley and the backwaters of the calm Warasgaon dam area, set amidst 7 hills and 60 kms of
lakefront. It is touted as independent India’s first planned hill city and is one of the largest Infrastructure
Projects in the country. A total of 10,000 hectares (= 25,000 acres) land will be used for the project which
includes mostly the farm land and private forests or forest like land. Master Plan was prepared by HOK
USA. HOK, formerly Hellmuth, Obata + Kassabaum and legally HOK Group, Inc., is an American design,
architecture, engineering and urban planning firm, founded in 1955. In the plan of architectural design
sensitively integrated with natural environment.

The development plan is spread over 20 years and was estimated to be complete by 2025. It involves
dynamic planning in phases.

 Phase I: Dasve, Mugaon, Bhoni – To establish Lavasa Brand .Development will be mostly mixed
use with focus on front-loaded economic drivers.
 Phase II: Focus on meeting residential demand driven through development of economic
activities and scaling up of tourism, hospitality, and leisure activities.
 Phase III: Sakhari, Wadaval – In addition to residential development, focus on developing a
commercial business district.
 Phase IV: Bhode, Mose, Saiv – Development of the second commercial business district.

Fig:- Lavasa City view

Fig:- Lavasa Fortune Hotel

 Current Progress and Future Plans

 Construction of two out of the five planned towns was going till 2011.
 By 2011 four hotels and a city center were completed.
 A number of residences have been completed as of 2013.
 A primary, middle, and high school, Le Mont High, has been constructed as well.
 The town also boasts a hospitality management college, École hôtelière Lavasa.
 The project confirmed that Lavasa will included four large towns and one low-cost town.
 Planned sports facilities included a Nick Faldo-designed golf course and a Manchester City-
branded football academy.
 A theme park of over 65 acres (0.26 km2) in size was planned.
 An 81-hectare (200-acre) health and wellness centre and an herb plantation was also planned.
 In 2018, project was declared to be under bankruptcy.
 With degrading beauty of the city due to lack of maintenance tourists visit has been reduced.
 In 2021, Oberoi Realty, US based fund interrupts to bid for cash – strapped Lavasa.

Awards and Recognition

Lavasa has won several awards for its plans and designs. In 2005, Dasve village in Lavasa won awards from
the Congress for the New Urbanism and the American Society of Landscape Architects. In 2009, the St.
Louis chapter of the American Society of Landscape Architects recognised the Lavasa landscape master
plan with a merit award.

Controversies – Violations of rules

Ministry’s stand: Construction work at Lavasa was on full swing till November 25 last year when the Union
Ministry of Environment and Forests (MoEF) intervened and issued a stop-work order and notice to Lavasa
Corporation Limited (LCL), mostly owned by construction major Hindus-tan Construction Company. The
reason being the company had failed to obtain environmental clearance from the Union ministry. It had
proceeded on the basis of a clearance from Maharashtra’s environment department.

In March first week of 2011, the ministry’s Expert Appraisal Committee (EAC) for new infrastructure
projects and Coastal Regulation Zone said that planning and development of the whole project should be
reworked and its environmental impact assessed afresh. At the same time the ministry also recommended
permission be given to complete the semi-finished buildings being built as villas and apartments. It
clarified that structures that did not reach plinth level, should not be allowed. The move to regularize
illegal constructions is at variance with the ministry’s findings over the past four months.
An expert committee constituted by the ministry on the directions of the high court at Mumbai,
comprising Central and state EAC members and MOEF officials, had visited the project site in January. The
committee’s report, dated January 13 2011, confirms the violations of environmental laws, including
haphazard cutting of hills.

The ministry had stopped work and constituted the committee in response to the public interest petition
moved by the National Alliance of People’s Movements (NAPM), formed by activists and NGOs, in the high
court of Mumbai. The ministry’s order in the high court was challenged by Lavasa, saying it had taken the
requisite clearances from the state and the ministry had no jurisdiction over the project. The petition
named environment minister Jairam Rameshand two ministry officials in person.

LCL later applied for post facto clearance from MoEF for the first phase of the project, on February 1 2011;
Lavasa is being developed in two phases of 2,000 ha and 3,000 ha. While seeking clearance from the
ministry, the company argued it has already spent about Rs 3,000 crore on the project and investors have
gained third party rights in the city. The project has brought employment and development to a neglected
area, LCL said. EAC said it was ready to consider post facto clearance on certain conditions, which include
a penalty for violating laws and creation of an environment restoration fund by the company. EAC
observed that substantial development has already taken place in about 700 ha. But activists are unhappy
with EAC’s recommendations. On March 10, NAPM moved court, challenging the retrospective clearance.
“There is no provision in the Environment Protection Act for post facto clearance. At the time of issuing
show cause notice on November 25, MoEF had asked the company why the unauthorised structures
should not be removed.

The damage report: The site inspection of MoEF notes that the company has resorted to large scale hill-
cut-ting to extract construction material and for making roads. This has rendered the hills barren. The
Pune collector had granted LCL lease to quarry minor minerals like stones. Lavasa, in its sub-missions to
the ministry, said using locally available construction material was more eco-friendly than transporting it
to site. People living in the area disagree. The blasting of hillsides for quarrying stone has spoilt their water
sources. “Many springs in the region have dried. We get very little water now,” says Leelabai of Mugaon
village, one of the 18 villages affected by the project.

Planning norms violated: Lavasa has also flouted state rules. Its plan does not conform to the procedures
in the Maharashtra Regional and Town Planning Act of 1966, which include inviting public objections and
obtaining approval from the state government. MoEF’s site inspection report notes there is no approved
landscape plan, parking and circulation plan or baseline environmental information within and around the
site. The city’s master plan is essentially a layout plan for 580 ha which was approved by the Pune collector
in 2006. This was revised by LCL after it was appointed Special Planning Authority (SPA) by the state
government in June 2008. This bestowed LCL powers to sanction its own plans.

Once the developer acquired the powers of a planning authority, it modified the layout plans. The hill
station regulations do not allow construction on steep slopes. This made LCL shift most of the
development in the valley. The original hill station policy permits only two story buildings; Lavasa
structures have six story. This was achieved by transferring the floor space index (FSI) of the buildings that
would have come up on the slopes to the buildings in the valley.
Another major planning violation is that the buildings are almost touching the water body; the state
government had permitted LCL to construct at a distance of 50m from the reservoir which was reduced
to 30m and then 15m. At site, the concrete pavement almost touches the reservoir. The developer
allegedly reclaimed land from the reservoir bank. All this may have a negative impact on the flora and
fauna of the water body, says MoEF’s site report.

The Maharashtra Krishna Valley Development Corporation, the water resource department of the state,
had leased 141.15 ha to LCL to build check dams. LCL used a portion of the leased land which was above
the submergence zone to construct commercial and residential buildings. To promote tourism, the
regulations give developers certain concessions.

Planning norms bypassed:

The regulation contained certain conditions that did not suit LCL. It did not allow cutting of mountains;
set a ceiling of 2,000 ha for developing a hill city; did not permit construction on gradients steeper than
1:5 (every five meter distance equals one meter height) and FSI of residential plots was limited to 30 per
cent with a height restriction of two story. These were changed at LCL’s behest. Once more, as in the case
of Adarsh, rules were changed again and again and again, to make the illegal legal.

On 30th May 2001, the Maharashtra govt. removed the upper limit of 2,000 ha in the hill station policy,
allowing Lavasa to take as much land as it wished. The next day, the state urban development department
changed the regional master plan of Pune to allow the hill station to be developed in the Sahyadris (Pune
was one of the first districts to change its regional master plan following the change in hill station policy).
The day after, on June 1, the Maharashtra government issued orders that 18 villages in Mulshi and Velhe
talukas of Pune would be declared hill station. Within three weeks, LCL, which was then called Lake City
Corporation, was granted in- principle permission to develop the hill city. In the original regional plan, the
area was earmarked for afforestation.

Lavasa’s political patrons:

The speed shown by the government to change its hill station policy and master plan could be because
the Lake City Corporation has strong political backing. The company had influential board members—
Supriya Sule, daughter of Union agriculture minister and NCP leader Sharad Pawar, her husband Sadanand
Sule and their close business associate Aniruddha Deshpande. The Sule couple owned 21.97 per cent share
in the company which was rechristened Lavasa Corporation in 2004 .The Sules sold their shares in 2004
and withdrew from LCL, but the company did not lose political patronage. Vitthal Maniyar, who serves in
the trusts run by the Pawar family, continues to be one of LCL‘s board of directors.

The state water resources department, too, spared no efforts to help LCL. “The government simply
handed over a 20 km stretch of the river that was acquired for a public purpose to a private company,”
says B G Ahuja, a former civil engineer with Central government, living in Pune. The order for issuing the
lease, as documents with Down To Earth show, was passed by Ajit Pawar, who was then the state’s
minister for water resources. He happens to be Sharad Pawar’s nephew. This transfer was illegal as the
mandatory permission from the revenue department was not taken. The amendment triggered haphazard
cutting of hills. The amendment also made it possible to construct on steeper slopes with gradient of 1:3;
the earlier policy allowed construction only on slopes with gradient of 1:5. The building norms were also
relaxed to permit three story structures in 25 per cent of the residential area.

Lavasa wanted more concessions. The chief planner of Lavasa wrote to the urban development
department seeking building law relaxations that would allow six-story buildings and a town centre with
mixed activities right on the reservoir’s bank. The government acceded to this request. On July 14, Sharad
Pawar, along with then Maharashtra chief minister Vilasrao Deshmukh and Ajit Pawar, visited Lavasa,
accompanied by senior officials. They met Lavasa officials at Ekaant, a resort in the town’s periphery. The
minutes of this meeting, accessed by DTE shows, Ajit Gulabchand, chairperson of Hindustan Construction
Company which owns 65 per cent of LCL, made a number of demands. Gulabchand gave a time-frame of
four weeks to take necessary actions. The chief minister directed the officials to act expeditiously.

These demands were met the next year. A month earlier, the urban development department gave
permission to use global FSI separately for residential, commercial and other sectors and reduced the no-
development zone from 100m to 50m distance from the water body.

All members of the special planning authority were from Lavasa, except one—Pune’s director of town
planning.

This was brought to the notice of the Director Town Planning by an assistant director through a letter in
July 2009. The letter says the company was seeking undue relaxations which could alter the basic nature
of the Hill Station Regulations. The letter states that the regulations are not for just one hill station but for
all hill stations in the entire state, and bending rules for one hill station could set a wrong precedent. The
note was ignored.

The cover-up:

The Maharashtra Pollution Control Board (MPCB) gave Lavasa “consent to establish” in May 2002, much
before the project received environmental clearance. In normal circumstances, the consent is given after
a project obtains environmental clearance. A letter by member secretary of MPCB, to the Union
environment ministry, dated July 15, 2005, says the work on the project was started in January 2003 with
intimation to the collector; the project received environmental clearance only in 2004.

In the same letter, the pollution board attempts to gloss over the illegalities at Lavasa which did not apply
to the ministry for environmental clearance. The letter says, “Since the project is located below elevation
of 1,000 meter, EIA notification of 1994 was not applicable to the project and since work commenced in
2003, EIA notification of 2004 was not applicable.” The letter also assures that the developer was
“scrupulously following the environmental management plan and carrying out environmental monitoring
as recommended by NEERI in its EIA. The pollution board also issued consent for stone crushing of 1,500
tonnes a day in April 2004. This has resulted in large scale stone quarrying in the eco-sensitive Western
Ghats.
A 2009 interim report by the People’s Commission of Inquiry, a commission of lawyers and activists set
up by non-profits to probe land deals and displacement of people because of projects in the Sahyadris,
says various government departments granted a total of 31 clearances in a short period between 2002 -
2003.

Land acquisitions:

Lavasa has also been accused of acquiring land illegally for the project. If activists of the National Alliance
of People's Movements (NAPM) are to be believed, 372 ha with LCL was acquired by the state under
Maharashtra Agriculture Land (Ceiling and Holding) Act of 1961. Un-der the Act, land in excess of the
ceiling limit is acquired from landowners and distributed to the landless. The letter dated January 9, 2005,
says the government would earn only Rs 1,02,736 if the land was given to the poor, instead of Rs 1.65
crore if the it is given to LCL. Maharashtra’s revenue secretary declined to speak on the land transfer,
saying the Legislative Assembly was in session. But former revenue secretary R Ramesh Kumar says if at
all the land was to be transferred to LCL, the company should have paid 75 per cent cost of land to the
government as nazrana. Instead, they paid only 2 per cent of the land cost as tax. Ramesh said about 90
ha purchased from tribal families in the area was illegal as no permission was taken. As secretary, Kumar
says, he had pointed out these discrepancies but the government ignored them. Bandya Bhau Wahelkar,
65-year-old resident of Mugaon, says the 6 ha he was allocated under the land ceiling Act was sold twice
without his knowledge. The land records of Mugaon state it was sold to a couple Sharada and Suresh
Shetty, who later sold it to a person named M R Diwakar. Walhekar says he did not meet any of these
three persons. “When I tried to block access to my land with boulders to prevent mining, company
workers threatened me twice with a pistol,” he adds.

Another resident of the village, Leelabai says 20.23 ha land that her family had tilled for 40 years was
transferred without their knowledge. “About three years ago, Lavasa wanted per-mission to build a road
through our land. We refused but they went ahead with the construction,” says Leelabai. “When we went
to check the land records at the tehsil office, we could not find our names in the records.” There may be
more land acquisitions in the offing, but the extent of the city’s spread is still uncertain. Lavasa’s red
herring prospectus, filed in preparation for its initial public offer, says that Maharashtra has declared 18
villages in Mulshi and Velhe talukas in Pune, measuring about 9,313 ha, as hill station. LCL has so far
purchased 3,830 ha, but has applied to the Union environment ministry to give clearance for 5,000 ha.
LCL has applied for environmental clearance for 7,000 ha from the Maharashtra state EIA authority.

Lavasa may not be the only hill station in the offing in Maharashtra. In Pune district it-self, three
companies— Satind Infrastructure Private Ltd, Aqua land India Private Ltd and Maharashtra Valley View
Private Limited—are planning to build hill stations in the Sahyadris. Any developer with 400 hectares of
land can go ahead and build his dream town. But the fragile ecology of the Western Ghats may take a
beating. There are lessons that need to be learnt from Lavasa, else more townships will emerge in the hills
by bending laws and breaking regulations. Will the MoEF set another example like it did with Adarsh
society or will the Western Ghats be-come second or third or fourth home for the affluent.
Water:

The Warasgaon reservoir is integral to Lavasa’s landscape and its water needs. In an un-dated white paper
on the township’s water use, distributed to the media, Lavasa claims water us-age would not affect
downstream Pune.

Eight check dams are being constructed by LCL upstream of Warasgaon dam to store wa-ter for the
project. Two dams are already constructed in the water body; the remaining six are to be built in the
catchment of the dam. These eight dams will store 24.67 million cubic meter (MCM) water, which is
around seven per cent of the storage capacity of Warasgaon dam. MoEF fears the check dams will reduce
the flow of water in the main reservoir.

The Warasgaon dam contributes to the Khadakwasla dam which provides drinking water to Pune. LCL
claims the water requirement of Lavasa is minuscule compared to the water requirement of Pune. The
current requirement of water for Pune is about 325 MCM. All of this is met by Khadakwasla Dam where
water from three dams, including Warasgaon, converges. Warasgaon contributes about 373.9 MCM water
and Khadakwasla releases 1041 MCM for various uses, including Pune’s water supply. B G Ahuja, Pune-
based former engineer with the Central government, says with the increasing population, Pune will face
water crisis.

LCL informed the ministry that Lavasa hill station is a part of the final Regional Plan for Pune Region and
its water requirements are considered while permitting the development. It said the Pune Municipal
Corporation will recycle the water it draws from Khadakwasla dam and re-duce distribution losses to 15
per cent from current level of 40 per cent. What’s more, the supply norms for Pune may need to be
reduced from 300 liters to 125-200 liters per person a day

Fig:- Unfinished construction at Lavasa hill city

 Conclusion

It is often seen that Western business models cannot be replicated in India because the country has its
own socio-economic conditions which are drastically different from the countries in the West. The latest
example of this being true is the Lavasa city project headed by Hindustan Construction Company (HCC).
The Managing Director of HCC Ajit Gulabchand came up with an idea to build a hilltop city on the Western
Ghats of Maharashtra, modeled after the cotton-candy harbor of Italy’s Portofino. The site chosen for the
project was a hill station in the district of Pune, four hours away from the metropolis of Mumbai. The site
was chosen on the basis of availability of land and proximity from Mumbai, the financial capital of the
country.

It was expected to be India’s first privately built and managed city, with billions of dollars pumped in and
its management being free from bureaucratic interference. One of the five towns, Dasve was planned for
30,000 to 50,000 people each, with the aim of soaking up settlers from towns and village looking for
opportunities in urban areas. To make this dream project a concrete reality, Ajit Gulabchand hired the
architects at HOK, creators of LaGuardia’s Airport Central Terminal B in New York and the Barclays world
headquarters in London. Today, Dasve is an in-complete shell housing some 10,000 people where garbage
collection is sporadic which makes litter soil the man-made lakes. Signs of neglect are everywhere,
maintenance is non-existent and that’s for the construction already done; for the unfinished building work
there is little happening. The plan for the other four towns is already abandoned.

Lavasa defaulted on dues payable to bondholders, and has delayed repayment to other creditors including
banks so the creditors may go to RBI for initiating insolvency proceedings against the company. The Lavasa
project got bankrupt in the month of August 2018. The builder-politician nexus prevalent from the
previous UPA era, coupled with the lack of in the real estate sector, is what is responsible for this mess.
The previous UPA government did not bring any strong laws to regulate the real estate sector, because
many of its leaders were directly or indirectly involved in big infrastructure projects. Billions of dollars of
black money were being pumped into real estate to convert it to white money. The Modi government
since coming to power took a series of reforms to end the lawlessness in infrastructure sector. The
government brought The Real Estate (Regulation and Development) Act or RERA to regulate the real
estate and then the demonetisation to curb the black money investment in infrastructure projects. Now
the government has decided to amend the IBC law to make homebuyers preferential lenders as per banks
to protect their money invested on housing. The positive steps by the government will lead to regulated
and transparent real estate development which will lead to cheaper housing in the country.

With all the above observations carried out by the government constituted committee, post-facto green
signal to Phase-I of Lavasa by the Union Ministry of Environment and Forests (MoEF) given on the
November 9th , 2011 was widely condemned by many intellectual groups and was declared as a blot on
the democratic process. It also created a shockingly dangerous precedent in the history of environmental
action in India. MoEF’s improper action has in fact sent shock-waves to eco-activists within the country
and also across the world. Although it is not the first time in the long history of Indian Environmental
clearance regime that political highhandedness has been used to subvert rule of law and the ends of
justice, this case is unique since the clearance has disregarded well established evidence based on facts
collected by no other than the MoEF itself. It is surprising that the Ministry’s decision has come in the
wake of the case filed by the Maharashtra government against 15 persons including promoters of Lavasa
Corporation for alleged violations of the Environment Protection Act (EPA), while the Maharashtra Chief
Minister on the other hand has recommended that Lavasa be considered for environmental clearance,
exposed the double standards of the state government.

Suggestions

 First step - to investigate the corruption that seems to be a part & parcel of Lavasa.
 If the corruption is exposed, finding the irregularities should be easy.
 Raise funds for proper operations of project and get proper license and permissions from state
government, central government and Indian Ministry of Environmental & Forest (MoEF)
 Build proper strategies to acquire estimated population and waste management.

References

https://www.business-standard.com/article/companies/mumbai-s-darwin-platform-infra-ltd-wins-bid-
for-pune-s-lavasa-city-121122400956_1.html

https://www.business-standard.com/article/companies/oberoi-realty-us-based-fund-interups-inc-to-
bid-for-cash-strapped-lavasa-120012001572_1.html

www.Wikipedia.com