On the other hand, with their efforts having met with some success, the Gurgaon citizens’ groups are likely to remain vigilant in exerting pressure on authorities and developers. This HC order may also encourage residents’ groups in other Indian cities competing with real estate developers for increasingly scarce water resources to oppose new projects. Many Indian cities already have groups of resident welfare associations that have been fighting urban authorities on inadequate water supply. Urban citizens are becoming increasingly informed, empowered and resourceful and, as such, are better suited to seeking legal recourse. Similar legal action in other cities that have serious groundwater concerns could result in restrictions being placed on the scope or nature of further development. Indian real estate developers’ pressing water challenge In 2010, McKinsey projected that India’s urbanization would add the equivalent of a new Chicago every year up to 2030 – a massive opportunity for developers. However, water is set to be a serious constraint: a 2007 World Bank study on India’s larger cities found that average daily water supply was only 3.9 hours. The acute pressure on water supplies has resulted in increased use of groundwater. The Indian Central Ground Water Board (CGWB) has observed this to be the case particularly for newly developed areas, where municipal supplies cannot keep pace with development. Against this backdrop and with groundwater tables declining, it was only a matter of time before the risks became more concrete. While
in Gurgaon the issue has resulted in a court order, this is only one way in which developers are likely to feel the pinch. Mitigating water risks There are several strategies that developers can implement to reduce water scarcity risks. These include: factoring water into land bank acquisition and development; identifying ways to reduce water use and recycle it during construction; prioritizing the use of water sources that are less vulnerable; and creating innovative developments that are water efficient during use. Over the longer-term the best defence is a careful assessment of competing water usage (actual and potential) and anticipating supply prior to land acquisition. This would allow developers to reduce exposure to water scarce areas without adequate plans for alternate supplies. Given the longer-term nature of the risk, developers whose business models are heavily centred on land bank appreciation are more vulnerable to groundwater risk. These developers should consider limiting the size and/or value of land purchases for long-term development in regions with acute and worsening groundwater supplies and inadequate or unreliable alternate supplies. Developers such as Value & Budget Housing Corporation (VBHC) – an unlisted company involved in affordable housing which intentionally avoids long-term land investments and focuses on rapidly developing a plot — have business models that are less vulnerable to longer-term water risk.