Real Estate Weekly News Letter 1-7 December 2014
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Transcript of Real Estate Weekly News Letter 1-7 December 2014
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Real Estate News Letter
1st December 7th December, 2014
For private circulation only
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CONTENTS
2. Interest Rates
3. Infrastructure
4. Industry News
5. Private Equity News
6. Regulatory Buzz
8. Land
9. Residential
10. Commercial/ Retail
11. Township
12. SEZ
13. Hospitality
14. Input Cost
7. Public Markets
1. Snapshot
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Snapshot
Source : NSE
Source : NSE
Note : Data indicates inflation over previous years month Source : Ministry of Commerce and Industry
7.7%
7.0%
8.6%
6.8%6.8%
3.9%
2.2%
1.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Mar/14 Apr/14 May/14 Jun/14 Jul/14 Aug/14 Sep/14 Oct/14
Per cent
WPI-inflation data (primary articles)
-0.4-0.4
0.20.3
-0.3
-0.6
0.1
1.2
0.2
1.27
-1.0
0.0
1.0
2.0
01/Dec 02/Dec 03/Dec 04/Dec 05/Dec
per centTrends in Nifty and CNX realty index
Nifty CNX REALTY
66
47
36
48
41 42 43
34
44
34
20
30
40
50
60
70
01/Dec 02/Dec 03/Dec 04/Dec 05/Dec
Rs billionTrends of FII in equity markets
Buy sell
-
rates are a few more months away and the
government's efforts to boost infrastructure would
certainly make for a compelling case for a rate cut in
RBI's next policy announcement in February next
year.
J P Gupta, vice-president of Credai-NCR-Haryana
said: We have full faith in the new government and the RBI, but keeping interest rates unchanged is
disappointing. With inflation largely under control,
cheaper housing loans were the need of the
hour.They not only fulfil aspirations, they also have a
ripple effect on growth. Housing affects demand in
several other industries and would have boosted the
overall sentiments in the MARKET.
The Times of India,06 December,2014,New Delhi
Interest Rates
RBI plays safe on credit policy
Experts say that the RBI's decision not to cut policy
rates was expected, although it disappointed
stakeholders of the sector. The RBI left repo rate
unchanged at 8% and reverse repo rate at 7% in its
bimonthly review of credit policy. The CRR, too,
remains the same at 4%. With moderation of inflation
there was great expectation in the industry that the
RBI would cut interest rates in its bimonthly monetary
policy, Sachin Sandhir, global MD (Emerging
Business) and MD (South Asia) of RICS, said. A rate
cut at this stage would have galvanized MARKET
senti ment and helped in growth he said.
Rate cut will help companies with huge debt on their
books.This would have helped companies in the real
estate space, too, which are currently reeling under
high levels of debt. However, consultants say that
RBI's decision to not cut key poli cy rates comes
along expected lines, as recent economic data
suggests that the much anticipated headroom for
easing policy stance is still some way away.
While growth rate of the economy has slowed, the
apex bank continues to be cautious in its fight against
inflation and deepening FINANCIAL stress due to
banks' non performing assets. As the RBI governor
already said in his previous monetary policy
announcement that he would look at base effect while
considering rate cut, the move is well intentioned.
Driven by softening of fuel and food prices, the
wholesale price inflation dropped for the fifth
consecutive month--to 1.77% in October--its slowest
since October 2009. Retail inflation at 5.52% has
been the slowest since January 2012. Prime concerns
like food inflation fell to 2.7% in October, from 9.6% in
May--its lowest level since February 2012.
Interestingly, the RBI was hoping to contain retail
inflation at 8% by January 2015 and to 6% in January
2016.
DTZ, a consultancy firm, said it hoped that the central
bank would soon start cutting interest rates to bring
down the cost of money, so that INVESTMENT
becomes more attractive. It said the cut in interest
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(Janakpuri to Botanical Garden). Without this depot,
the line cannot be commissioned, admitted the
official. However, around 1 lakh sqm of DDA land is
yet to be cleared for the construction.
"The land has been officially handed over by DDA but
residents of Shram Vihar, which falls in that part,
have gone to court on the acquisition. DMRC hasn't
been able to access the area as a result," said the
official.
Similarly, on paper, 108 plots in Trilokpuri have been
handed over to Delhi Metro, but in reality, the land is
yet to be cleared for construction work.
Government sources said that after the letter was
received, two of the delayed pockets have been
handed over to DMRC. "The depot at Vinod Nagar
was stuck as the permission for tree-cutting was
awaited. This has now been given to DMRC," said the
source. Also, a part of the land which falls between
the Lajpat Nagar and IP extension stations has been
handed over physically to Delhi Metro.
The Times of India,01 December,2014,New Delhi
CCEA clears expansion of highway
projects
The Cabinet Committee on Economic Affairs on
Tuesday approved the four-laning of three national
highway sections Lucknow to Sultanpur, Nagina to Kashipur and Singhara to Binjabahal. The projects
will be carried out in a build-operate-transfer mode,
on a design, build, finance, operate and transfer
basis. The Lucknow to Sultanpur section on the
National Highway 56 in Uttar Pradesh will cost Rs.
1,352 crore including the cost of land acquisition and
the total length of the road will be 126 kms. The
Nagina to Kashipur section on National Highway 74
between Uttarakhand to Uttar Pradesh will cost Rs.
1,471.40 crore for a length of 99 km. The Singhara to
Binjabahal section on National Highway 6 in Odisha
will cost Rs. 1,077.11 crore for the 104 km strech.
The Hindu Business Line,03 December,2014,New Delhi
Infrastructure
Land tangle may delay Delhi Metro
Phase-III
Delay in acquisition of land is putting a question mark
on the completion of the Delhi Metro's Phase-III work.
This is what DMRC boss Mangu Singh had written to
the state chief secretary earlier this month. In the letter,
Singh has clearly warned that if the identified pockets
of land are not handed over immediately,
commissioning of Phase-III could be impacted, and not
completed on time.
The letter, a copy of which is with TOI, is candid about
the impact of non-availability of these pockets of land.
The total area is a measly 307m, said a Delhi
government official. The letter also asks chief secretary
D M Spolia to step in and "avoid the situation". "You
will appreciate that DMRC planned the work to
accommodate the delay in handing over of the land at
the above locations but any further delay now will
affect the completion of Phase-III," says the letter by
the Delhi Metro chief. The letter goes on to say: "The
line cannot be commissioned in time unless the land
pockets are handed over immediately." The letter was
written on November 11. A copy of the letter has also
been sent to lieutenant governor Najeeb Jung.
The pockets of land identified affect line 7 (Mukundpur-
Shiv Vihar) mostly, added the official. "The entire line
is 56.8km long. But the line goes through highly
congested areas, which are slowly being vacated for
the Delhi Metro work," said the government official.
The Mukundpur to Mayapuri stretch, which measures
12.5km is part of the list, as is the Mayapuri-Lajpat
Nagar stretch. Both stretches have land areas,
measuring between 46m and 84m, which is holding up
work. While one 84m stretch consisting of a slum has
held up the construction of the viaduct in Punjabi Bagh,
another 83m stretchagain a slumhas held up work on the Naraina viaduct. The Punjabi Bagh station is
also incomplete because of non-availability of land.
The biggest hold-up, however, is the depot scheduled
to come up in Kalindi Kunj. Here, 2.15 lakh sqm of
land, belonging to the DDA and UP irrigation
department, is set to house the depot for line 8
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for land-owners. The Governments role in land acquisition has been curtailed as far as private
enterprises are concerned. These enterprises can
now enter into their own negotiations and arrive at the
price for acquisition, he added. The Bill also requires a Social Impact Assessment, which will outline how
the acquiring parties intend to use the land, and how
the original inhabitants or owners will be rehabilitated.
Ajay Aggarwal, MD, Microtek Infrastructure, said:
The Bill may convey the impression of welfare of farmers or land-owners on the surface, but it will harm
their prospects in future, as industry and the real-
estate sector will avoid investing in areas that have a
history of land disputes.
With the law being enacted, the real estate sector has
no option but to face the repercussions. Project costs
will spiral upwards and implementation will be
delayed. J. Rao, Chairman, Value and Budget
Housing Corporation Pvt Ltd, says the law will have
an overall negative impact on housing for the mass
market segments, including the middle-income group
and the poor.
If the purchase price of land has to be over two- to
four-times the prevailing market price, depending on
the location, just one transaction will drive up land
costs and make projects unviable. Anuj Nangpal,
Managing Director, Investment Services, DTZ India,
said: The Bill walks a tightrope. While an enhanced compensation package ensures that land-owners get
their due, the same would make a project financially
unviable.
Since developers will want to preserve their profits,
there could be more joint development projects
happening, wherein the profits as well as the
resources and risks will be shared.
The Hindu Business Line,01 December,2014,New Delhi
Property sizes in Mumbai region
falling since 2012: Survey
Sizes of homes across the Mumbai metropolitan
Industry News
Land Bill: Real estate project cost
may shoot up
The Land Bill, passed in the Lok Sabha on Thursday,
may ensure transparency and fair compensation for
farmers, but the slowdown-hit real estate sector feels it
will add to project costs and lead to execution delays.
The Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Bill,
2012 replaces a 120-year-old law.
The highlights of the Bill include a transparent land
acquisition strategy, compensation and rehabilitation
as a matter of right. The industry notes that the cost of
infrastructure projects is likely to go up by almost 3 per
cent and companies will tend to avoid bigger
infrastructure projects because of clauses such as
time-bound execution. Niranjan Hiranandani, Chairman, Housing and Real Estate Committee of the
Federation of Indian Chambers of Commerce and
Industry, and the Housing Committee of the Indian
Merchants Association, said a new law was definitely
needed to replace the existing archaic law. But the
provisions of the proposed law will hike up land costs
multi fold and make most infrastructure projects and
affordable housing projects unviable.
In affordable housing projects land costs can be about
30-40 per cent of the project cost. But if this is to go up
four times or even double, affordable housing will
simply not be possible. Also, the social provisions like
compensating people who have worked on the land,
how are the beneficiaries to be identified? How will the
governments implement this provision especially if the
law is the take effect retrospectively, he asked.
Sanjay Dutt, Executive MD, South Asia, Cushman &
Wakefield, said: The cost of land acquisition will surely go up for all projects, irrespective of them being
Government or private or public-private-partnerships
(PPP). Further, the clause of mandatory consent of 80
per cent of owners for private projects and consent of
70 per cent for PPP projects will delay the process of
acquisition and the projects.
Mayank Saksena, Managing Director - Land Services,
Jones Lang LaSalle India, said the Bill was beneficial
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the Mumbai metropolitan region, said CM Devendra
Fadnavis on Monday.
The F E Dinshaw Trust (controlled by Nusli Wadia), A
H Wadia Trust (whose managing trustee is Muncher
Cama of Mumbai Samachar), the Byramjee
Jeejeebhoy family, Veekayal Property and
Mohammed Yusuf Khot trust are the five owners
whose properties are encroached. A Byramjee
Jeejeebhoy spokesperson told TOI that none of its
land is encroached upon.
The announcements came after Fadnavis held a
review meeting on housing at the SRA HQ in Bandra
(East), only the second CM after Sushilkumar Shinde
to do so in a decade.
The F E Dinshaw Trust's encroached land is in
Goregaon, Byramjee Jeejeebhoy sprawl in Malad, A
H Wadia land in Kurla, Veekayal properties in
Kandivli-Borivli-Dahisar belt and Mohammed Yusuf
Khot land in Bhandup. Fadnavis said reasonable time
will be given to the land-owners to initiate the
rehabilitation schemes before the government moves
in. The SRA policy allows 70% of the eligible slum
dwellers to select a builder to provide each family a
269sq ft new house free of cost. As compensation,
the builder receives rights to build larger residences
or commercial space on a portion of the plot for sale
in the open market.
Deshmukh said if the government is forced to acquire
these lands, slum dwellers will be asked to form their
own societies and select a developer as done in
regular SRA schemes across the city. The 600 acres
of the Centre's salt department land the state
government has zeroed in on is located in Wadala,
Kanjurmarg and Vikhroli. Fadnavis said this sprawl
will help increase the public housing stock.
The government also wants to kickstart the much-
delayed Dharavi redevelopment project. "Dharavi
slum is not just residential, but has a large industry
within it. We will have to take into account all these
factors," said Fadnavis. The government is thinking of
giving larger 400sq ft free houses in Dharavi if the
slum dwellers pay the construction cost for 100sq ft,
Industry News
region (MMR) are shrinking over the past two years as
real estate players are developing small-sized
properties keeping in mind the price factor.
The home size has decreased by as much as eight
per cent since 2012 and the trend is likely to continue
as the population grows and property prices increase,
property portal Commonfloor said in its study. "...since
2012, it may be found that property sizes have
constantly decreased, while prices have almost
remained the same or marginally increased," it said.
The trend started as early as 2009 but became
increasingly visible over the last two years.
"One of the main reasons for increasing number of
small-sized properties is the affordability aspect. Prices
in Mumbai have seen a meteoric rise over the last few
years. Yet every individual aspires to own a home
there. Keeping in mind the affordability aspect of
buyers, realty players have started launching
properties that are smaller in size. Buyers don't mind compromising on the size of the properties if they fall
within budget and are in the city limits, the survey said.
"Secondly, the MMR is witnessing a rapid increase in
population over the last few decades. Mumbai is
currently the seventh most populous city in the world
and in the league of Tokyo and Delhi. An increasing
population raises concerns for available space. This
may be considered a key contributor to the reducing
property sizes," it said.
The Economic Times,02 December,2014,Mumbai
State wants citys top five land owners to house slumdwellers
The state government will acquire about 2,000 acres
(equivalent to around 80 Azad Maidans) of encroached
land belonging to five of Mumbai's biggest private land
owners if they fail to come forward to rehabilitate
slumdwellers under the Slum Rehabilitation Authority
(SRA) scheme. In other decisions that will boost
affordable housing, the government plans to free up
600 acres of salt pan lands belonging to the Centre in
the eastern suburbs and the SRA will pay Rs 500 crore
to the state housing authority (Mhada) to buy land in
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Anshuman Magazine, Chairman & MD, CBRE South
Asia, said, For the real estate industry, the move may be seen as a lost opportunity. A rate cut at this
juncture could have been the trigger for housing
sales.
Rohit Raj Modi, President, CREDAI NCR, said, "A
rate cut would have been a boon for the sector at a
time when it is coming out of a not-so-good festive
seasons. A mere reformatory announcements from
the Government would not do much if it is not
supported by monetary liberty. We expect the RBI
would consider this while its next review and would
lower key rates to boost real estate."
Samantak Das- Rs.Chief Economist & Director Research, Knight Frank India, said, With the recent sales in the real estate sector remaining subdued
across the country, stakeholders were hoping for a
rate cut this time to initiate tractions in the market.
However, given the current scenario of high optimism
along with economic fundamentals falling in place, the
RBI may look at testing the sustainability of the
economic progress for one more quarter.
The Hindu Business Line,03 December,2014, Mumbai
How Gurgaon was built, licence by
licence, govt by govt
Gurgaon is the story of a new city. Land is its
centrepiece, and also a source of controversy. Since
1981, seven Haryana governments have approved
1,003 licences for land plots in Gurgaon. The
graphics below show how much each government
has allotted or approved to which developer in the last
34 years. It shows that 55% of land allotments in
Gurgaon were made in Bhupinder Singh Hoodas nine-year tenure; that DLF Ltd received most of its
allotments under Congress rule; that builders were
actively acquiring land even after the 2008 credit
crisis left them gasping for cash to finish projects; that
every large developer has its pocket of presence.
BY GOVERNMENTS
From 1982 to 2005, five state governments gave
Industry News
he added. In Mumbai, there are 12 lakh slums
comprising 46% of Greater Mumbai's over 12 million
population.
The CM also called for relaxation of the 500metre
construction ban imposed by the defence ministry in
Mumbai. "This rule applies even in places where there
are no vital installations. Many projects are stuck," he
said, adding that vital installations would be
sacrosanct. The government will issue show cause
notices to builders who have not started work on three
large SRA projects in Kandivli, Sion and Chembur.
Under Section 3K of the Slum Act, it is not mandatory
for the developer to obtain 70% consent in the initial
stages. It empowers the government to direct the SRA
to hand over a large slum cluster for redevelopment to
a builder without inviting tenders or allowing competing
builders to participate in the project.
The CM said slum rehab schemes will be expedited
on 117 BMC-owned plots and 96 Mhada plots, which
are currently encroached.
The Times of India,02 December,2014,Mumbai
RBI Monetary Policy: Realty sector
says it is a lost opportunity
Real estate sector player and industry watchers say an
interest rate cut could have set a trigger for housing
sales. The Reserve Bank of India on Tuesday left its
benchmark rate unchanged saying it still needs more
proof that inflation is under control before it can start
lowering lending rates. Pradeep Jain, Chairman,
Parsvnath Developers, said, RBI is only looking towards taming inflation. It is overlooking the pressure
being borne by key sectors. The recent fall in
manufacturing growth is a live example.
The overall GDP growth forecast has also been cut by
many experts. The RBI should understand that curbing
inflation at the cost of growth is not a wise step. It
should stand up and cut the rates in its next review to
pump funds into the economy and the real estate
sector in particular which is one of the major
contributors to the GDP."
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legal rights to the property dealers. DDA had
introduced a clause in its latest housing scheme
preventing successful applicants from selling their
flats for five years, by denying them ownership rights
for that period.
Ganesh Murthy (name changed) is disappointed with
the state of his flat in Dwarka's Sector 29 and is now
considering offers that have already come from a few
property dealers. "I didn't know how small the flat 340
square feet LIG flat was going to be but, as soon as I
saw it, I knew moving here was out of the question.
Three property dealers have approached me which
I'm now considering," Murthy said. A property dealer
has approached him with an offer for Rs 6 lakh. "I
was told that the person who got the flat opposite
mine wants to buy my flat and have two flats, which
would be more convenient for him. So if I get a good
price I'm ready to sign the GPA."
Property dealers say the 2,300 EWS flats in Dwarka,
despite their small size, are attracting premiums of Rs
8 lakh to Rs 15 lakh. Similar prices are being offered
for LIG flats in Rohini's sectors 34 and 35. Best deals
are in store for flats in the best locations, like
Mukherjee Nagar. "For a two-bedroom flat in
Mukherjee Nagar, which was offered for Rs 70 lakh in
this scheme, a seller could easily fetch Rs 30-40 lakh
if he transfers his legal rights to the allottee and sells
it at the end of five years," a property dealer added.
Officials from DDA advise people against making
such deals. "DDA will hand over possession only to
the original allottees after the five-year period. If any
transaction takes place during the intervening time
that will be illegal," Neemo Dhar, spokesperson, DDA,
said.
The Times of India,04 December,2014,New Delhi
Expressgrowth - Realty
development along NH-8
NH-8 has been playing a crucial role in facilitating the
growth of commercial and residential INVESTMENTS
along its entire length. Of special interest is the
Industry News
7,400 acres of land in Gurgaon (the first licence issued
in 1981, for 161 acres, has been included in the
calculation). In the next nine years, the Bhupinder
Singh Hooda-led Congress government gave another
9,400 acres, or 55% of all land given to builders in
Gurgaon.
BY TOP DEVELOPERS
In all, licences amounting to 16,795 acres have been
given to 344 developers. Just three developers
account for 38% of the area: DLF (20.5%), Ansals
(9.2%) and Unitech (8.7%). They were the first
entrants, but now they rub fences with many
developers. The presence of other developers has
increased principally during the tenure of Bhupinder
Singh Hooda, even as the cash-strapped top three
pulled back in their land purchases. Further, each of
the top three has tried to build a pocket of presence:
DLF in north-east and east Gurgaon, Ansals in north-
west and Unitech in the centre.
BY YEAR
The maximum allotment happened in 2008, the year in
which the world economy was rocked by a credit crisis.
In India, the real estate sector, where a bubble had
been building, was the worst hit. Starved of cash and
facing tame buyer interest, builders were saddled with
unfinished projects. Yet, in Gurgaon, the state
government kept issuing licences and builders kept
buying: as much as 6,380 acres were given since
2008, or 38% of all land allotted in Gurgaon.
Live Mint,03 December,2014,New Delhi
Takers for DDA flats despite 5-year
rule
Despite DDA's best efforts to keep speculators out of
their latest housing scheme, successful applicants are
receiving offers for their flats based on a General-
Power-of-Attorney (GPA) transfer of rights. Some
allottees who say they are unhappy with the size or
location of their flats are now planning to dispose them
of.
Based on location and size of the flat, allottees are
getting offers from Rs 5 lakh to Rs 40 lakh to transfer
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Industry News
stretch that lies in the NCR, developing at a rapid clip
Real estate development along National Highway 8
has seen remarkable progress over the past few
months. A report estimates that there would be JOB
OPPORTUNITIES for 22 lakh people by 2017 in this
zone. Realty projects under construction along NH-8
cover a stretch of 15km through Haryana and present
multiple options to investors in search of early-bird
INVESTMENT opportunities. Residential property
prices on Southern Peripheral Road (SPR) connecting
to NH-8 have seen rapid appreciation over the past
few months. This location holds great INVESTMENT
potential due to the fast connectivity that NH-8
provides to Manesar and Dwarka.
As prices soar in new areas of Gurgaon like Dwarka
Expressway, Golf Course Extension Road, and Main
Gurgaon Sohna Road, buyers are looking at
alternative locations. The INVESTMENT regions and
areas along NH-8 being developed under the DMIC
(Delhi-Mumbai Industrial Corridor) include Manesar-
Bawal Investment Region (MBIR) in Haryana and
Khushkhera-GurgaonNeemrana Investment Region
(KGNIR) in Rajasthan.
The forthcoming 1,483km-long DMIC coming up along
NH-8, where multiple SEZs have been approved by
the government, is attracting FDI in real estate, IT-
ITeS, automobile, glass technology, etc, from Japan,
the US, Korea, China, etc. Conceived as a global
manufacturing and TRADING hub, the project is
expected to double employment potential, triple
industrial output and quadruple exports from the region
in five years.
Honda Motors, Asahi, Saint Gobain, Musasi, etc, have
already set up some of the largest car and glass plants
of the world along this corridor. American companies
like Becton, Dickinson and Company, Hollisters, etc,
also have plans to mark their presence and INVEST in
this zone. Today, the residential subsector is growing
rapidly and the urban population of India is expected to
touch 590 million by 2030. Therefore, in order to meet
the future demand, regional players are expanding to
achieve a pan-India presence.
The Times of India,06 December,2014,New Delhi
-
entities during the period, indicating perhaps a
significant amount of investment in greenfield and
brownfield development, CBRE said.
The commercial office segment, meanwhile,
attracted more than 20 per cent of this total
investment amount during the period in review.
Mumbai attracted the highest investments, followed
by Delhi and Bangalore, the report shows. In terms of
total real estate investments made in Mumbai and
Delhi during the period, land and development stage
transactions spelt nearly 70 per cent and more than
60 per cent of total realty investments in the cities,
respectively.
In case of Bangalore, more than 50 per cent of total
investments were attracted by the commercial office
segment. According to the study, office space
transactions increased by about 20 per cent year-on-
year in the first nine months, with more large-scale
space leases and higher lease volumes on an
average over the previous year across leading cities
in India. Investors were keen to invest in completed
and well-leased core commercial office assets and IT
parks across key cities, it said.
"While investor interest in India and southeast Asia
steadily increased over the first nine months of the
year, this interest is yet to translate into an increase
in investment turnover. India, recorded a sizable
uptick in business confidence following the coming of
a new government earlier in the year," it said.
The Economic Times,05 December,2014,Mumbai
Dutch fund APG to pump more
money into Indian infra sector
Global institutional investor APG Asset Management
NV is keen to increase its allocation to infrastructure
in India, but prefers to team up with other investors in
club deals, or enter into joint ventures. With pension
assets of close to $490 billion under management,
the Dutch fund manager sees a host of opportunities
in the Indian infrastructure sector. Hans-Martin Aerts,
Head of Infrastructure-Asia, APG, insists the outlook
Private Equity News
PE Funds to put Rs 450 crore into
Lotus Greens Noida project
Private equity funds Clearwater Capital and SSG
Capital Management are investing Rs 450 crore in the
sports city township of Noida-based builder Lotus
Greens, two people aware of developments said. Lotus
Greens is acquiring over 300 acres in Noida's Sector
150 for around Rs 2,500 crore and it will use the Rs
450 crore infusion to make the first tranche of payment
to Noida Authority next week for 230 acre, these
people said on condition of anonymity.
The developer will issue non-convertible debentures
(NCD) to the non-banking financial company (NBFC)
of Clearwater Capital and to SSG Capital
Management, one of these people said. An email sent
to Pramendra Sahel, vice-chairman at Lotus Greens,
did not elicit any response. SSG's general counsel
Richard Yee declined comment on an email query.
Clearwater Capital did not respond to an email
questionnaire. The Noida Authority had awarded the
bid to build the sports city to Lotus Greens in July. The
over low-density project will offer residential as well as
recreational facilities, including a nine-hole golf course.
The Economic Times,05 December,2014,New Delhi
Indian realty market sees $4.5 bn
investment during January-
September: CBRE
Country's real estate market attracted investments
worth nearly $4.5 billion during the January-September
period this year, with Mumbai receiving a significant
part of it, says a report. According to property
consultant CBRE, institutional investors pumped in
$4.5 billion into India's realty sector during the first nine
months of 2014, an indication of improved investor
sentiment after the formation of a new government at
the Centre.
Out of the total investments, land and development
stage transactions attracted the highest quantum of
nearly 60 per cent from domestic as well as foreign
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Private Equity News
for Indian infrastructure has improved significantly after
the change in political power in May.
The new Government has a much better power base than its predecessors, and is committed to implement
key reforms aimed at further development and
economic growth. The infrastructure sector is expected
to be one of the key beneficiaries of these reforms, Aerts told Business Line.
Direct investments
APG has been investing in India for several years. In
2012, the company had entered into a deal with the
property development subsidiary of the Godrej Group.
The same year, it had formed a $300-million fund with
investment firm, The Xander Group, to buy leased
office assets in India. The size of the fund with Xander
could be increased to $500 million, with investment in
Mumbai, Bangalore, Chennai, Delhi, Hyderabad and
Pune.
APG has also taken a 13 per cent stake in Lemon Tree
Hotels, a Delhi-based group, and set up the Fleur
Hotels joint venture. Warburg Pincus, a global private
equity investment institution, has a 25 per cent holding
in the hotel chain. Over time, we have made investments (in India) across various sectors. We
started investing through funds, as this allowed us to
get familiar with the Indian infrastructure market. We
are now trying to capitalise on our experience, by
moving away from traditional fund investments towards
direct and co-investments, said Aerts.
Asia focus
In what is termed its largest commitment to the Indian
infrastructure sector, APG teamed up with Piramal
Enterprises in August, to invest $1 billion in
infrastructure projects. APG had announced in May
that it would invest $650 million for a majority stake in
Shanghai e-Shang Warehousing Services, to develop
logistic properties in China, with Warburg Pincus.
Other than India, we consider countries like Indonesia and the Philippines as an attractive investment
destination.
The Hindu Business Line,05 Dec.,2014,Mumbai
-
There is also likely be an impact on group housing
plots, where ground coverage that was previously
33.3 per cent will now be 50 per cent. This will allow
for bigger apartments to be built, though FAR here
was already 200 under the master plan. No height
restrictions were applicable for group housing plots,
and hence there is no issue for such developments
with regards to height provisions.
A sizeable uptick in the stock prices of listed players
which are likely to be holding prime lands in Delhi notably DLF, Unitech and Anant Raj has been seen.
Better valuation for such land on account of increased FAR for residential plotted developments is
the likely factor behind this increase in their
respective stocks. The impact may be seen in the
short-term, but there should be more going forward
when the mid-term review of the master plan 2021 is
completed and the changes notified by the end of the
year, added Puri.
Experts are, however, keeping their fingers crossed
about the exact impact of this move on the property
prices as it will be clear once the issues of change in
density, number of dwelling units and height are
addressed in detail.
Though no clarity has been given so far on an
increase in the dwelling units allowed on the larger
plots, there is a provision in the draft Delhi Master
Plan 2021 which allows for an increase in the number
of dwelling units. Under this provision, the cost of a
concurrent augmentation of associated civic
infrastructure has to be borne by the developer and
paid to the authority. This provision in the draft master plan can be used to increase the number of
dwelling units, added Puri. Mohit Goel, CEO, Omaxe Limited said, The increase in FAR will encourage vertical and new development
in Delhi. It is a good move by the government to allow
more space for development. This will help stem the
rise in price of homes in Delhi and give a boost to
affordable housing.
The Tribune,01 December,2014,New Delhi
Regulatory Buzz
High hopes over higher FAR
The Central Governments approval for the proposal to increase the FAR in Delhi state recently has got a
positive response from the industry players. The
increase in FAR is for residential plots which are 750
square meters or higher, wherein the FAR has been
increased to 200 from 150. For plots bigger than 1,000
square meters, the FAR has gone up to 200 from 120
and ground coverage has been increased from 40 per
cent to 50 per cent. This move will result in bigger
apartments and with no change in density norms, ticket-sizes may rise as well.
Rohit Raj Modi, President, Credai NCR, said, On behalf of the industry, we welcome this move as it will
address the rising problem of providing
accommodation to all and in realising the dream of
Housing for all by 2022. This extra FAR would definitely help developers with extra space and thus
would help match the demand and supply gap in
Delhi.
Commenting on the impact of this move Anuj Puri,
Chairman & Country Head, JLL India, said, If used judiciously, this provision in conjunction with the
increased FAR can be utilised for increasing the
housing stock on residential plots going forward. Only
then will some movement towards creating more
houses and an associated reduction in prices will be
likely. With height restrictions for individual residential
plots not increased from the current 17.5 meters along
with stilt parking provisions, developments are likely to
remain of same height.
Calling it an opportunity for more vertical growth Vinay
Jain CMD AVJ Group, We appreciate the decision to increase the FAR, though it will only have figurative
difference on the real estate market. FAR has been
increased from 150 per cent to 200 per cent on 750-
1,000 sq. m plots, it has been raised from 120 per cent
to 200 per cent for plots of 1,000 sq. m and above. The
additional FAR allowance will be valuable for
redevelopment in projects. It will positively bring in
more supply in the market and create outlook for more
affordable housing, this is also an opportunity for
developers to grow vertical.
-
Easy exit norms for foreign
investors in construction sector
It has reduced minimum built-up area as well as
capital requirement and eased the exit norms. To help
attract foreign funds in construction of townships,
hospitals and hotels, the government on Wednesday
relaxed the FDI policy for this sector by easing exit
norms and reducing built-up area and capital needs.
The revised norms relating to construction
development sector has been notified by the
Department of Industrial Policy and Promotion
(DIPP). India allows 100 per cent FDI in the sector
through the automatic route.
The new policy has done away with the three-year
lock-in period for repatriation of investment. The investor will be permitted to exit on completion of the
project or after development of trunk infrastructure,
that is, roads, water supply, street lighting, drainage
and sewerage, a DIPP circular said. It is to be noted here, the official statement issued after the October
29 Cabinet meeting had mentioned that the investor
can exit on completion of the project or after three years from the date of final investment, subject to development of trunk infrastructure.
Under the new policy, the minimum floor area
requirement has been reduced to 20,000 square
metres from 50,000 square metres earlier. It also
brought down the minimum capital requirement to $5
million from $10 million. In case of development of
serviced plots, the condition of minimum land of 10
hectares has been completely removed. Reacting on
the new policy, Chairman & Country Head of JLL
India Anuj Puri said: With the FDI policy now providing investors a much more attractive exit
option...FII interest in the Indian construction sector is
bound to increase.
DLFs Executive Director (Finance) said the easing of exit norms would give flexibility to investors. Smaller projects can now attract FDI with reduction in
minimum built-up area requirement, he added. Although 100 per cent foreign direct investment was
allowed in townships, housing and built-up
Regulatory Buzz
SEBI permits 123 alternative
investment funds to operate in India
Market regulator SEBI has allowed as many as 123
entities to set up AIFs newly created class of pooled-in investment vehicles for real estate, private equity
and hedge funds in less than two-and-half years. The 123 Alternative Investment Funds (AIFs) have been
registered with the Securities and Exchange Board of
India (SEBI) since July 2012.
Of these, around 34 entities got the market regulators approval to operate so far this year (January-
November), 67 in 2013 and the remaining 22 in 2011.
The AIFs that have registered with SEBI in November
are Religare Dynamic Trust, Indus Way Emerging
Market Fund and Carpediem Capital Partners Fund
and those registered in October are Singular India
Opportunities Trust.
The regulator had notified in May 2012, the guidelines
for this new class of market intermediaries. AIFs are
basically funds established or incorporated in India for
the purpose of pooling in capital from Indian and
foreign investors for investing as per a pre-decided
policy. Under SEBI guidelines, AIFs can operate
broadly in three categories. The SEBI rules apply to all
AIFs, including those operating as private equity funds,
real estate funds and hedge funds, among others.
The Category-I AIFs are those funds that get
incentives from the government, SEBI or other
regulators and include Social Venture Funds,
Infrastructure Funds, Venture Capital Funds and SME
Funds. The Category-III, AIFs are those trading with a
view to making short-term returns and it includes
hedge funds, among others.he Category-II AIFs can
invest anywhere in any combination but are prohibited
from raising debt, except for meeting their day-to-day
operational requirements. These AIFs include private
equity funds, debt funds or fund of funds, as also all
others falling outside the ambit of above two other
categories.
The Hindu Business Line,02 December,2014,New Delhi
-
Regulatory Buzz
infrastructure and construction developments since
2005, the government had imposed certain conditions.
The government expects the new measures would
result in enhanced inflows into the construction
development sector. The measures are also likely to
result in creation of much needed low cost affordable
housing in the country and development of smart
cities. Between April, 2000, and August, 2014, the
construction sector received FDI worth $23.75 billion or
10 per cent of the total FDI attracted by India during
the period. For affordable homes, the government has
exempted the conditions of minimum floor area and
capital requirement if an investee/joint venture
companies commit at least 30 per cent of the total
project cost for low-cost housing.
The Hindu,04 December,2014,Mumbai
-
Ashiana Homes-Landcraft to invest
Rs 650 crore on housing project
Realty firms Ashiana Homes and Landcraft Projects
will jointly invest about Rs 650 crore over the next five
years to develop a housing project in Gurgaon.
Ashiana Homes and Landcraft have formed an equal
joint venture to develop the 14-acre housing project,
comprising 750 apartments, located on Dwarka
Expressway.
To fund this project, the JV firm Ashiana Landcraft
Realty has already raised Rs 180 crore from Pirmal
Group private equity firm Indiareit and financial
institution India Infoline."We are coming up with a
premium housing project on Dwarka Expressway. The
construction of first phase comprising 450 units have
started and the second phase would be launched next
year," Ashiana Homes Director Rohit Raj Modi said.
Asked about investment, he said the total project cost
would be about Rs 650 crore including investment on
land, which the joint venture firm had bought from
another realty firm Vatika group.
"We have already raised Rs 180 crore for this project
in a structured deal. The remaining investment would
be funded from advances against sales and
construction financing from HDFC Ltd," Modi said.
The JV is expecting a sales realisation of about Rs
1,000 crore from this project 'Center Court' over the
next five years, he added. The first phase would be
delivered by mid-2017 and the entire project would get
completed by 2019. At present, the company is selling
the flats at a basic selling price of Rs 6,500 per sq ft.
Delhi-based Ashiana Homes is developing projects in
the national capital region, Jaipur and Bhubaneshwar.
Ghaziabad- based Landcraft Projects is building a 90-
acre township and a group housing projects in the
city.
The Economic Times,04 December,2014,New Delhi
Public Markets
Realty firm Puravankara enters JV
for housing project in Pune
Realty firm Puravankara Projects has entered into a
joint venture for developing a 30-acre, Rs 500 crore
housing project in Pune. Bangalore-based
Puravankara today said it formed JV with the land
owners, Pune-based Oxford Group and Mumbai-
based EKTA World, and the deal was facilitated by
the property consultant JLL India. "We have entered
into joint venture for the development of 30 acres of
prime residential land in Mundhwa, east Pune,"
Puravankara Projects Joint Managing Director Ashish
Puravankara told PTI.
"We will be developing about 1,600 housing units
covering 2 million sq ft area. The project is likely to be
launched by March next year after getting necessary
approvals and it will be delivered in four years," he
added.Asked about investment, he said the
construction cost of this project would be about Rs
500 crore, which will be largely funded from sales
realisation. Giving details about the JV, Puravankara
said the three partners would share revenue from this
project, but did not disclose in which ratio.
He noted that joint venture in Pune marks the
company's foray into the country's western market.
"Pune offers great potential with its changing
demographics and significant demand in real estate,
across segments. Asked about reports of foray into the Delhi-NCR market, he said "there is no immediate
plan" but company would consider if it gets some
"exciting joint venture opportunity".
Puravankara said the company would not buy land for
the development of projects in the Delhi-NCR market.
Puravankara is currently developing 25.52 million sq
ft of projects and nearly 80 million sq ft is in pipeline
over the next 7-10 years. Apart from Bangalore, the
company has presence in Kochi, Chennai,
Coimbatore, Hyderabad and Mysore. It is also
developing project in Sri Lanka.
The Economic Times,01 December,2014,New Delhi
-
Land
Patel Engineering sells Mumbai land
for Rs 300 crore
Patel Engineering has sold a 4-acre plot in Mumbai's
central business district, Bandra Kurla Complex, for
about Rs 300 crore as part of plans to sell assets to
reduce debt. Patel Realty, a subsidiary of Patel
Engineering, last week signed a deal to sell the land to
unlisted realty company Kanakia Spaces Ltd, industry
sources said. Patel Engineering's Managing Director
Rupen Patel did not reply to calls made for seeking
comments.
Sources said the company is also in advanced talks
with at least two investors for getting a co-developer
for its 16-acre residential complex which it is building in
Yogeshwari in Mumbai.The deal to get a joint
developer for the Yogeshwari residential complex is
likely to get the company Rs 700 crore, they said. In
September, Patel Engineering had sought
shareholder's approval to dispose off its non-core
assets to cut debt.
In a filing to stock exchanges in late September, it had
said that it is planning to sell assets to reduce debt to
the extent of Rs 1,000 crore. As of March 31, the
company's total consolidated debt was Rs 4,478 crore.
The Economic Times,05 December,2014,Mumbai
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Arihant launches residential project
in Kolkata
Kolkata-headquartered Arihant Group, which has
diverse interests in buildings, roads, bridges and
ports, is now coming up with its new residential
project, Arihant Viento. Located on Maheshtala Road
(Topsia) in close proximity to Park Circus, Arihant
Viento, developers claim, denotes an ultimate urban
living experience in a location dotted with leafy
vegetation, famous eating houses at Kolkatas China Town and flower gardens.
Arihant Viento will house altogether 45 apartments in BHK and 4 BHK configurations. While the 3 BHK
apartments will come with sizes ranging between
1,539 sq ft and 1,790 sq ft, the 4 BHK apartments will
have sizes between 2,317 sq ft and 2,772 sq ft,
Subrata Bhakat sales manager, premium residential,
Somani Realtors, which is marketing the property,
said.
On offer at Arihant Viento will be state-of-the-art high
speed elevators of reputed make and one service
elevator, 24X7 security system with CCTV at ground
floor and intercom, well-equipped fire fighting
arrangement, 24-hour water supply, gymnasium and
indoor game and a host of other features that include
a domestic attendants quarter in each floor with toilet, double height air conditioned community hall, children
play area, drivers waiting area, double height AC lobby on the ground floor, meditation room, well
decorated rooftop, community hall, to mention a few,
Bhakat said.
Developers also promised earthquake resistance
RCC framed construction with infill brick walls,
cement plastering internal wall, overlaid with smooth,
impervious plaster of paris, anodised/powder coated
aluminium window with clear glazing grill in all
windows, sleek CP fitting in light colored sanitary
ware in all bathrooms, among other things.
Arihant Viento is a majestic structure that presents a world of novelties capsuled within acres of lush
greenery. Nestled amidst peaceful environs yet close
to the conveniences of city life, this residential
complex perfectly defines elegance and class. Tailor-
Residential
Casa Grande launches new project
in Coimbatore
Chennai-based realty major Casa Grande Pvt Ltd
(CGPL), which already has a presence in Coimbatore,
has come out with a new project 'Casa Grande Amber'
in Ramanathapuram area in Coimbatore. The project
coming up behind Central Studio would have a mix of
villas and apartments about half-a-km off Tiruchi road
in the city.
In a release, the company said that the new project
was designed keeping in view what the affluent buyers
were looking for.
It would have 13 independent 4 bedroom villas ranging
from 3,360 sq.ft. to 4,041 sq.ft. in size (built-up area)
on a land area of 3,500-4,300 sq.ft. with high-end
specifications. The gated community project would
also have 32 apartments ranging from 1,242 sq.ft to
2,111 sq.ft. in size.
While the villas would have a starting price of Rs.2.3
crore (for a 3,360 sq.ft villa), the apartments are priced
from Rs.49 lakh onwards.
Arun Kumar, founder and MD, Casa Grande,
explaining the salient features of the project, said that
Casa Grande Amber had been "planned with space as
concept with lavish internal and external spaces'' and
claimed it would be "one of the most luxurious
projects'' in the city.
Senthil Kumar, MD - Coimbatore Region, CGPL, said
the project was strategically located with easier
proximity to educational institutions and healthcare
facilities and would meet the aspirations of those who
want a luxurious life within the city area.
He said the villas and apartments in the companys first project at Kalapatti in the city will be handed over
to the owners in January 2015, about three months
ahead of schedule. The new project coming up in
Ramanathapuram area on about 2.1 acres would be
completed in the first quarter of March 2016.
The Hindu Business Line,05 December,2014
-
Residential
made for those seeking a life of quiet luxury, the
housing complex encompasses artistically crafted
apartments coupled with luxurious amenities, he said.
The apartments at Arihant Viento will come with a price
tag of Rs 5,800 per sq ft. While the 3 BHK apartments
will cost between Rs 88.68 lakh and Rs 1.03 crore, the
4 BHK apartments will come between Rs 1.37 crore
and Rs 1.69 crore. Possessions of these apartments
are likely to be handed over to their new owners by
January 2016.
Financial Chronicle,05 December,2014,Kolkata
Ashiana Housing forays into
Chennai market
Ashiana Housing will mark its entry into the Chennai's
realty space by launching residential projects, one of
them targeted at senior citizens.
The company has entered into a joint development
agreement with Escapade Real Estate to develop a
senior citizen living and group housing projects in the
Tamil Nadu capital.
"Ashiana Housing has has signed a development
agreement, on revenue-sharing basis, with Escapade
Real Estate, a Group company of Arihant Foundations
and Housing, for developing senior living as well as
regular group housing projects," the company said
today in a statement here.
"Chennai is an emerging destination for senior living
homes in southern part of India and we are excited to
enter this market," Ashiana Managing Director Vishal
Gupta said.
The New Delhi-based realty firm currently has four
retirement housing projects in its portfolio - one each in
Jaipur and Lavasa in Pune and two in Bhiwadi in NCR.
The BSE-listed company has so far delivered over
118 lakh sq ft of property and has more than 97.3 lakh
sq ft under development.
The Economic Times,05 December,2014,Chennai
-
square feet) were finalised by leading corporates from
sectors such as IT/ITeS, banking, healthcare and
manufacturing / engineering.
All of these transactions were for SEZ spaces in the micro-markets of the Outer Ring Road (ORR) and
North Bengaluru, he added.
The Hindu Business Line,01 Dec.,2014, Bangalore
Essel Group acquires Rs 400 crore
worth property in Mumbai
The city's second-biggest ever office purchase marks
stunning recovery from lows for its beleaguered
commercial property market and may portend a
period of rapid growth amidst rising demand and
shrinking inventory.
In one of the largest front-office transaction, Essel
Group, widely known for its media and entertainment
business Zee Entertainment Enterprises, has
acquired 2.20 lakh square feet commercial space in
Marathon Futurex complex at Lower Parel in Mumbai
for overRs 400 crore, said two persons familiar with
the development.
The group will be shifting headquarters from Worli to
this new office spread over top seven floors of
Marathon Realty's tower II. "Essel Group has
identified certain premises in Marathon Futurex at
Lower Parel. This is still under process," said Mukund
Galgali, Executive Vice-President, Essel Group, in
response to ET's email query.
The transaction assumes significance as it signals a
dramatic recovery for Mumbai's commercial property
market after three years of sluggish growth. A dull
show in the first two quarters of the year was more
than offset by a sale plus lease of 1.8 million sq ft in
the third quarter alone. This is half of total nine month
sales plus lease of 3.6 million sq feet concluded in
Mumbai.
Both capital values and lease rentals for office spaces
have been weakening across the country for over
three years now. But optimism about the new
government's economic programme has prompted
Commercial/ Retail
Office space investment: Bengaluru
a cut above other Indian cities
Bengaluru is a notch above Pune or Delhi or Chennai
in the global real estate investment destination. The
city being the epicentre of IT/ITeS and BPO industry
has attracted occupier and investors to work in
tandem. This attraction and recognition of the city on
the global platform has led to higher yields than what
one would get in more mature markets such as
Singapore, Tokyo, Hong Kong, Shanghai and Australia
in the region.
According to Alastair Hughes, CEO-Asia Pacific Jones
Lang LaSalle (JLL), So here (Bengaluru) we are looking at sought of 10 per cent. In matured market, it
is just 3 per cent. This is for the similar profile
properties and great profile of occupiers.
Picking up such properties has no development risk,
so on that basis Singapore is a round about 3 per cent,
Tokyo about 4 per cent, Hong Kong about 3 per cent,
Shanghai between 5 and 6 per cent, these are the kind
of main hubs in Asia, while Australia is another very
attractive place for international investors at about 5
per cent.
Expansion and relocation by IT/ITeS companies
continue to drive the Bengaluru office market. The
Outer Ring Road (ORR) continues to remain the most
preferred location by major occupants, with about 41
per cent of total absorption, followed by CBD and off
CBD (15 per cent). The epicentre of the Bengaluru suburban office market is gradually shifting towards
ORR, which offers location advantages and large
tenant pool to the growing IT and back-office
processing centres. Companies which are in
expansion mode have relocated and have also locked
in large office spaces with favourable rates, said Colliers International, a global property consultant in its
Q3 report.
According to Anshuman Magazine, CMD, CBRE South
Asia, Leasing activity remained upbeat with Bengaluru leading the pack in the country, accounting for almost
60 per cent of the overall space transacted during the
month. A few large-sized transactions (above 1,00,000
-
Commercial/ Retail
buyers to take advantage of the weakness in the
commercial property market. Purchases on outright
basis and long leases have climbed in recent months
as prices continue to be competitive and easing of
inventory levels for commercial spaces, said property
consultants.
The Zee deal is also a major vote of confidence for
Lower Parel, Worli and Prabhadevi localities which
have emerged as competitors to BKC as a business
district despite transport bottlenecks and flooding
problem during the monsoons.
This is the second largest outright commercial space
transaction based on both area and value terms after
Citigroup's purchase of 2.97 lakh sq ft in Bandra-Kurla
Complex more than two years ago. Most office
transactions including the Goldman Sachs and
Flipkart's deals in Bangalore, have since been
concluded on a lease basis.
"The deal was signed and concluded recently. Fit outs
and interiors work has also been commissioned and
Essel Group is expected to shift its headquarter by the
end of next quarter," said one of the persons
mentioned above.
An email to Marathon Realty did not elicit any
response. Transaction advisor JLL India declined to
comment. Currently, these three areas (Lower Parel,
Worli, Prabhadevi) have office space stock of 11
million sq ft. Of this around 1 million sq ft is available
now as inventory against 4million sq ft three years ago.
"Commercial market has shrugged off the
sluggishness witnessed since last three years.
Enquiries have gone up and deals are taking place
smoothly particularly after June since when the new
stable government was formed," said Rajiv Jain, a
broker operating in south and central Mumbai.
The Economic Times,04 December,2014,Mumbai
-
Township
No news in this section for the week
-
crore-worth income tax concessions and Rs 27,947
crore indirect tax (customs) concessions) given to
these enclaves between FY07 and FY13 did not result
in proportionate benefits to the country in terms of the
objectives behind the SEZs Act.
Earlier, the finance ministry had in a study pegged the
revenue loss at Rs 1.76 lakh crore from tax holidays
granted to SEZs for 2004-10. The CAG report does not
include revenue foregone on account of central excise
and service tax. The commerce department has long
argued that the gains from SEZs to the economy (in
terms of infrastructure creation, employment
generation and exports) outweigh the notional revenue
foregone.
In a study of 79 units/developers in 11 states, it was
found that though they projected an investment of Rs
1.95 lakh core, the actual investment was only worth
Rs 80,176 crore, leading to a 59% shortfall. Similarly,
there was a 74.5% shortfall in export projection and
79.5% shortfall in projections of net foreign exchange
(where exports by an SEZ unit should be more than
imports), the CAG study found. All this led to the
concessions given to these enclaves not resulting in
the expected gains to the economy. gnificant trend in
SEZ growth that the CAG observed was the
preponderance of the IT/ITeS industry. Of the total
SEZs in the country, an overwhelming 57% was in
IT/ITeS while just 9.6% was in the multi-product
manufacturing sector, it found.
The Financial Express,01 December,2014,New Delhi
Land acquired for SEZs sold off, put
to other uses: CAG
Several hectares of land acquired for special economic
zones (SEZ) invoking public purpose were later sold
off or used for other purposes, the Comptroller and
Auditor General (CAG) has found. Among the groups
that diverted land acquired for SEZs are Reliance
Industries and Essar Steel, according to the audit
report. In a report submitted to Parliament last week,
CAG said the SEZs of Essar Steel in Hazira and
Reliance in Jamnagar in Gujarat de-notified an area of
247.522 ha and 708.13 ha respectively, and allotted
SEZ
MAT, DDT waiver for SEZs wont be restored, says govt
On a day when the countrys top auditor observed that special economic zones (SEZs) have barely boosted
economic growth and hinted that the Act was widely
used for land grabbing, the government said in
Parliament that the original waiver for these zones
from the minimum alternate tax (MAT) and dividend
distribution tax (DDT) wont be restored.
In a performance audit report tabled in Parliament on
Friday, the Comptroller and Auditor General (CAG)
said the SEZs set up with the objective of propelling
exports, investments and job creation could not live up
to the promises. Land appeared to be the most crucial and attractive component of the scheme. Out of the
45,635.63 hectares of the land notified in the country
for SEZ purposes, operations commenced on only
28,488.49 hectares of land. In addition, we noted a
trend wherein developers approached the government
for allotment/purchase of vast areas of land in the
name of SEZs. However, only a fraction of the land so
acquired was notified for SEZ and later denotification
was also resported to within a few years to benefit from
price appreciation.
The SEZ Act came into effect in February 2006 and
since then 542 such zones have been approved of,
which 196 are functional. Various tax incentives covering corporate tax, excise and customs are accorded to these zones and units therein. SEZs are
supposed to meet net foreign exchange earner criteria.
The SEZ developers and units had cited the removal of
MAT/DDT exemptions as one of the main reasons
affecting performance, in addition to the economic
slowdown and weak overseas demand. RIL opting to
take 40% of its Jamnagar facilities from the SEZ ambit
was also a dampener.
An 18.5% MAT on SEZ developers and units and DDT
on developers were imposed in the FY12 Budget by
the then finance minister Pranab Mukherjee as the
revenue department in the UPA regime had begun to
see SEZs as drain on the exchequer.
The CAG found that the tax concessions (Rs 55,158
-
production," the audit said.
Since the enactment of SEZ Act 2005, 576 formal
approvals of SEZs covering 60,374.76 hectares was
granted in the country, out of which 392 SEZs covering
45,635.63 hectares were notified till March 2014. Out
of the 392 notified zones, only 152 had become
operational, and SEZs had no noticeable impact on the
national economy, the audit said.
The Times of India,03 December,2014,New Delhi
SEZ
them to ineligible (DTA - domestic tariff area) units.
In case of Sricity SEZ in Andhra Pradesh, the audit
found that 2,070.12 ha of the allotted land was not
used for the intended purpose. This de-notified land
was allotted by the SEZ operators to private
companies such as Alstom, Pepsico, Cadbury,
Colgate, Kellogg's etc.
"Land appeared to be the most crucial and attractive
component of the scheme. Out of 45,635.63 ha of land
notified in the country for SEZ purposes, operations
commenced in only 28,488.49 ha (62.42%) of land,"
the audit said.
The audit found that many developers approached the
government for allotment/purchase of vast areas of
land in the name of SEZ. "However, only a fraction of
the land so acquired was notified for SEZ and later de-
notification was also resorted to within a few years to
benefit from price appreciation," the CAG said.
In terms of area of land, out of 39,245.56 ha of land
notified in the six states, 5402.22 ha (14%) of land was
de-notified and diverted for commercial purposes in
several cases, the audit found. "Many tracts of these
lands were acquired invoking the 'public purpose'
clause. Thus, land acquired was not serving the
objectives of the SEZ Act," the audit said.
As per SEZ Act, 2005, land for establishment of SEZs
needs to be contiguous and the developer is required
to have irrevocable rights over the land. Lands are
being allotted by the state government directly or
through land banks/agencies on the basis of proposals
made by the developers.
The audit also found that at least nine SEZs were
allotted restricted land, such as that of defence, forest
and irrigated land, in contravention of Supreme Court
orders and SEZ norms.
"The acquisition of land from the public by the
government is proving to be a major transfer of wealth
from the rural populace to the corporate world.
Questions have already been raised on account of loss
of revenue on tax holidays and the effect on agriculture
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Hospitality
No news in this section for the week
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Input Cost
No news in this section for the week
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Disclaimer
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