Latest Property News on 'Special Economic Zones'

ECB Policy Has no Short Term Benefits- SEZ Developers

Real estate players on Wednesday hailed the Government’s decision to open the external commercial borrowing (ECB) window for special economic zone (SEZ) developers, although some players felt that the move may not offer immediate gains given the global economic downturn. Reacting to the latest changes in ECB policy, real estate major Unitech said that while the move was “positive”, it would not make a big difference in the short-term.

“There would be no immediate benefit due to the global financial market conditions. However, this offers an additional avenue for SEZ developers to get funding requirement at a lower cost”, a senior Unitech offical said. Currently, Unitech has five IT-SEZs in the country. The Government on Tuesday modified its external commercial borrowing (ECB) policy to allow SEZ developers to avail ECBs for providing infrastructure facilities within the SEZ. The SEZ developers can avail themselves of ECBs only under the approval route, according to a Finance Ministry release. However, ECBs will not be permissible for development of integrated township and commercial real estate within the Special Economic Zones (SEZs). Read More »

SEZ Developers can Raise Overseas Debt- GOVT

The government on Wednesday allowed developers of special economic zones to raise overseas debt for building infrastructure facilities within the zones. The move is expected to benefit companies such as Reliance Industries , Adani, Mahindra, Suzlon, Parsvanath and others who have plans for SEZs in place. However, SEZ developers cannot raise ECB for buidling integrated townships or commercial real estate within the zone. They can raise overseas loan after taking approval for establishing infrastructure facilities including power, telecommunication, railways, road including bridges, ports, industrial parks, urban infrastructure (water supply, sanitation and sewage projects) and mining, refining and exploration as laid down in the ECB policy.

Companies such as DLF, Unitech and Parsvnath that build integrated townships have also been allowed to raise foreign loans upto December. Integrated townships comprise houses and other urban amenities like commercial premises, hotels, resorts, roads and bridges built in an area of at least 100 acres. The government had opened the foreign borrowing window for developers of integrated townships on January 2 this year until June 30 as it sought to stimulate the economy. The facility has been extended untill December to make a meaningful impact on the sector which has been hit hard by fall in demand. Read More »

Downturn Hit Realty Majors Betting Big from Forthcoming Budget

Having been hit the hardest by the economic downturn, embattled realty majors are betting big on the forthcoming Budget, to be presented on July 6, in a bid to revive the sector’s fortunes. Experts say the sector needs government support as well as further stimulus to get out of the current slump. While the government with a clear mandate has provided the requisite stability to the economy, it now needs to focus on retrieving the sluggish real estate which is now facing a severe financial crunch. This is important in view of the fact that real estate in India is the second largest employer next only to agriculture, and growth in the sector has a direct impact on ancillary industries such as steel and cement. “In the backdrop of its importance to the growth of the Indian economy, it is vital for the government to nudge growth in the sector, through fiscal stimulus, to newer heights which would also help make affordable housing a reality and within the reach of the proverbial ‘aam aadmi’,” says Nandita Tripathi, associate director, KPMG.

As a first step, the government should accord ‘infrastructure status’ to the housing sector and appoint a regulator to act as a single window for overseeing and monitoring the affordable housing agenda. “After being hit by the global financial meltdown, real estate developers have now recognized the growing demand for affordable housing. To provide further impetus to this direction of development, the government should consider reinstatement of the tax holiday benefits under Section 80IB-(10) for affordable housing projects,” says Tripathi. Brotin Banerjee, MD & CEO, Tata Housing, is also of the same view. “We seriously believe that the housing sector should be delinked from real estate and be accorded infrastructure status. This will enable easier access to low-cost institutional funds as also allow the sector to tap long-term funds,” he says. Read More »

SC Decision can Turn Things Around for SEZs

The Supreme Court, or SC, will hear together at least half a dozen cases in July that could change the contours of India’s policy on SEZs, or special economic zones, and even require a change to the SEZ Act of 2005. Leading the clutch of petitions is one against Mumbai Special Economic Zone Ltd, or MSEZ, promoted by billionaire industrialist Mukesh Ambani and his business associate Anand Jain. Experts say the outcome of the hearing could set a precedent for SEZ projects, irrespective of which way the court’s decision goes. There are also petitions, such as Kuldeep Bishnoi and Others versus The Union of India, that raise questions about the acquisition of farmland for SEZs in Haryana. Mint could not obtain specifics of other petitions that have been tagged together by SC.

SC has not yet announced a date for the commencement of the hearing. Some of the cases challenge specific SEZ projects while others, such as the public interest litigation against MSEZ by half a dozen farmers from Raigad district and led by the Maha Mumbai Shetkari Sangharsh Samiti (MMSSS), a regional farmers’ activist group, question the constitutional validity of the SEZ Act itself. Last year, the apex court had transferred these cases to itself from across various state high courts to be able to hear the issue in its entirety. Lawyers and experts agree that the cases will test the SEZ Act as well as the government’s will to stick to its legislation. Read More »

ICAI to Unveil Accounting Norms for SEZs to Increase Transparency

The Institute of Chartered Accountants of India (ICAI) will soon unveil accounting norms for special economic zones (SEZs) in the country. The new norms will standardise financial disclosure of SEZs as well as bring about greater transparency. The guidance note which is now open to the public for their suggestions seeks to bring uniformity in the manner land allotted to SEZ’s is to be treated. The various other aspects of accounting that are being aimed at uniformity is on the project development costs, rehabilitation and resettlement costs and of activities performed after a zone is notified. With huge investments going into SEZ projects, the new norms will ensure that the developers are made to follow standardised norms of accounting for their investments and revenue earned, and will provide them greater clarity in maintaining their accounts, said an ICAI official, who did not wish to be named.

The objective of this technical guide is to provide guidance to developers on accounting treatment of various SEZ development activities in their financial statements. The accounting guide comes at a time when the entire concept of SEZ is being discussed with the developers demanding further incentives.

23 SEZ Proposals Get BOA Approval

The Board of Approvals (BoA), chaired by Commerce Secretary Rahul Khullar, today approved K Raheja Universal’s request to scrap its Navi Mumbai SEZ and also allowed 23 developers more time to develop the tax-free industrial enclaves. In addition, the board also gave its nod to partially scrap another special economic zone (SEZ) developed by the Mumbai-based realtor K Raheja Universal. The company cited economic slowdown as the reason for its inability to develop both the zones, which were notified by the commerce ministry. Though there are no provisions for denotification of zones in the SEZ Act or rules till now, the law ministry had told its commerce counterpart that the board has the power to denotify SEZs with the condition that the developer will have to give back the government all the benefits it availed while constructing it.

K Raheja Universal’s told the board that it had not developed the zones and hence, had not availed any duty benefits. In its earlier meeting on June 2, the board had given conditional approval to DLF for scrapping four of its notified SEZs. In today’s meeting, which took up the leftover agenda of the previous meeting, the board also gave additional time of one year to 23 developers to build the SEZs. These include three SEZs proposed to be developed by fraud-hit Satyam Computer Services that has been recently acquired by Tech Mahindra. The pace of development of the zones have slowed down considerably, owing to lesser demand for SEZ space, high cost of borrowing and land acquisition problems. Prospective clients of the zones have put their expansion plans in the back burner, which has made developers go slow on their construction. The board also approved proposals by Shyam Steel Industries and Limitless Properties for building two zones related to information technology in West Bengal. Read More »

Chennai Plans New IT SEZ

Tamil Nadu government is planning a special IT industry economic zone spanning 1,000 square kilometres, according to T Willington, director of projects, Tamil Nadu Industrial Development Corporation (TIDCO). The project, worth about thousands of crores of rupees, is likely to attract investments of more than Rs one lakh crore and is being termed as ‘IT investment region’. Willington was speaking at a FICCI-MIBC (Malaysian-Indian Business Cooperative) conference on real estate and infrastructure here. He said the petroleum, chemicals and petrochemicals investment region at Cuddalore which had planned investment of Rs 19,000 crore, and the IT investment region near Chennai, were major projects apart from the 69 SEZs being planned in the State.

He told Express that the project report had been sent to the Centre. “We expect the approval by the end of this year, after which we will begin work on phase 1 of the project. The project will be many times larger than the Cuddalore project,” he added. The project, he said, would be executed in two phases wherein the first phase covering not more than 20 per cent of the project area would be completed within five years and the next phase within 15 to 20 years. The identified region spans from the outskirts of Chennai to its North and extends upto Kancheepuram and Chengalpet to its South and will be bordered by the East coast road to its East. Read More »

DLF Seeks GOVT Approval to Build Apartments & Commercial Complexes in SEZs

Realty major DLF has sought government approval for building service apartments and commercial complexes in four special economic zones, of which two are located in Gurgaon. The Board of Approval (BoA) in the Commerce Ministry will consider requests from the developers for building apartments and commercial space in the non-processing areas of the four IT/ITeS SEZs at Gurgaon, Chennai and Hyderabad, an official said. The non-processing area includes non-core activities.

The BoA is meeting here on June 17 to take up the request, along with other agenda. DLF has informed the ministry that it wants to build service apartments on 15,000 square metre and commercial space on 12,000 sq m at one of its Gurgaon SEZ. The total notified area for SEZ is 10.73 hectares (1,07,300 sq m). At the height of the SEZ ontroversy, it was alleged that the land was being acquired for real estate gains by the developers. However, the Commerce Ministry has denied these claims stating the commercial activities would be restricted to non-core areas. The SEZ developers have been demanding that they should be granted an infrastructure status for availing the bank finance. However, the Reserve Bank has not acceded to the demand taking a view that it is a real estate activity.

Slowdown in SEZs

When the Board of Approval for special economic zones (SEZs) meets on Friday, liaison and corporate affairs executives will jostle for space in the narrow corridors on the ground floor of Udyog Bhavan, which houses the commerce department. In stark contrast to last year, however, few of them will be pushing proposals for new zones. Demand dynamics brought on by the global slowdown and persistent land acquisition problems are forcing developers to alter their plans.

As a result, almost half the proposals that the inter-ministerial panel headed by Commerce Secretary Rahul Khullar will consider have to do with extensions to acquire land or cancellations of these tax-free enclaves that were supposed to catapult India’s exports into the big league. Of the 58 SEZ proposals on the agenda, only two are for setting up new zones; 23 zones are applying for an extension of the validity period and two — from K Rajeha Universal — are seeking de-notification on the grounds that the economic downturn has resulted in lower demand. Then there is Mansarovar Industrial Development Corporation that has decided to expand the focus of its zone from handicrafts to information technology-enabled services (ITES), and to split the 131 hectare-zone. Read More »

Mahindra Lifespace Plans to Target SEZ and Real Estate

The Mahindra group has decided to intensify its focus on special economic zones (SEZs) and real estate to take advantage of the improved sentiments witnessed in the sector across the country. The group is going ahead with its planned SEZ in Rajasthan, besides increasing focus on residential developments and integrated mega cities in southern and western India. Mahindra Lifespace Developers, which leads the group’s foray in this business, recently achieved a milestone of almost 5.8 million sq ft, comprising business cities and green homes spread over 2,000 acres. “At Mahindra World City New Chennai, the industrial area has been completely leased out. We are now looking to acquire land for the next phase here,” said Arun Nanda, president of infrastructure development, Mahindra and Mahindra (M&).

The industrial area of the Mahindra World city comprises an infotech/IT enabled services special economic zone (SEZ), an automobile SEZ and apparel SEZ, in addition to an earmarked domestic tariff area. Tamil Nadu Industrial Development Corporation holds 11 per cent stake in Mahindra World City Developers, Chennai, while the balance is split between M&M and Mahindra Lifespace Developers. “At Mahindra World City, there are enough local businesses, which can support additional dedicated housing. So we are launching a residential project there,” said Nanda. The residential development aggregating 1.5 million sq ft, spread over 55 acres, is being developed as a joint venture (JV) with Arch Capital — an affiliate of the Philippines-based Ayala group. While the Philippines conglomerate holds 49 per cent in Mahindra Residential Developers, Mahindra Integrated Township holds the balance. The project is expected to be completed in three years. About 300 acres, including the 55 acres being developed as a JV, has been earmarked for residential development in the World City at Chennai. “Building on our success in Tamil Nadu, we are now scouting for land around Chennai to build a second World City. We are, at present, aggregating land parcels there,” Nanda said. FC Estate learns that this land is being acquired at a location that’s around 35 km from Chennai city. “We plan to build an integrated city spred over 1,500 acres in Chennai,” Nanda added. Read More »