Latest Property News on 'Special Economic Zones'

RBI Makes Bank Lending Easier for SEZs

The Reserve Bank of India (RBI) has made it easier for banks to lend to special economic zones (SEZ). Several types of advances to projects in special economic zones have now been excluded from the definition of commercial real estate loans. Reference to SEZs as commercial real estate loans by RBI in a ’06 circular had made it difficult for those involved in these projects to raise funds. Real estate loans are considered risky and categorised as part of exposure to sensitive sectors which also include capital markets and commodities. There are also restriction on foreign investment in real estate.

Speaking to ET, LB Singhal, director general, Export Promotion Council for EoUs and SEZs said: “We had taken up this issue with the ministry of finance and the ministry of commerce. The matter was before the empowered group of ministers headed by finance minister Pranab Mukherjee, which had decided that SEZ should be treated as infrastructure.” He added that now with the central bank clarification, loans to those developing, operating and maintaining SEZs as well as setting up or acquiring units in SEZs will be part of infrastructure lending. “This would enable domestic institutions and banks to make funds available to SEZ sector on the terms and conditions which are applicable for infrastructure lending,” he added. Read More »

SEZs Regaining Prominence

Global trends suggest that barely 10 per cent of special economic zones (SEZs) that are planned actually fructify, says Mayur Shah, MD of SEZ Marathon Group. At Nexzone, his upcoming IT and ITeS SEZ site in the periphery of Navi Mumbai, Shah says that the global trend is reflected in India too. “Ninety per cent of the Indian SEZs that were to be announced have been dropped and the remaining 10 per cent will succeed,” he says. “Times will be positive, from now on,” he predicts. “All indications are that the markets in Europe and North America will be back to business, between April and September of next year,” he says. That will bring back smiles on the faces of Indian IT and ITeS companies and also BPO and KPO companies, but it will also create new challenges for them. IT and ITeS SEZs can prove to be among the best solutions for these challenges, feels Shah. World class infrastructure will be the key to the success of not just IT and ITeS SEZs, but also of manufacturing and industrial SEZs, says Shah. The tenants for these will be a mix of mid-sized Indian companies that will be looking to go global, as well as some of the large players in the respective domains, explains Shah.

Any marketing strategy in terms of SEZs should be directed at new domestic and international companies, gearing up to enter the Indian market and hoping to expand operations after deployment, points out Abhishek Kiran Gupta, head (research), Jones Lang LaSalle Meghraj. Commercial real estate specialist, Mohanjeet Sehgal, sees value-additions when it comes to SEZs, over the next couple of years. “Policy flip-flops and land acquisition issues have created a negative impression, especially when STPI was granted a year’s extension in the last budget,” he says. “However, when the STPI concessions cease, ultimately those who have space in IT and ITeS SEZs will be clear winners,” he insists. In Navi Mumbai and its periphery, he sees great potential for BPO and KPO companies at SEZs. “Marketing activities for SEZs were rather slow, till recently. Now, companies are comparing different aspects of leasing space in SEZs in Navi Mumbai vis-à-vis Mumbai’s central suburbs. It is decision making time, now,” he says. Read More »

Top Three IT Companies Go Slow on SEZ Expansion

The top three information technology service providers — Tata Consultancy Services (TCS), Infosys Technologies and Wipro Ltd — have cumulatively got approvals for developing 15 special economic zones (SEZs), but both analysts and the companies say these will be delayed due to the economic slowdown. Most Indian IT majors planned to shift their operations from Software Technology Parks of India (STPIs) to SEZs, as the government plans to do away with the STPI scheme (that has been extended only by a year till 2010), which provides for tax benefits under 10A/10B that allows deduction of export profits. SEZs allow deduction of export profits for 15 years in a phased manner.

India’s largest IT services provider, TCS, which has approval for four SEZs in Andhra Pradesh, Gujarat, Chennai and West Bengal, confirmed it will go slow. “It will depend on the economic scenario,” said S Mahalingam, CFO and Executive Director. Analysts and real estate experts reasoned that with the US being the primary market for Indian IT firms, it is natural if they chose to go slow. “Developing these SEZs requires financial investments, as well as other strategic planning. A small delay is fine, but they will have to take it for development some time. Firms have a window of five-six years for developing of SEZs. They cannot delay beyond this,” said Vikram Nadkarni, partner, Economic Laws Practice. Pranay Vakil, chairman, Knight Frank, believes further expansion in the SEZs will be delayed by at least one to two years, with demand for these centres going down. According to Knight Frank, an international property consultant, in the next two years, 163 million sq ft of A-class office space (SEZ) will be delivered, whereas the demand is for 122 million sq ft. Read More »

Govt Gives Manufacturers Located in SEZs Additional 6 Months for Foreign Sales

The government has decided to give manufacturers located in special economic zones a whole year to sell their goods, including gems & jewellery, in foreign shops and designated show-rooms instead of the six months stipulated earlier, before these products can be brought back to the country. As per recently amended SEZ rules, the items not sold abroad in such shops may be re-imported within a year from the date of their export without attracting penalties. The government has allowed the manufacturers longer time to sell their wares to provide relief as they are facing difficulties finding buyers at the back of the global downturn.

The amendment gives companies more time to find suitable buyers for their wares. Meanwhile, the government allowed Maytas Ventures to give up its biotech SEZ in Hyderabad. No decision, however, was taken on Reliance India’s request of getting a two year extension for completing the process of acquiring land for its multi-product zone at Gurgaon. The board of approval (BoA) for SEZs also gave its approval to three new proposals, including those by Brooke Bond Real Estate, Karnataka State Electronics Development Corporation and Lanco Solar.

Commerce Dept Urges RBI to Treat Loan for SEZs as Infrastructure Financing

The commerce department has urged the Reserve Bank of India (RBI) to treat all bank loans to developers of special economic zones as infrastructure financing, eligible for a lower interest rate. The ministry has said the concessional rate of interest should be given even if the developer leases out or rents a part of the land to other units within the zone. The RBI had earlier proposed that land rented out would be considered a commercial realty activity, which would not get concessional interest rates from banks.

The central bank had said that since repayment of loans by developers who rent out units was linked to real estate prices and not economic activity, it was a real estate activity. The commerce department, however, disagrees. “We have pointed out to the RBI that ultimately repayment of all loans taken by developers are linked to economic performance of units and hence there should be no discretion in classification of SEZ development activities as infrastructure or real estate projects. All activities should be treated as infrastructure,” a commerce department official, who did not want to be named, told ET. Infrastructure projects get funds at about 2% lower interest rates compared to real estate projects, and also have access to funds earmarked for infrastructure activities. Read More »

SEZ to attract investors in Nagaland

Parliamentary Secretary for Industries & Commerce Dr. KC Nihoshe today said that a Special Economic Zone (SEZ) in Nagaland as a first in the entire North Eastern region is expected to attract investors. Setting up a SEZ for agro and food processing would be a major boost for farmers in Nagaland, he said. A number of industrial sectors involved in agro and food processing have in fact indicated interest in establishing units in the SEZ, the legislator said in a press release today.

Korean investors have indicated interest in establishing a ginger-processing unit in the SEZ, Dr. Nihoshe informed. The location of the SEZ is the erstwhile Export Promotion Industrial Park (EPIP) developed by the Nagaland Industrial Development Corporation (NIDC). The EPIP in Nagaland could not take off successfully as similar parks had come up in neighboring Assam and Meghalaya, offering similar incentives and facilities. Further, the performance of similar parks in the NE region was reportedly not satisfactory as the industrial units were unable to meet export obligations envisaged under the EPIP scheme, the parliamentary secretary said. Read More »

Assocham’s and Ministry of Commerce and Industry’s Delegation to Japan to Attract Investment in SEZ

Industry body Assocham along with the Ministry of Commerce and Industry will lead a 40-member business delegation comprising representatives from Videocon, JSW Steel, SAIL and others to Japan to attract investments to India’s Special Economic Zones (SEZs). “The members of Indian delegation led by Assocham President Sajjan Jindal would interact with Japanese businessmen and appraise them to take advantage of sprawling SEZs facility in India,” the chamber said.

The delegation, which would leave for Japan on July 26, would be seeking investment in power equipment, steel value addition, environment technology, capital goods machinery, construction work, R&D, engineering and automation, it said. Business meetings aimed at building partnerships to make India’s SEZs a preferred destination for Japanese investments have been planned at Tokyo, Osaka and Yakohoma, it said. “Indian delegates and Japanese businessmen … feel elated and hopeful for concluding business tie ups as both the sides are getting right and desired opportunity to beat the recession,” the chamber said. Read More »

Hi-Tech Infra to invest Rs 600cr in Coimbatore SEZ

Hi-Tech Infrastructure Private Limited, promoted by Coimbatore-based KG Information Systems Limited (KGISL), plans to invest around Rs 600 core over the next two years in building a township at a special economic zone (SEZ), the first SEZ for IT and ITeS sectors being developed at Saravanampally in Coimbatore. Speaking to Business Standard, KGISL managing director, Ashok Bakthavathsalam, said the company was developing the SEZ on 150 acre, of which 65 acre had already been allotted to Robert Bosch India, Cognizant and Perot Systems. Bosch is setting up a research and development centre in the SEZ with an investment of around Rs 250 crore.

Bakthavathsalam said the SEZ was expected to attract investments to the tune of Rs 2,000 crore and generate employment to about 15,000 people over the next two years. “KGISL alone will invest around Rs 600 crore in the SEZ, which will be funded through a mix of internal accruals and debt,” he said. The company is planning to set up a budget hotel, 400 affordable houses and a hospital to supplement the upcoming industries in the SEZ, he said, adding that the company is open to join hands with private partners to promote the township. Read More »

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 »