Monday, February 2, 2009
'UNITECH , DLF LAND BUYS NOT TRANSPARENT ’
'UNITECH , DLF LAND BUYS NOT TRANSPARENT ’
Mail Today, January 31, 2009, page 1
Credit Suisse questions accounting practices of realty biggies and says their land acquisition disclosure is inadequate
AFTER Satyam, real estate biggies like DLF and Unitech now have their corporate governance and accounting practices under the scanner.
In a report which could further spook investors, global investment banking major Credit Suisse ( CS) has said the corporate governance practices of real estate firms DLF, Unitech, IVRCL, IBREL, Parsvnath and Sobha Developers are lacking in transparency and that key financial disclosures are inadequate.
They also had flaws in their corporate governance and planning.
In its report titled ‘ Corporate Handbook’, CS analysts warned that the losses caused by the steep fall in markets and the economic slowdown will have to be reflected in “ someone’s net worth”. It said investors “ may see many new ways in which they are reported or hidden in profit and loss statements.” DLF and Unitech in particular, were found to be opaque with regard to land acquisition processes. Both deviated sharply from conservative accounting practice, with a mismatch between revenue recognition and cash flow, the analysts reported.
The practice of buying land from companies controlled by the promoters of the realty majors, lack of disclosures on the acquisition process, as well as on the land banks, which form the bulk of their assets, are issues of concern, CS analysts said.
The CS framework analyses corporate governance on structural risks, accounting risks, transactional risks and events/ issues that raise investor concern.
DLF’s spokesperson declined to comment on the findings in ‘ Corporate Handbook’ as the company was due to disclose its results on Saturday, and was thus in a “ silent period.” Unitech said it “ does not comment on such reports.” Efforts to contact DLF chairman K. P. Singh, and his son, DLF vice chairman Rajiv Singh, failed as their mobiles were switched off. K. P. Singh is currently in Davos attending the World Economic Forum.
The areas of concern picked out in the report cover their basic operations regarding acquisition of land, the way they reported revenues on their books, as well as the large number of unlisted subsidiaries and related companies, mostly controlled by the promoters, with which the listed entities had dealings.
Both DLF and Unitech, for instance, showed “ revenues on a percentage of completion method even where the cash receipt is yet not due,” the CS report said.
Unitech’s investments in telecom, an unrelated business at a time when the real estate business needed funds, are also under the scanner.
The report said, “ There is also no transparency in the land acquisition process. The promoters have privately controlled entities from which Unitech buys land. Also, land bank disclosure in annual reports is inadequate and there is no information on areas sold, or unsold areas, or status of completion.” The key related parties at Unitech include a listed entity, Unitech Corporate Parks ( listed on the Alternative Investment Market of the London Stock Exchange).
Unlisted parties include Unitech Wireless, as many as 316 arms, 21 JVs and associates and four entities under the control of key management personnel.
DLF, which has 88.1 per cent of the stake held by promoter K. P. Singh, was flagged for its bewildering network of deals with related, but unlisted or privately- held group firms.
DLF has as many as 245 subsidiaries, 12 partnership companies, 12 joint ventures and 124 entities under the control of key management personnel.
In financial year 2008, DLF sold assets or real estate projects amounting to Rs 5,560 crore to a promoter- controlled entity, DLF Assets. It also cancelled an earlier sale of assets worth Rs1,890 crore.
There is also no transparency in the land acquisition process. Promoters have privately controlled entities from which DLF buys land.
Also, “ its land bank disclosure in annual reports is inadequate,” the report noted. The company does not disclose detailed accounts of all subsidiaries.
DLF reports standalone and consolidated results every quarter, CS analysts found.
DLF had outstanding receivable from promoter entities of Rs 1,940 crore as of March 2008, CS points out. In Unitech’s case, in financial year 2008, loans taken from key management personnel and controlled entities amounted to Rs 350 crore.
Unitech also “ does not disclose detailed accounts of all subsidiaries and reports standalone and consolidated results every quarter,” the report said.
The issues seem to be common across the realty sector.
Another realtor, Parsvnath Developers too has a mismatch between revenue recognition, cash flows and capitalisation of interest expense. It recognises revenues on a percentage completion method and does not disclose detailed accounts of all subsidiaries and reports standalone and consolidated results every quarter.
Besides, there is no transparency in the land acquisition process.
Promoters have privatelycontrolled entities from which Parsvnath buys land and the land bank disclosure in annual reports is inadequate. There is no information on area sold, unsold areas or status of completion available, the report states.
The report reveals that apart from the realty biggies, Bajaj Hindustan, Dr Reddy’s, Grasim, JP Associates and others also have flaws. While the realty majors have gaping issues with their corporate governance norms, Bajaj Hindustan, Dr Reddy’s, Grasim, and JP Associates also have glitches as far as accounting practices, related party transactions and investor sentiment are concerned.
Mail Today, January 31, 2009, page 1
Credit Suisse questions accounting practices of realty biggies and says their land acquisition disclosure is inadequate
AFTER Satyam, real estate biggies like DLF and Unitech now have their corporate governance and accounting practices under the scanner.
In a report which could further spook investors, global investment banking major Credit Suisse ( CS) has said the corporate governance practices of real estate firms DLF, Unitech, IVRCL, IBREL, Parsvnath and Sobha Developers are lacking in transparency and that key financial disclosures are inadequate.
They also had flaws in their corporate governance and planning.
In its report titled ‘ Corporate Handbook’, CS analysts warned that the losses caused by the steep fall in markets and the economic slowdown will have to be reflected in “ someone’s net worth”. It said investors “ may see many new ways in which they are reported or hidden in profit and loss statements.” DLF and Unitech in particular, were found to be opaque with regard to land acquisition processes. Both deviated sharply from conservative accounting practice, with a mismatch between revenue recognition and cash flow, the analysts reported.
The practice of buying land from companies controlled by the promoters of the realty majors, lack of disclosures on the acquisition process, as well as on the land banks, which form the bulk of their assets, are issues of concern, CS analysts said.
The CS framework analyses corporate governance on structural risks, accounting risks, transactional risks and events/ issues that raise investor concern.
DLF’s spokesperson declined to comment on the findings in ‘ Corporate Handbook’ as the company was due to disclose its results on Saturday, and was thus in a “ silent period.” Unitech said it “ does not comment on such reports.” Efforts to contact DLF chairman K. P. Singh, and his son, DLF vice chairman Rajiv Singh, failed as their mobiles were switched off. K. P. Singh is currently in Davos attending the World Economic Forum.
The areas of concern picked out in the report cover their basic operations regarding acquisition of land, the way they reported revenues on their books, as well as the large number of unlisted subsidiaries and related companies, mostly controlled by the promoters, with which the listed entities had dealings.
Both DLF and Unitech, for instance, showed “ revenues on a percentage of completion method even where the cash receipt is yet not due,” the CS report said.
Unitech’s investments in telecom, an unrelated business at a time when the real estate business needed funds, are also under the scanner.
The report said, “ There is also no transparency in the land acquisition process. The promoters have privately controlled entities from which Unitech buys land. Also, land bank disclosure in annual reports is inadequate and there is no information on areas sold, or unsold areas, or status of completion.” The key related parties at Unitech include a listed entity, Unitech Corporate Parks ( listed on the Alternative Investment Market of the London Stock Exchange).
Unlisted parties include Unitech Wireless, as many as 316 arms, 21 JVs and associates and four entities under the control of key management personnel.
DLF, which has 88.1 per cent of the stake held by promoter K. P. Singh, was flagged for its bewildering network of deals with related, but unlisted or privately- held group firms.
DLF has as many as 245 subsidiaries, 12 partnership companies, 12 joint ventures and 124 entities under the control of key management personnel.
In financial year 2008, DLF sold assets or real estate projects amounting to Rs 5,560 crore to a promoter- controlled entity, DLF Assets. It also cancelled an earlier sale of assets worth Rs1,890 crore.
There is also no transparency in the land acquisition process. Promoters have privately controlled entities from which DLF buys land.
Also, “ its land bank disclosure in annual reports is inadequate,” the report noted. The company does not disclose detailed accounts of all subsidiaries.
DLF reports standalone and consolidated results every quarter, CS analysts found.
DLF had outstanding receivable from promoter entities of Rs 1,940 crore as of March 2008, CS points out. In Unitech’s case, in financial year 2008, loans taken from key management personnel and controlled entities amounted to Rs 350 crore.
Unitech also “ does not disclose detailed accounts of all subsidiaries and reports standalone and consolidated results every quarter,” the report said.
The issues seem to be common across the realty sector.
Another realtor, Parsvnath Developers too has a mismatch between revenue recognition, cash flows and capitalisation of interest expense. It recognises revenues on a percentage completion method and does not disclose detailed accounts of all subsidiaries and reports standalone and consolidated results every quarter.
Besides, there is no transparency in the land acquisition process.
Promoters have privatelycontrolled entities from which Parsvnath buys land and the land bank disclosure in annual reports is inadequate. There is no information on area sold, unsold areas or status of completion available, the report states.
The report reveals that apart from the realty biggies, Bajaj Hindustan, Dr Reddy’s, Grasim, JP Associates and others also have flaws. While the realty majors have gaping issues with their corporate governance norms, Bajaj Hindustan, Dr Reddy’s, Grasim, and JP Associates also have glitches as far as accounting practices, related party transactions and investor sentiment are concerned.
DLF Q3 net dips to Rs.671 Cr | UNITECH net falls to 74 % in Q3 | PARSVNATH Q3 net plunges 95 pc
DLF Q3 net dips to Rs.671 Cr
The Sunday Express, February 01, 2009, page 17
The country’s largest real estate developer, DLF Ltd, on Saturday said its third quarter net profit dipped to Rs 670.79 crore, less than one-third of the same in the year-ago period. It had a net profit of Rs 2,138.87 crore in the quarter ended December 31, 2007, DLF said in a filing to the National Stock Exchange. Its consolidated net sales also plunged more than half to Rs 1,366.67 crore in the quarter ended December 31, 2008, from Rs 3,598.42 crore in the year-ago period.
UNITECH net falls to 74 % in Q3
Hit hard by a significant slowdown in commercial property demand, the country's second largest realty firm, Unitech Ltd, today posted a 74.12 per cent decline in its consolidated net profit at Rs 136.05 crore for the quarter ended December 31, 2008. The company had recorded a net profit of Rs 525.78 crore in the third quarter of the last fiscal, Unitech said in a statement. The total income also fell by 56.48 per cent to Rs 507 crore from Rs 1,165.11 crore during the period under review, it added.
PARSVNATH Q3 net plunges 95 pc
Realty firm Parsvnath Developers Ltd today reported a sharp fall of 95.18 per cent in its consolidated net profit at Rs 5.42 crore in the quarter ended December 31, 2008, on account of declining sales and high interest cost. The company had posted a net profit of Rs 112.57 crore in the third quarter of the previous fiscal, Parsvnath Developers said in a statement. The total income also declined to Rs 98.01 crore from Rs 497.10 crore during the period under review, a dip of 80.28 per cent, it added. “The reason for decline is on account of pressure on sales, reduced turnover, coupled with the burden of fixed overheads,” the statement said.
The Sunday Express, February 01, 2009, page 17
The country’s largest real estate developer, DLF Ltd, on Saturday said its third quarter net profit dipped to Rs 670.79 crore, less than one-third of the same in the year-ago period. It had a net profit of Rs 2,138.87 crore in the quarter ended December 31, 2007, DLF said in a filing to the National Stock Exchange. Its consolidated net sales also plunged more than half to Rs 1,366.67 crore in the quarter ended December 31, 2008, from Rs 3,598.42 crore in the year-ago period.
UNITECH net falls to 74 % in Q3
Hit hard by a significant slowdown in commercial property demand, the country's second largest realty firm, Unitech Ltd, today posted a 74.12 per cent decline in its consolidated net profit at Rs 136.05 crore for the quarter ended December 31, 2008. The company had recorded a net profit of Rs 525.78 crore in the third quarter of the last fiscal, Unitech said in a statement. The total income also fell by 56.48 per cent to Rs 507 crore from Rs 1,165.11 crore during the period under review, it added.
PARSVNATH Q3 net plunges 95 pc
Realty firm Parsvnath Developers Ltd today reported a sharp fall of 95.18 per cent in its consolidated net profit at Rs 5.42 crore in the quarter ended December 31, 2008, on account of declining sales and high interest cost. The company had posted a net profit of Rs 112.57 crore in the third quarter of the previous fiscal, Parsvnath Developers said in a statement. The total income also declined to Rs 98.01 crore from Rs 497.10 crore during the period under review, a dip of 80.28 per cent, it added. “The reason for decline is on account of pressure on sales, reduced turnover, coupled with the burden of fixed overheads,” the statement said.
Realty majors’ Q3 net profit takes a nosedive
Realty majors’ Q3 net profit takes a nosedive
The Financial Express, February 1, 2008, page 1
feBureau
Hit hard by a major slump in commercial and housing property demand, country’s three real estate majors on Saturday reported a substantial decline in their third quarter performances.
The country’s largest real estate developer DLF Ltd has said its third quarter net profit dipped to Rs 670.79 crore, less than one-third of the same in the year-ago period.
It had a net profit of Rs 2,138.87 crore in the quarter ended December 31, 2007, DLF said in a filing to the National Stock Exchange.
The company’s consolidated net sales also plunged by more than half to Rs 1,366.67 crore in the quarter ended December 31, 2008, from Rs 3,598.42 crore in the year-ago period.
On a stand-alone basis, the net profit fell to Rs 178.06 crore in the latest quarter, from Rs 605.84 crore in the year-ago quarter.
The stand-alone net sales fell to Rs 424.41 crore in the quarter ended December 31, 2008, from Rs 1,676.51 crore in the three-month period ended December 31, 2007.
India’s second largest realty company, the cash-strapped Unitech Ltd, has registered a decline of 75% in its net profit at Rs 136.05 crore during the quarter ended December 31, 2008. The company had posted profit of Rs 525.78 crore during the corresponding quarter in 2007.
On a consolidated basis the total income of the company during the quarter was Rs 507 crore, down 56.48% against Rs 1165.11 crore in the corresponding period of last financial year.
The downturn in the realty sector, which is the worst hit-due to the global economic meltdown was apparent when the country’s twelfth largest real estate firm, Parsvnath Developers Ltd, also reported a decline of 95.18% in its consolidated net profit at Rs 5.42 crore as against last year’s Rs 112.57 crore during the same quarter.
Parsvnath’s total income during the period declined to Rs 98.01 crore, down 80.28% from last year’s Rs 497.10 crore.
Both firms attributed the decline in profits to the downturn in the financial environment.
Unitech attributed the lower sales to the change in the macroeconomic environment. “Last quarter witnessed a dramatic change in the macroeconomic environment. It was characterised by tight liquidity conditions and significant demand slowdown across segments. Consumer sentiment continues to be weak”, Unitech MD Sanjay Chandra said.
The company’s main thrust during the quarter was on reviewing projects with a view to according higher priority to pre-committed projects and on generating additional cash flows through asset sales and infusion of private equity at project level, he added.
On its part, Pradeep Jain, chairman, Parsvnath Developers said, “Industries across sectors have witnessed a slowdown in the current macro-economic environment. The real estate sector is no exception and there has been a cascading negative impact on customers’ sentiment.
This negative sentiment amongst customers has forced them to either defer their investment or reduce the investment bracket given the current liquidity positions”.
For the nine month period of the current financial year, Unitech recorded a 29.45 % dip in its net profit at Rs 918.28 crore as against Rs 1,301.58 crore in the year-ago period. The total income stood at Rs 2,562.82 crore, down 18.10%, against Rs 3,129.04 crore in the corresponding period in the last financial year.
Realty bites
• DLF’s third quarter net profit dips to Rs 670.79 crore, less than one-third of the same in the year-ago period.
• Unitech Ltd has registered a decline of 75% in its net profit at Rs 136.05 crore during the quarter ended December 31, 2008.
• Parsvnath Developers Ltd has reported a decline of 95.18% in its consolidated net profit at Rs 5.42 crore.
The Financial Express, February 1, 2008, page 1
feBureau
Hit hard by a major slump in commercial and housing property demand, country’s three real estate majors on Saturday reported a substantial decline in their third quarter performances.
The country’s largest real estate developer DLF Ltd has said its third quarter net profit dipped to Rs 670.79 crore, less than one-third of the same in the year-ago period.
It had a net profit of Rs 2,138.87 crore in the quarter ended December 31, 2007, DLF said in a filing to the National Stock Exchange.
The company’s consolidated net sales also plunged by more than half to Rs 1,366.67 crore in the quarter ended December 31, 2008, from Rs 3,598.42 crore in the year-ago period.
On a stand-alone basis, the net profit fell to Rs 178.06 crore in the latest quarter, from Rs 605.84 crore in the year-ago quarter.
The stand-alone net sales fell to Rs 424.41 crore in the quarter ended December 31, 2008, from Rs 1,676.51 crore in the three-month period ended December 31, 2007.
India’s second largest realty company, the cash-strapped Unitech Ltd, has registered a decline of 75% in its net profit at Rs 136.05 crore during the quarter ended December 31, 2008. The company had posted profit of Rs 525.78 crore during the corresponding quarter in 2007.
On a consolidated basis the total income of the company during the quarter was Rs 507 crore, down 56.48% against Rs 1165.11 crore in the corresponding period of last financial year.
The downturn in the realty sector, which is the worst hit-due to the global economic meltdown was apparent when the country’s twelfth largest real estate firm, Parsvnath Developers Ltd, also reported a decline of 95.18% in its consolidated net profit at Rs 5.42 crore as against last year’s Rs 112.57 crore during the same quarter.
Parsvnath’s total income during the period declined to Rs 98.01 crore, down 80.28% from last year’s Rs 497.10 crore.
Both firms attributed the decline in profits to the downturn in the financial environment.
Unitech attributed the lower sales to the change in the macroeconomic environment. “Last quarter witnessed a dramatic change in the macroeconomic environment. It was characterised by tight liquidity conditions and significant demand slowdown across segments. Consumer sentiment continues to be weak”, Unitech MD Sanjay Chandra said.
The company’s main thrust during the quarter was on reviewing projects with a view to according higher priority to pre-committed projects and on generating additional cash flows through asset sales and infusion of private equity at project level, he added.
On its part, Pradeep Jain, chairman, Parsvnath Developers said, “Industries across sectors have witnessed a slowdown in the current macro-economic environment. The real estate sector is no exception and there has been a cascading negative impact on customers’ sentiment.
This negative sentiment amongst customers has forced them to either defer their investment or reduce the investment bracket given the current liquidity positions”.
For the nine month period of the current financial year, Unitech recorded a 29.45 % dip in its net profit at Rs 918.28 crore as against Rs 1,301.58 crore in the year-ago period. The total income stood at Rs 2,562.82 crore, down 18.10%, against Rs 3,129.04 crore in the corresponding period in the last financial year.
Realty bites
• DLF’s third quarter net profit dips to Rs 670.79 crore, less than one-third of the same in the year-ago period.
• Unitech Ltd has registered a decline of 75% in its net profit at Rs 136.05 crore during the quarter ended December 31, 2008.
• Parsvnath Developers Ltd has reported a decline of 95.18% in its consolidated net profit at Rs 5.42 crore.
SC relief to realtors on external development charges
SC relief to realtors on external development charges
The Economic Times - Property, February 1, 2009, page 9
New Delhi: To the delight of real estate developers, the Supreme Court has held that external development charges demanded by the state government from realtors is unjustified and beyond its authority. In this instance, the Haryana Government had asked realty firm Ansal Properties & Industries to pay Rs 61,000 per gross acre towards EDC, which included cost for developing community sites in Gurgaon. A bench comprising justices R V Raveendran and Mukundakam Sharma while allowing Ansal’s appeal held that the state government “was not authorised or justified in raising the demand of Rs 61,000 per gross acre.” “Whatever payment is made in respect of the aforesaid demand was not payable by the appellant to the director, Town and Country Planning as the said demand is held to be illegal, unjustified and unreasonable,” it said.
The Economic Times - Property, February 1, 2009, page 9
New Delhi: To the delight of real estate developers, the Supreme Court has held that external development charges demanded by the state government from realtors is unjustified and beyond its authority. In this instance, the Haryana Government had asked realty firm Ansal Properties & Industries to pay Rs 61,000 per gross acre towards EDC, which included cost for developing community sites in Gurgaon. A bench comprising justices R V Raveendran and Mukundakam Sharma while allowing Ansal’s appeal held that the state government “was not authorised or justified in raising the demand of Rs 61,000 per gross acre.” “Whatever payment is made in respect of the aforesaid demand was not payable by the appellant to the director, Town and Country Planning as the said demand is held to be illegal, unjustified and unreasonable,” it said.
Hospitality demand likely to grow at 8-10% by 2011: C&W
Hospitality demand likely to grow at 8-10% by 2011: C&W
The Economic Times - Property, February 1, 2009, page 9
New Delhi: Despite the current economic slowdown, the CAGR for hotel room demand in India in the organised sector for five-star deluxe, five-star, four-star and three-star categories is expected to be in the range of 8-10% per annum from 2008 to 2011, while the average supply CAGR is estimated to be approximately 22% per annum over the same period according to global property consultants, Cushman & Wakefield. In their latest report The Voyage, 11 key hospitality markets in India have been assessed to reveal that NCR (20%), Mumbai (15%) and Bangalore (14%) are expected to witness the highest compounded annual growth in demand from 2008 -2011.
The Economic Times - Property, February 1, 2009, page 9
New Delhi: Despite the current economic slowdown, the CAGR for hotel room demand in India in the organised sector for five-star deluxe, five-star, four-star and three-star categories is expected to be in the range of 8-10% per annum from 2008 to 2011, while the average supply CAGR is estimated to be approximately 22% per annum over the same period according to global property consultants, Cushman & Wakefield. In their latest report The Voyage, 11 key hospitality markets in India have been assessed to reveal that NCR (20%), Mumbai (15%) and Bangalore (14%) are expected to witness the highest compounded annual growth in demand from 2008 -2011.
Govt mulls easier FDI rules for hotels, tourism projects
Govt mulls easier FDI rules for hotels, tourism projects
The Economic Times, 31 January 2009, page 9
Minimum Area & Capital Requirements In Projects May Be Done Away With
Rajat Guha & Ravi Teja Sharma NEW DELHI
THE government plans to do away with the minimum area and capital requirements for foreign investments in realty projects involving hotels, cineplexes, health clubs and other tourism-related activities to help the tourism industry meet investment needs.
However, to avail the relaxation, the projects must use at least 50% of the total built-up area for hotels or facilities promoting tourism, food and culture, said an official with the commerce and industry ministry who asked not to be named. Builders can develop commercial and residential real estate in the remaining space, he said.
The current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multi-national companies and $5 million for joint ventures investing in real estate. However, foreign investors will not be allowed to exit such projects before three years of completion of the project.
The tourism industry badly needs foreign direct investment to construct hotels. “The sector has recorded an FDI inflow of $853 million since January 2000 till March 2008. To give a fillip to the hotel and tourism sector, further policy initiatives are urgently required,” said the official.
According to tourism ministry estimates, there are about 1.2 million hotel rooms in the country. The requirement for 2010 and 2020 is estimated to be 2.9 million and 6.6 million, respectively. The department of industrial policy and promotion feels mixed projects are required for promoting tourism.
The move will result in price rationalisation in hotel sector, said Manav Thadani, MD of hotel consultant HVS International. Over the last few years, tariffs have reached unrealistic levels, especially in metros, owing to a demand supply mismatch.
“Smaller ticket size of mixed-use projects would be commercially more viable and attract increased foreign investment,” said Gaurav Karnik, associate director, tax & regulatory services, Ernst & Young.
“There has been a huge interest among foreign investors to invest in mixed-use format but they have been hesitant because of the minimum size and capital commitments,” he said.
LENIENT APPROACH
Projects must use 50% of built-up area for hotels or facilities promoting tourism.
Builders can use remaining space for commercial & residential purpose.
According to tourism ministry, India has about 1.2 million hotel rooms. It needs 2.9 million hotel rooms by 2010 and 6.6 million by 2020.
The Economic Times, 31 January 2009, page 9
Minimum Area & Capital Requirements In Projects May Be Done Away With
Rajat Guha & Ravi Teja Sharma NEW DELHI
THE government plans to do away with the minimum area and capital requirements for foreign investments in realty projects involving hotels, cineplexes, health clubs and other tourism-related activities to help the tourism industry meet investment needs.
However, to avail the relaxation, the projects must use at least 50% of the total built-up area for hotels or facilities promoting tourism, food and culture, said an official with the commerce and industry ministry who asked not to be named. Builders can develop commercial and residential real estate in the remaining space, he said.
The current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multi-national companies and $5 million for joint ventures investing in real estate. However, foreign investors will not be allowed to exit such projects before three years of completion of the project.
The tourism industry badly needs foreign direct investment to construct hotels. “The sector has recorded an FDI inflow of $853 million since January 2000 till March 2008. To give a fillip to the hotel and tourism sector, further policy initiatives are urgently required,” said the official.
According to tourism ministry estimates, there are about 1.2 million hotel rooms in the country. The requirement for 2010 and 2020 is estimated to be 2.9 million and 6.6 million, respectively. The department of industrial policy and promotion feels mixed projects are required for promoting tourism.
The move will result in price rationalisation in hotel sector, said Manav Thadani, MD of hotel consultant HVS International. Over the last few years, tariffs have reached unrealistic levels, especially in metros, owing to a demand supply mismatch.
“Smaller ticket size of mixed-use projects would be commercially more viable and attract increased foreign investment,” said Gaurav Karnik, associate director, tax & regulatory services, Ernst & Young.
“There has been a huge interest among foreign investors to invest in mixed-use format but they have been hesitant because of the minimum size and capital commitments,” he said.
LENIENT APPROACH
Projects must use 50% of built-up area for hotels or facilities promoting tourism.
Builders can use remaining space for commercial & residential purpose.
According to tourism ministry, India has about 1.2 million hotel rooms. It needs 2.9 million hotel rooms by 2010 and 6.6 million by 2020.
SBI LOANS AT 8% FLAT
SBI LOANS AT 8% FLAT
The Economic Times, February 1, 2009, page 1
The Economic Times, February 1, 2009, page 1
Move aimed at stimulating demand in property mkt
Our Bureau MUMBAI
THE COUNTRY’S largest bank, State Bank of India (SBI), on Saturday unveiled an offer to provide loans to all new home buyers at a fixed rate of 8 % — the lowest rate offered by any lender.
This rate will be applicable to all new borrowers irrespective of the loan amount. However, the fixed rate of 8% on home loans will be effective for only one year. SBI’s move is aimed at stimulating demand in the home loan market.
All customers of SBI who have already taken a loan under a special scheme — featuring an interest rate of 8.5% for a Rs 5 lakh loan and 9.25% for a Rs 20 lakh loan — will also benefit under the new offer announced on Saturday. SBI will also charge them 8% for one year on their borrowings. After one year, these borrowers will have to pay the earlier contracted rate which in the case of special scheme borrowers will be 8.5% for loans up to Rs 5 lakh and 9.25% for loans up to Rs 20 lakh.
For those who borrow above Rs 20 lakh, SBI will charge the prevailing home loan rate. SBI has said the offer is applicable only up to April 30, 2009. Existing customers of SBI can also avail of a home loan at 8%. They can borrow up to 10% of their exposure subject to a cap of Rs 5 lakh at 8%. With this, SBI will be offering the lowest interest rate on home loans. This also means that new borrowers who would otherwise have paid an interest rate of 10.75% for loans between Rs 30 lakh and Rs 75 lakh will now be charged only 8%, which will be on a fixed rate basis for one year.
Banking industry analysts said the move to offer a special rate of 8% comes just two days before external affairs minister Pranab Mukherjee, who also holds additional charge of the finance ministry, is due to meet the chiefs of state-owned banks to review their performance. Among other things, the finance ministry has also told banks to provide information on how borrowers have responded to the special home loan scheme introduced in December 2008.
Some senior bankers said the demand for home loans will pickup only after builders cut rates. “A borrower would first take into consideration the price of the flat and than look at the interest rates. If they feel that the property is over-priced, they will not borrow just because interest rates are low,” said an official in a stateowned bank who heads the credit portfolio.
SBI has also decided to provide an additional working capital facility of 20% of the fund based limits at 8%. This is aimed to “take care of inventories of raw materials, finished goods as also delayed payments from the buyers in the current downturn,” the banks said in a statement to media. This loan offer at 8% will be applicable for one year.
SBI will also charge 8% on term loans to SMEs for purchase fixed assets including generator sets. The rate of 8% will be fixed for one year and thereafter the applicable rate will be charged. All the above loans will be on offer till April 30, 2009 and interest will be reset after one year.
THE FIRST STEP
New home buyers to get a fixed rate of 8 %
Only 8% will be charged from existing customers in the first year, thereafter the applicable rate will be charged.
Existing customers can borrow up to 10% of their exposure subject to a cap of Rs 5 lakh at 8%.
All the above loans will be on offer till April 30, 2009 and interest will be reset after a yr.
Funds not reaching industry, consumers’
Funds not reaching industry, consumers’
The Financial Express, February 1, 2009, page 17
Davos: Liquidity injected by the Indian government and the central bank has not reached the cash-starved industry and consumers, posing a key challenge for the policy-makers, commerce and industry minister Kamal Nath said on Saturday.
“We have injected liquidity into the banking system, but the liquidity is still not credit. Now the challenge is to make banks lend,”Nath said at the India Brand Equity Foundation function at the World Economic Forum meeting here.
Since mid-September this fiscal, the Reserve Bank of India has taken steps to pump in close to Rs 4-lakh crore into the banking system to stem the impact of the global downturn on the Indian economy.
Following reduction in the key policy rates and relaxation in norms like the cash reserve ratio, banks have announced cuts in the lending rates ranging between 150-200 basis points. However, the industry bodies have complained of the banks' reluctance to lend in a cautious environment.
Nath said while the Indian government is prodding banks to increase lending to stimulate demand, governments elsewhere are spending money just to save banks.
“They (governments elsewhere) are putting money to save banks which I think is completely a wrong strategy. If banks do not lend, there is no use of saving banks,”he said.
Since majority of the Indian banks are owned by the government, external affairs minister Pranab Mukherjee, holding the charge of finance portfolio as well, has called a bankers' meeting in New Delhi on February 2. He is expected to advise them to enhance lending.
The Financial Express, February 1, 2009, page 17
Davos: Liquidity injected by the Indian government and the central bank has not reached the cash-starved industry and consumers, posing a key challenge for the policy-makers, commerce and industry minister Kamal Nath said on Saturday.
“We have injected liquidity into the banking system, but the liquidity is still not credit. Now the challenge is to make banks lend,”Nath said at the India Brand Equity Foundation function at the World Economic Forum meeting here.
Since mid-September this fiscal, the Reserve Bank of India has taken steps to pump in close to Rs 4-lakh crore into the banking system to stem the impact of the global downturn on the Indian economy.
Following reduction in the key policy rates and relaxation in norms like the cash reserve ratio, banks have announced cuts in the lending rates ranging between 150-200 basis points. However, the industry bodies have complained of the banks' reluctance to lend in a cautious environment.
Nath said while the Indian government is prodding banks to increase lending to stimulate demand, governments elsewhere are spending money just to save banks.
“They (governments elsewhere) are putting money to save banks which I think is completely a wrong strategy. If banks do not lend, there is no use of saving banks,”he said.
Since majority of the Indian banks are owned by the government, external affairs minister Pranab Mukherjee, holding the charge of finance portfolio as well, has called a bankers' meeting in New Delhi on February 2. He is expected to advise them to enhance lending.
DLF to sell assets to survive slump
DLF to sell assets to survive slump
The Economic Times, February 2, 2009, page 6
Realtor To Stop Asset Sale To Promoter Group Firm As Demand For Leased Office Space Shrinks
Sanjeev Choudhary NEW DELHI
LIKE its smaller rival Unitech, India’s largest property firm DLF said it will sell its assets as it battles a slump in the real estate sector that has brought down its profit by 69% and sales by 59%. DLF will also stop sale of its assets to promoter group company DLF Assets (DAL) in the short term as demand for leased office space shrinks sharply and receivables from DAL rise dramatically.
The company said in a statement announcing its December quarter earnings that it will “focus on unlocking ‘non-strategic’ assets with no medium-term utility.” It didn’t describe what it meant by “non-strategic assets”. DLF said it would focus on liquidity and cash flows rather than growth in short to medium term.
“Our focus will be on the mid-income homes and commercial complexes, with deferment of high-margin launches in luxury homes and retail space,” DLF vice-chairman Rajiv Singh said in a statement.
The company said that ‘due to a sharp reduction in the demand for leased office space’ the balance delivery in DAL will be ‘substantially delayed’ and accordingly the revenues accruing to DLF from the sale of assets to DAL will ‘not be significant at least for the next several quarters.’ DLF is supposed to deliver 19 million sqft of total space to DAL. More than half of this space has already been delivered to DAL. The decision to delay delivery to DAL may also be partly on account of the rising receivables from DAL to DLF for earlier purchases and DAL’s inability to raise fresh funds. The receivables from DAL at the end of September quarter was Rs 4,800 crore. The company didn’t clarify by how much receivables have gone up in December quarter. DAL hasn’t been able to raise fresh fund in December quarter to pay back to DLF, but the realty firm said, “DAL has received a serious level of interest from large private equity investors and DAL expects to close this transaction soon, possibly within this financial year itself.”
The company booked a total of 1.74 million sqft, including sale and leases in December quarter. This included 0.70 million sqft of space in homes. Compared to this, DLF had sold 3.12 million sqft of space, including 2.79 million sqft of homes and 0.33 million sqft of commercial complexes, in the September quarter. The company said extremely adverse market sentiment affected both topline and bottomline. “Where is the demand? Demand has completely evaporated across segments,” DLF CFO Ramesh Sanka said.
The Economic Times, February 2, 2009, page 6
Realtor To Stop Asset Sale To Promoter Group Firm As Demand For Leased Office Space Shrinks
Sanjeev Choudhary NEW DELHI
LIKE its smaller rival Unitech, India’s largest property firm DLF said it will sell its assets as it battles a slump in the real estate sector that has brought down its profit by 69% and sales by 59%. DLF will also stop sale of its assets to promoter group company DLF Assets (DAL) in the short term as demand for leased office space shrinks sharply and receivables from DAL rise dramatically.
The company said in a statement announcing its December quarter earnings that it will “focus on unlocking ‘non-strategic’ assets with no medium-term utility.” It didn’t describe what it meant by “non-strategic assets”. DLF said it would focus on liquidity and cash flows rather than growth in short to medium term.
“Our focus will be on the mid-income homes and commercial complexes, with deferment of high-margin launches in luxury homes and retail space,” DLF vice-chairman Rajiv Singh said in a statement.
The company said that ‘due to a sharp reduction in the demand for leased office space’ the balance delivery in DAL will be ‘substantially delayed’ and accordingly the revenues accruing to DLF from the sale of assets to DAL will ‘not be significant at least for the next several quarters.’ DLF is supposed to deliver 19 million sqft of total space to DAL. More than half of this space has already been delivered to DAL. The decision to delay delivery to DAL may also be partly on account of the rising receivables from DAL to DLF for earlier purchases and DAL’s inability to raise fresh funds. The receivables from DAL at the end of September quarter was Rs 4,800 crore. The company didn’t clarify by how much receivables have gone up in December quarter. DAL hasn’t been able to raise fresh fund in December quarter to pay back to DLF, but the realty firm said, “DAL has received a serious level of interest from large private equity investors and DAL expects to close this transaction soon, possibly within this financial year itself.”
The company booked a total of 1.74 million sqft, including sale and leases in December quarter. This included 0.70 million sqft of space in homes. Compared to this, DLF had sold 3.12 million sqft of space, including 2.79 million sqft of homes and 0.33 million sqft of commercial complexes, in the September quarter. The company said extremely adverse market sentiment affected both topline and bottomline. “Where is the demand? Demand has completely evaporated across segments,” DLF CFO Ramesh Sanka said.
DLF alters plans, now seeks to build 500-acre township
DLF alters plans, now seeks to build 500-acre township
MINT, The Wall Street Journal, February 2, 2009, page 7
With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few monthsRomita Datta Kolkata: DLF Ltd has proposed building a 500-acre township at Dankuni in the suburbs of Kolkata, abandoning plans to develop a 4,840-acre township in the same area, which was to be its biggest project in eastern India.
In July 2006, the West Bengal government had awarded the contract to build a 4,840-acre township in Dankuni in Hooghly district to DLF, which had offered a record price of Rs56 lakh an acre, or around Rs2,700 crore, and to spend up to Rs40,000 crore on building the township. The government, however, couldn’t acquire the land.
DLF’s new proposal comes as a face saver for the state government, said an official of West Bengal’s urban development department. “On the other hand, the (state) government’s inability to acquire land gave DLF the opportunity to wriggle out of the project… DLF would have certainly not paid Rs2,700 crore now,” added this official, who did not want to be identified because he isn’t authorized to speak to the media.
After the panchayat polls in May, in which the ruling Communist Party of India (Marxist), or CPM, and its allies suffered a major setback, the state’s urban development minister Asok Bhattacharya had formally announced that his government wouldn’t acquire the land forcibly in Dankuni even if it meant abandoning the project.
Confirming DLF’s new proposal, which was sent last week, Bhattacharya said the state government was willing to provide land for the smaller township that the real estate firm now wants to build. “DLF can have its 500-acre township, but we aren’t abandoning plans to build a bigger township there (in Dankuni). The real estate business seems to be in trouble…we will build an industrial township instead,” said Bhattacharya.
A DLF spokesperson said he wasn’t aware of his company’s new proposal to build a 500-acre township, and refused to offer any comment on the stalled Dankuni project.
Bhattacharya also said that DLF, which, in January 2007, had paid Rs270 crore, or 10% of the amount it had bid for the proposed township, has asked the government to return the money. The real estate firm has agreed to make an advance payment, albeit of smaller amount, for the 500 acres that it has now asked for, he said.
The price of land in Dankuni could go up again when DLF’s new proposal is made public. It had earlier shot up to Rs1.2 crore an acre because of DLF’s proposed township and the now abandoned small car factory that Tata Motors Ltd was building in Singur, which is barely a 20-minute drive from Dankuni.
Faced with stiff resistance to the acquisition of farmland in Singur, which, too, is in the Hooghly district, the state government had abandoned plans to forcibly procure land in Dankuni much before it was formally announced by the minister. Bhattacharya had decided to build consensus and buy land from farmers paying the market price, but the spurt in real estate prices in Dankuni put the state government in a spot.
With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few months.
A few months ago, district magistrate Neelam Meena estimated that land prices in Dankuni ranged from Rs11 lakh to Rs38 lakh an acre depending on productivity and the distance from NH2, the highway that connects Kolkata with northern India.
MINT, The Wall Street Journal, February 2, 2009, page 7
With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few monthsRomita Datta Kolkata: DLF Ltd has proposed building a 500-acre township at Dankuni in the suburbs of Kolkata, abandoning plans to develop a 4,840-acre township in the same area, which was to be its biggest project in eastern India.
In July 2006, the West Bengal government had awarded the contract to build a 4,840-acre township in Dankuni in Hooghly district to DLF, which had offered a record price of Rs56 lakh an acre, or around Rs2,700 crore, and to spend up to Rs40,000 crore on building the township. The government, however, couldn’t acquire the land.
DLF’s new proposal comes as a face saver for the state government, said an official of West Bengal’s urban development department. “On the other hand, the (state) government’s inability to acquire land gave DLF the opportunity to wriggle out of the project… DLF would have certainly not paid Rs2,700 crore now,” added this official, who did not want to be identified because he isn’t authorized to speak to the media.
After the panchayat polls in May, in which the ruling Communist Party of India (Marxist), or CPM, and its allies suffered a major setback, the state’s urban development minister Asok Bhattacharya had formally announced that his government wouldn’t acquire the land forcibly in Dankuni even if it meant abandoning the project.
Confirming DLF’s new proposal, which was sent last week, Bhattacharya said the state government was willing to provide land for the smaller township that the real estate firm now wants to build. “DLF can have its 500-acre township, but we aren’t abandoning plans to build a bigger township there (in Dankuni). The real estate business seems to be in trouble…we will build an industrial township instead,” said Bhattacharya.
A DLF spokesperson said he wasn’t aware of his company’s new proposal to build a 500-acre township, and refused to offer any comment on the stalled Dankuni project.
Bhattacharya also said that DLF, which, in January 2007, had paid Rs270 crore, or 10% of the amount it had bid for the proposed township, has asked the government to return the money. The real estate firm has agreed to make an advance payment, albeit of smaller amount, for the 500 acres that it has now asked for, he said.
The price of land in Dankuni could go up again when DLF’s new proposal is made public. It had earlier shot up to Rs1.2 crore an acre because of DLF’s proposed township and the now abandoned small car factory that Tata Motors Ltd was building in Singur, which is barely a 20-minute drive from Dankuni.
Faced with stiff resistance to the acquisition of farmland in Singur, which, too, is in the Hooghly district, the state government had abandoned plans to forcibly procure land in Dankuni much before it was formally announced by the minister. Bhattacharya had decided to build consensus and buy land from farmers paying the market price, but the spurt in real estate prices in Dankuni put the state government in a spot.
With Tata Motors calling off its Singur project, and DLF’s proposed 4,840-acre township almost written off, real estate prices in Dankuni have crashed in the past few months.
A few months ago, district magistrate Neelam Meena estimated that land prices in Dankuni ranged from Rs11 lakh to Rs38 lakh an acre depending on productivity and the distance from NH2, the highway that connects Kolkata with northern India.
DLF may walk out of Delhi convention complex project
DLF may walk out of Delhi convention complex project
Business Standard, January 31, 2009, page 5
JOE C MATHEW New Delhi, 30 January
DLF, the country’s biggest real estate company, may drop the plan to develop India’s largest convention and exhibition complex in Delhi, sources say.
The move comes 18 months after the cash-strapped developer was allotted 35 acres by the Delhi Development Authority (DDA) to build and maintain an international convention &exhibition centre, hotels and allied commercial facilities. The cost of the project is estimated at Rs 6,000 crore and was expected to be completed in three years.
The realty major has already spent Rs 900 crore on land purchase. The continuing liquidity crunch and delay in sourcing funds internationally have led DLF to review its plans to invest further in the project.
The company has spent over Rs 100 crore in finalising the project plan, identifying its technology partners and beginning the spadework for various projects. It has intimated its inability to complete the project unless the existing contractual obligations were renegotiated, according to DDA sources.
DLF is in talks with DDA to see if changes can be made to the original terms in the lease agreement, sources said. The lease agreement stipulates a time-bound completion of the project and has penalty clauses for every missed deadline. However, the agreement allows DLF and DDA to extend the timeframe for completing the project after mutual negotiation.
“DLF is looking at revising the contractual agreement that can even allow some equity participation from the government side,’’ sources said. The agreement stipulates that the entire financial burden from the conceptual stage to execution is on the developer.
DLF declined to comment on the delay and status of the project though company insiders say the developer is not keen on the project. “The project has been killed,’’ a source said. The lease deed allows DDA to take back the land if the developer fails to executive the project beyond a certain time. The proposed convention centre is one of the most prestigious projects of DDA and was modeled on Suntec Convention Centre in Singapore and aimed at attracting tourists of the MICE (meetings, incentives, conferences and exhibitions) segment.
The conference centre has been designed to accommodate 12,000 delegates. In addition, the complex will house 25 meeting rooms of varying sizes with a total seating capacity of over 2,000 delegates for breakout sessions.
Debt papers downgraded by Crisil
DLF, the country’s biggest real estate developer, had about Rs 1300 crore worth of debt papers, including pass through certificates downgraded by one notch by Crisil on slowing real estate sales which is contraining cash flows and will lead to problems on capital structure.
The company has been forced to increasingly rely on refinancing of its debt, Crisil said in a statement. The rating agency on January 28 downgraded the company’s rating to A+ from AA- on slowing real estate sales and deteriorating external environment.
DLF has to repay an estimated Rs 4300 crore of debts in the next two quarters. The company is planning to raise loans of about Rs 4900 crore against its portfolio of leased assets. The company expects to receive about Rs 4400 crore over the next few months through equity investments in the company.
Small landowners get govt nod to jointly develop special zones
Small landowners get govt nod to jointly develop special zones
The Financial Express, January 31, 2009, page 4
Tough times call for innovative measures. At a time when funds for special economic zones (SEZ) are drying up and big companies are facing opposition while acquiring large tracts of contiguous land for such projects, the Centre has, for the first time, allowed small landholders to jointly develop an SEZ.
The IT SEZ, to come in Noida, has a lead developer (Wellgrow Infotech Pvt Ltd) owning 4 hectares, and three other small joint developers owning only a little over 2 hectares — Vansh Software Developers Pvt Ltd (2.409 hectares), Panacea Townships Pvt Ltd (2.024 hectares) and Abloom Infotech Pvt Ltd (2.024 hectares)—making the total size of the SEZ 10.457 hectares.
The commerce ministry’s board of approval (BoA) has asked all the four developers to build on their respective plots of land as per the norms under the SEZ Act and Rules. The rider, however, is that to get the approval, separate plots of land owned by different parties should be contiguous and the total area must meet the minimum land area requirement of a particular type of SEZ. Each of the small landholders will also have to meet the stipulated minimum net worth requirements.
“The approval for this SEZ project was given in accordance with the provisions of the SEZ Act and rules. We looked at the contiguity of the land and the net worth of the developers. Now each developer will be jointly and severally liable for developing the SEZ,” an official told FE.
The move, leading to a paradigm shift in the manner in which SEZs are being developed, would result in the creation of several mini-SEZs within a big SEZ jointly developed by small landowners with holding of as little as 2 hectares — who were often the main opposition to the land acquisition for such projects. It would also reduce risks involved in a single developer developing and marketing an SEZ.
Earlier, in most cases, the big players would arm twist or coax the small landholders to sell/transfer their land to them to build an SEZ. The big companies would then at the most make the small landholders co-developers by leasing out a portion of the total land to develop infrastructure for the SEZ. However, since co-developers have no free hold over the land, they have lesser status than a developer who can dictate terms to them as per the co-developer agreement.
But after the recent decision of the BoA, small landholders can hold on to the ownership title of their land and be joint developers of the SEZ. This would mean that there would be lesser incidents like that of Raigad and Singur, where the fight was about acquiring large tracts of land from many small landowners for industrial projects.
However, considering the complications involved in monitoring such an SEZ, the BoA decided that the entire SEZ will be a processing zone (where industrial units are located) and that it will now have any non-processing area housing social amenities.
Without this rider, each developer could have asked for a separate processing area and non-processing area for their part of the zone. This would have forced the government to appoint more customs field officers at each entry and exit point, resulting in a monitoring nightmare. But with the rider, there will now be only one exit and entry point.
“It throws open tremendous opportunities for small landholders who can now share the risk of development and marketing of the SEZ with other joint developers, however big or small they are. I see that the BoA is keeping in mind today's economic environment and is progressively evolving the SEZ policy,” said Tapan Sangal, senior manager, PricewaterhouseCoopers said.
Also, since there are more freeholders of the land, the value of each plot will be more than in the case where the plots are leased out, he said. However, the downside of such an approval is that the government authorities would have to now get involved in more paperwork and due diligence of each of the small players who want to be developers, an industry source said.
The Financial Express, January 31, 2009, page 4
Tough times call for innovative measures. At a time when funds for special economic zones (SEZ) are drying up and big companies are facing opposition while acquiring large tracts of contiguous land for such projects, the Centre has, for the first time, allowed small landholders to jointly develop an SEZ.
The IT SEZ, to come in Noida, has a lead developer (Wellgrow Infotech Pvt Ltd) owning 4 hectares, and three other small joint developers owning only a little over 2 hectares — Vansh Software Developers Pvt Ltd (2.409 hectares), Panacea Townships Pvt Ltd (2.024 hectares) and Abloom Infotech Pvt Ltd (2.024 hectares)—making the total size of the SEZ 10.457 hectares.
The commerce ministry’s board of approval (BoA) has asked all the four developers to build on their respective plots of land as per the norms under the SEZ Act and Rules. The rider, however, is that to get the approval, separate plots of land owned by different parties should be contiguous and the total area must meet the minimum land area requirement of a particular type of SEZ. Each of the small landholders will also have to meet the stipulated minimum net worth requirements.
“The approval for this SEZ project was given in accordance with the provisions of the SEZ Act and rules. We looked at the contiguity of the land and the net worth of the developers. Now each developer will be jointly and severally liable for developing the SEZ,” an official told FE.
The move, leading to a paradigm shift in the manner in which SEZs are being developed, would result in the creation of several mini-SEZs within a big SEZ jointly developed by small landowners with holding of as little as 2 hectares — who were often the main opposition to the land acquisition for such projects. It would also reduce risks involved in a single developer developing and marketing an SEZ.
Earlier, in most cases, the big players would arm twist or coax the small landholders to sell/transfer their land to them to build an SEZ. The big companies would then at the most make the small landholders co-developers by leasing out a portion of the total land to develop infrastructure for the SEZ. However, since co-developers have no free hold over the land, they have lesser status than a developer who can dictate terms to them as per the co-developer agreement.
But after the recent decision of the BoA, small landholders can hold on to the ownership title of their land and be joint developers of the SEZ. This would mean that there would be lesser incidents like that of Raigad and Singur, where the fight was about acquiring large tracts of land from many small landowners for industrial projects.
However, considering the complications involved in monitoring such an SEZ, the BoA decided that the entire SEZ will be a processing zone (where industrial units are located) and that it will now have any non-processing area housing social amenities.
Without this rider, each developer could have asked for a separate processing area and non-processing area for their part of the zone. This would have forced the government to appoint more customs field officers at each entry and exit point, resulting in a monitoring nightmare. But with the rider, there will now be only one exit and entry point.
“It throws open tremendous opportunities for small landholders who can now share the risk of development and marketing of the SEZ with other joint developers, however big or small they are. I see that the BoA is keeping in mind today's economic environment and is progressively evolving the SEZ policy,” said Tapan Sangal, senior manager, PricewaterhouseCoopers said.
Also, since there are more freeholders of the land, the value of each plot will be more than in the case where the plots are leased out, he said. However, the downside of such an approval is that the government authorities would have to now get involved in more paperwork and due diligence of each of the small players who want to be developers, an industry source said.
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