Friday, September 18, 2009
Rates may harden by fiscal end: Rangarajan
Rates may harden by fiscal end: Rangarajan
Business Standara, September 18, 2009, Section II, Page 3
BS Reporter / Hyderabad
Interest rates may harden a bit by the end of the current financial year, according to C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.
Speaking to mediapersons on the sidelines of an international conference on ‘Global Economic Meltdown: Challenges and Prospects’ here on Thursday, Rangarajan said credit offtake was also showing signs of recovery.
He said though capital flow had improved, but were not of the same order as two years ago. Nevertheless, inflows through foreign direct investment (FDI) and foreign institutional investment (FII) would be larger this year compared with last year, he said.
Rangarajan said that fiscal actions involving a cut in excise duty and enlarging government expenditure would stimulate aggregate demand. The government has already extended its stimulus package up to March 2010, which could be reviewed thereafter. On the issue of the continuance of the accommodative policy, he said this policy of the Reserve Bank of India (RBI) and the government might have to be withdrawn gradually.
“The quantitative easing cannot continue indefinitely. RBI particularly has to guard against the re-emergence of inflation,” he said. In this context, Rangarajan cautioned that there shouldn’t be a “premature” withdrawal of the accommodative policy. “It has to come after definite signs of recovery are visible. But once they are visible, we have to withdraw,” he said.
Even in the case of central fiscal deficit, he said, we should revert to Fiscal Responsibility and Budgetary Management (FRBM) targets as the economy began to recover. He does not envisage any increase in the 2009-10 fiscal deficit, which is pegged at 6.8 per cent of the gross domestic product (GDP).
Rangarajan said that RBI had taken right steps by reducing CRR (cash reserve ratio) and repo and reverse repo rates for expanding liquidity. However, it was being pointed out that the actions of the central bank have not percolated to the ground level and credit growth was slow.
“Is this a case of taking the horse to the pond but cannot compel it to drink?” he asked while emphasising that the role of RBI was to create an environment in which additional credit could be made available.
He envisaged that India would see “definite signs” of recovery in the second half of 2009-10 and the economy would grow between 6 and 6.5 per cent. Fiscal 2010-11 would see a distinct improvement and the economy would grow between 7 and 8 per cent. But to go back to 9 per cent growth, the country has to wait for the world economy to improve and the world trade to pick up.
According to Rangarajan, the shock waves produced by the current financial crisis would have their own effect on the structure of capitalism. Acceptable capitalism would require more regulations. Future discussions must centre around the nature and scope of such regulations. Runaway financial innovations that were dysfunctional did more harm than good, he added.
Economic slowdown hampers global FDI flows
Economic slowdown hampers global FDI flows
The Hindu Business Line, September 18, 2009, Page 15
Medium-to-long-term prospects of India, China promising: Unctad.
Our Bureau, New Delhi
The worldwide economic and financial crisis has extracted its toll with global foreign direct investment (FDI) flows getting severely hampered this year, says the UN Conference on Trade and Development (Unctad).
In its World Investment Report 2009, released worldwide on Thursday, the Geneva-based UN body said inflows are expected to fall from $1.7 trillion to below $1.2 trillion in 2009, with a slow recovery in 2010 (to a level up to $1.4 trillion) and gaining momentum in 2011(approaching $1.8 trillion).
Stating that the global economic crisis has altered the FDI landscape, it said investments to developing and transition economies surged, increasing their share in global FDI flows to 43 per cent in 2008. This was partly due to a concurrent large decline in FDI flows to developed countries (29 per cent). However, in 2009, FDI flows to all regions would suffer from a decline, it added.
The report said a major contributing factor to the decline in global FDI flows has been growing divestments by transnational corporations (TNCs). Illustrative of this trend that was that roughly one third of cross-border mergers and acquisitions during 2008 and the first half of 2009 entailed the sale of foreign affiliates to other companies.
According to Unctad, available data in early 2009 point to “a significant downturn” in FDI flows to the South, East and South-East Asian region, besides casting doubts about FDI growth prospects in the short term. Inflows to China and India are inevitably hit by the crisis, too, but their medium-to long-term prospects remain promising, it said, adding that respondents to World Investment Prospects Survey of Unctad ranked China and India as the first and third, respectively, among the most attractive locations for FDI.
During 2008, 110 new FDI-related measures were introduced, of which 85 were more favourable to FDI. But, compared with 2007, the percentage of less favourable measures remained unchanged, it said adding that during 2008, 59 new bilateral investment treaties were concluded, bringing the total number to 2,676.
Overall trends
Unctad found that overall policy trends during the crisis have so far been mostly favourable to FDI, both nationally and internationally. However, in some countries a more restrictive FDI approach has emerged, it said noting that there is a “growing evidence of covert protectionism”.
Instances of ‘covert’ protectionism include favouring products with high ‘domestic’ content in government procurement (particularly huge public infrastructure projects), de facto preventing banks from lending for foreign operations, invoking ‘national security’ exceptions that stretch the definition of national security or moving protectionist barriers to sub-national levels that are outside the scope of the application of global obligations (e.g., in matters of procurement).
Looking to the future, a crucial question is which FDI policies would be applied by host countries; once the global economy begins to recover, Unctad said.
The expected exit of public funds from flagship industries is likely to provide a boost to private investment, including FDI.
This could possibly trigger a new wave of economic nationalism to protect “national champions” from foreign takeovers, it said.
In this context, Unctad suggested that policymakers consider strengthening the investment promotion dimension of international investment agreements through effective and operational provisions.
Investment insurance and other home-country measures that encourage outward investment are cases in point where continued international cooperation could be useful.
The worst global economic and financial crisis has slowed the global production of goods and services by the world’s estimated 82,000 TNCs and their 8.10 lakh foreign affiliates which account for not less than 10 per cent of world GDP and employ about 78 million people.
Unctad’s list of the world’s largest 100 non-financial TNCs is dominated by manufacturing and petroleum companies, which saw their profit margins reduced drastically on the weakening demand for both manufactured goods and fuels. Overall, the profits of the largest 100 TNCs in the world fell by more than 25 per cent in 2008.
The Hindu Business Line, September 18, 2009, Page 15
Medium-to-long-term prospects of India, China promising: Unctad.
Our Bureau, New Delhi
The worldwide economic and financial crisis has extracted its toll with global foreign direct investment (FDI) flows getting severely hampered this year, says the UN Conference on Trade and Development (Unctad).
In its World Investment Report 2009, released worldwide on Thursday, the Geneva-based UN body said inflows are expected to fall from $1.7 trillion to below $1.2 trillion in 2009, with a slow recovery in 2010 (to a level up to $1.4 trillion) and gaining momentum in 2011(approaching $1.8 trillion).
Stating that the global economic crisis has altered the FDI landscape, it said investments to developing and transition economies surged, increasing their share in global FDI flows to 43 per cent in 2008. This was partly due to a concurrent large decline in FDI flows to developed countries (29 per cent). However, in 2009, FDI flows to all regions would suffer from a decline, it added.
The report said a major contributing factor to the decline in global FDI flows has been growing divestments by transnational corporations (TNCs). Illustrative of this trend that was that roughly one third of cross-border mergers and acquisitions during 2008 and the first half of 2009 entailed the sale of foreign affiliates to other companies.
According to Unctad, available data in early 2009 point to “a significant downturn” in FDI flows to the South, East and South-East Asian region, besides casting doubts about FDI growth prospects in the short term. Inflows to China and India are inevitably hit by the crisis, too, but their medium-to long-term prospects remain promising, it said, adding that respondents to World Investment Prospects Survey of Unctad ranked China and India as the first and third, respectively, among the most attractive locations for FDI.
During 2008, 110 new FDI-related measures were introduced, of which 85 were more favourable to FDI. But, compared with 2007, the percentage of less favourable measures remained unchanged, it said adding that during 2008, 59 new bilateral investment treaties were concluded, bringing the total number to 2,676.
Overall trends
Unctad found that overall policy trends during the crisis have so far been mostly favourable to FDI, both nationally and internationally. However, in some countries a more restrictive FDI approach has emerged, it said noting that there is a “growing evidence of covert protectionism”.
Instances of ‘covert’ protectionism include favouring products with high ‘domestic’ content in government procurement (particularly huge public infrastructure projects), de facto preventing banks from lending for foreign operations, invoking ‘national security’ exceptions that stretch the definition of national security or moving protectionist barriers to sub-national levels that are outside the scope of the application of global obligations (e.g., in matters of procurement).
Looking to the future, a crucial question is which FDI policies would be applied by host countries; once the global economy begins to recover, Unctad said.
The expected exit of public funds from flagship industries is likely to provide a boost to private investment, including FDI.
This could possibly trigger a new wave of economic nationalism to protect “national champions” from foreign takeovers, it said.
In this context, Unctad suggested that policymakers consider strengthening the investment promotion dimension of international investment agreements through effective and operational provisions.
Investment insurance and other home-country measures that encourage outward investment are cases in point where continued international cooperation could be useful.
The worst global economic and financial crisis has slowed the global production of goods and services by the world’s estimated 82,000 TNCs and their 8.10 lakh foreign affiliates which account for not less than 10 per cent of world GDP and employ about 78 million people.
Unctad’s list of the world’s largest 100 non-financial TNCs is dominated by manufacturing and petroleum companies, which saw their profit margins reduced drastically on the weakening demand for both manufactured goods and fuels. Overall, the profits of the largest 100 TNCs in the world fell by more than 25 per cent in 2008.
Unlock urban land values to beef up infrastructure
Unlock urban land values to beef up infrastructure
The Hindu Business Line, September 18, 2009, Page 17
The Railways should develop new growth centres and use transport corridors asset to contribute to urban renewal.
G. Srinivasan, New Delhi
Building infrastructure, both physical and social, requires huge investments and one of the effective ways of addressing this insurmountable obstacle is to unlock urban land values for infrastructure finance.
This is what experts contended here at a day-long deliberation on Wednesday, jointly organised by the Ministry of Urban Development, Infrastructure Development Finance Corporation, India Urban Space Foundation and National Institute of Urban Affairs in collaboration with Wolfensohn Centre for Development at Brookings.
Participants from different countries highlighted the unresolved paradox in that for most large infrastructure projects — those related to transportation and communications — infrastructure investments push the value of urban land more than the cost of the project.
If land-value gains so accrued exceed project costs, why has it been so difficult to ramp up infrastructure financing? Hence, the policy question to find a proper way out to capture part of the gain in land-values for urban infrastructure finance through land-based financing.
Land-based financing
Some experts opined that despite the incontrovertible arguments for the land-based instruments as part of the solution to urban infrastructure financing, initiatives on these lines often are met with political and popular opposition. The bursts of protests on acquisition of land for industrial projects in West Bengal or the special economic zones (SEZs) coming up in different parts of the country in recent period remain too strong to be set aside.
In fact, the provision in the yet-to-be tabled Land Acquisition (Amendment) Bill 2007 for private developers to acquire 70 per cent of land for an industrial project directly and the rest 30 per cent by the State Governments is a controversial one, provoking political parties to take sides and pot-shots to gain popular sympathy. Despite the obstructions, land-based financing proposals did surface in India, the example being auction of financial centre land by the Mumbai Metropolitan Regional Development Authority (MMRDA) and planned sale of excess land to finance access highway to the new airport built under PPP in Bangalore.
The obvious advantages for public sector companies possessing tracts of unused or waste land are that the land-based financing could generate revenue up-front, reducing dependence on costly debt. Making a case for using surplus lands vested with the Railways, the former Chairman of Railway Land Development Authority and former Member (Engg) of Railways, Mr. S.K.Vij, pointed out that developers seek 25 per cent return on projects. He said the emphasis should be on creating value for the land and not encashing it for immediate gains.
Rightly, he said, the pace of urbanisation, which was 25 per cent in 1991, is to reach 40 per cent by 2021, against 90 per cent urbanisation in advanced countries.
Growth centres
He said the Railways should give its land for developing agri-centres, warehousing, logistics parks, which could lend value to the railway land. Besides, it should develop new growth centres and use transport corridors asset to contribute to urban renewal.
In his presentation, the Executive Director, Faculty of Architecture, Universidad Catolica de Chile, Mr Pablo Allard, presented the Chacabuco plan case, disclosing how three municipalities were incorporated to form a big urban centre, using the National Ministry of Housing and Urbanisation as the nodal agency.
He recounted how the land was put to mixed use for productive activities, services and housing.
Experts said in some advanced countries, development fees now pay for a chunk of infrastructure costs as these fees are levied on developers who pass them on to buyers of residential and commercial buildings. Fee structure may be more or less fine-tuned, ranging from a uniform percentage of development cost to “impact fees” that capture the location of development and the costs of connecting to major infrastructure trunk systems such as water lines and road systems.
It was also pointed out that the highest payoff to infrastructure investment is for projects at the regional or metropolitan scale and instances include airports, metro (subways) and light rail systems, major bridges and light rail systems.
Ultimately, land being a polemical subject in India and its acquisition process being cumbersome, a reasonable middle-path could be arrived at safeguarding individual rights while letting some part of the value created by public infrastructure investment to be captured to help pay for such investments, experts said.
More liquidity than system needs
More liquidity than system needs
The Hindu Business Line, September 18, 2009, Page 8
RBI Annual Report 2008-09.
The official response to the emerging crisis a year ago was a massive unwarranted release of liquidity. Much of the money has been making a round trip to the RBI through reverse repos. And now the chickens are coming home to roost, says A. SESHAN.
There is no satisfactory explanation why interest rates have not fallen as much as expected despite the strategy of flooding the economy with money.
The much-awaited Annual Report of the Reserve Bank of India (RBI) recounts the story of the economy that has already been told — starting with the Economic Survey and followed up by Quarterly Reviews of the central bank and the other reports of Indian and international institutions.
Still, it is a valuable addition to the existing literature on the economy, being a convenient one-stop source of information and data and carrying the imprimatur of the Central Board of Directors with data not available elsewhere (e.g. the balance sheet and organisational matters of the Bank).
Like other RBI publications, it is rated highly for its authenticity, even if one does not agree with its interpretations of data. While this reviewer is in broad agreement with many of the observations in the Report, he would like to point out a few exceptions.
Liquidity in West and India
The whole thrust of monetary policy everywhere is on ensuring adequate liquidity to service the requirements of the economic system. In the aftermath of the sub-prime crisis in the West, the damage to both funding and market liquidity persisted for many days.
The severity of the crisis of confidence can be gauged from the fact that the spreads in respect of LIBOR-OIS and TED (difference between the three-month T-bill interest rate and three-month LIBOR) reached the record levels of 364 basis points (one basis point equals one-hundredth of a percentage point) and 465 basis points, respectively, in October 2008.
Historically, in normal times, the spreads hover around 10 and 30 bps, respectively. It was in that context that central banks, especially the US Federal Reserve, had to intervene massively and in unconventional ways to deal with the unusual situation so that the wheels of the financial system were lubricated.
As a result, funds have started flowing and the LIBOR-OIS spread has come down now to 25 basis points that is even below the Greenspan benchmark of 50 basis points in normal times.
During September-October of 2008, there was a liquidity problem in India due to the drying up of foreign sources of credit and capital outflows coupled with advance tax payments. It was further aggravated by the RBI intervention in the forex market selling dollars and absorbing rupees in order to arrest the depreciation of the domestic currency. Otherwise, the country was not in any big way exposed to the sub-prime loan losses.
Foreign currency assets of the RBI fell from $286.12 billion on August 29, 2008 to $274.91 billion on October 3. Of the total decline of $11.21 billion, around two-thirds ($7.7 billion) occurred in the week ended October 3. It is safe to assume that the bulk of it would have been due to market intervention sucking out rupees of a massive magnitude.
Unwarranted action
Till September 26, 2008, non-food credit growth rose during the financial year by 7.8 per cent from 6.1 per cent in the corresponding previous fiscal. Aggregate accommodation including credit and investments in the corporate sector rose by 7.4 per cent from end-March to end-September 2008 against 5.5 per cent in the earlier year. The investment in SLR securities as a proportion of aggregate deposit liabilities was lower at 28.7 per cent than a year back (31.7 per cent) obviously due to disinvestment to finance credit. It was still above the minimum SLR of 25 per cent.
Cash reserve ratio stood at 9.91 per cent barely enough to maintain the statutory minimum and the level of settlement balances for inter-bank clearing.
As a consequence, there was a shortage of liquidity in the money market. The call money rate ruled considerably above the repo rate, sometimes touching 20-plus level. The banks had large-sized access to the RBI for repo operations. The problem was with the call money, and not the credit market. Call money is required for several reasons, only one of which is loans and advances of banks.
The official response to the emerging crisis was a massive unwarranted release of liquidity by the government (through fiscal reliefs) and the Bank, adding up to 7.4 per cent of Gross Domestic Product till the end of March. Much of the money has been making a round trip to the RBI through Reverse Repos, being surplus to the system’s needs. Now the chickens are coming home to roost. A medium-sized lemon costs Rs 5 in Mumbai! There has been no general recession in the economy unlike in the West. Only the growth rate of Gross Domestic Product has been affected. Even then an expected rate of around, say, 6 per cent, is no small matter
Trends in Interest Rates
There is no satisfactory explanation as to why, unlike in the West, interest rates have not come down in India as much as the central bank would like to see in relation to the large cuts it has effected in policy rates despite the common strategy of flooding the economy with money.
What is more, as a pointer to the future, bond rates in the gilt-edged market have been firm. The attempt of the RBI to enter the market to purchase government securities injecting funds that would facilitate subscription to new issues at low yields has not been successful.
Between April 9 and September 10, it sought to buy securities worth Rs 79,500 crore but could do so only to the extent of Rs 50,991 crore (64.1 per cent).
In the auctions conducted so far the Bid-Cover Ratio was below 2 in 9 out of 13 occasions, the one on September 4 touching the nadir of 1.04 per cent. (A ratio of 2 and above indicates a good demand.). The price bids were generally high and a large proportion had to be rejected.
As a result, yields are hardening for buy-backs in alternate weeks that set the benchmarks for the succeeding sale of new securities. It is exactly the opposite of what the central bank wants to achieve.
At the same time, there are massive Reverse Repo (RR) operations of banks with the RBI in excess of Rs 1 lakh crore continuously since the beginning of the current year. There have been reports of arbitrage with dollar as a carry-currency instead of yen. Does it also explain the roller coaster drive of the rupee vis-À-vis the dollar?
Why should banks prefer the RR rate of 3.25 per cent as against much the higher coupons offered on long-term securities? It has to do with market psychology and strategy. Due to the drought prevailing now there is a strong expectation of rates going up before the end of the year due to the additional borrowings of the Centre over and above what has already been announced in the Budget.
The permission given to States to raise an additional amount of Rs 21,000 crore exacerbates the situation. Hence, banks do not want to face the risk of a depreciation of their portfolios.
The strategy of banks now is to sell high and buy low in the so-called open market operations. They would be happy if the RBI continues with the buybacks. As the Americans say, a sucker is born every minute! Why should the banks give up their securities unless the prices are attractive as they can deposit the proceeds only in RR at 3.25 per cent in the absence of adequate demand for credit?
(The author is an economic consultant based in Mumbai. blfeedback@thehindu.co.in)
Realty co plans separate a/c for luxury project
Realty co plans separate a/c for luxury project
The Hindu Business Line, September 18, 2009, Page 3
S. Shanker, Mumbai
To bring in more transparency to its accounting procedure and instil greater confidence among home buyers, Bangalore-based real estate developer Lalith Gangadhar Constructions (an investee company of Kotak Realty Fund) will maintain an exclusive construction escrow account with a bank (Kotak Bank) for the LGCL-Ashlar project it is developing in Garden City.
The Rs 150-crore project comprises 63 villas on 7.75 acres, each carrying a minimum price tag of Rs 2 crore.
The developer plans to launch two more luxury format projects.
The company will keep the budgeted construction cost for the project in a separate construction escrow account from payments received from the home-buyers. The funds here will be used solely for project construction.
Assurance guaranteed
Mr Girish Puravankara, Managing Director of LGCL Developers, said, “This is a major initiative from us to give utmost comfort to our buyers. We realised that home buyers need an assurance that their investment is in safe hands. The escrow account provides added safety as well as increases transparency for our customers in a market where a lot of real estate projects are stuck because of the diversion of sales proceeds received from the customers for non-construction purposes.”
The escrow account procedure is said to be widely followed in the US, UK and Australia. Mr Puravankara said the company would alone operate the account and that the transactions were beyond the purview of buyers who had made their bookings. The account would be operated in accordance to a method the firm’s Board had decided upon.
The Associated Chambers of Commerce and Industry of India has brought out a white paper to make it mandatory for real estate developers to open up an escrow account to ensure transparency in transactions.
Raymond diversifies into real estate business
Raymond diversifies into real estate business
Business Standard, September 18, 2009, Page 3
BS Reporter / Mumbai
Raymond, the Singhania group’s flagship company, has forayed into real estate development. The board of the company today approved using 15-20 acres of surplus land in Thane for developing affordable residential property. The real estate development would be handled by a division of Raymond.
“Depending on the response to this project, we will decide our future strategy for the real estate business,” Chairman and Managing Director Gautam Singhania said.
Mumbai-based Raymond is the world’s third-largest maker of worsted fabric, used in making men’s suits. The company has a plant in Mumbai’s neighbouring town, Thane, which has surplus land. It declined to specify the full size of the surplus, but just said 15-20 acres had been earmarked for the first phase of development.
“The plant will remain there. We will use a part of the surplus land according to the regulatory approvals we have received,” said Singhania.
He declined to give any details regarding the investment or time frame for the projects. “We have just got the board’s approval. Now we will look into details,” he said. The company is appointing an internal team to start with. It would gradually recruit experts for the real estate business.
The realty sector has caught the fancy of quite a few textile companies, including Bombay Dyeing, Century Textiles and Alok Industries. Since most textile mills in Mumbai have shifted operations to the hinterland of Maharashtra or Gujarat, the land thus freed is being used by real estate developers for building residential and commercial complexes.
The textile industry has failed to attract foreign direct investment and, with the slump in the international markets, textile companies are venturing into different sectors.
For instance, Century Textiles had shut operations in Mumbai’s Worli area last year. The 30 acres owned by the Birla company is to be converted into commercial real estate, especially for IT and IT-enabled services.
The company had reported Rs 231 crore of loss for the financial year 2008-09, against a profit of Rs 18 crore in the previous year. The revenue of the company for 2008-09 grew to Rs 2,628 crore, against Rs 2,444 crore in the previous year.
Mumbai towers
Mumbai towers
The Hindu Business Line, September 18, 2009, Life, Page 1
Space-starved metro sees the only way to go, and grow, is up. A slew of 50-plus-storey buildings are rising right in the heart of the city..
Aruna Rathod
From mill lands to malls and from shanties to skyscrapers, Mumbai’s skyline is changing. In just a matter of months, a string of 50-plus-storey buildings will tower up in the heart of the metropolis. Take, for instance, areas like Lalbaug, Parel and Sewri, which until a few years ago were middle-class settlements housing mill workers and lower income groups, but now have apartments that cost upwards of Rs 5 crore.
Lower Parel itself is in the middle of a metamorphosis, with old dilapidated structures being pulled down to make way for sprawling malls, glossy office buildings and skyscrapers to house the well-heeled. Its newest landmark is the 65-storey Indiabulls Sky, offering ‘private residences’ with all the attendant luxuries, of course at a price. Just a stone’s throw away, the 75-storey Jupiter Mills Tower is coming up as also the 80-storey Raheja Platinum and Waves buildings in Worli, followed closely by the 65-storey Dynamix-Balwas project at Marine Lines, and the 60-storey twin towers in Tardeo. The 45-storey Shreepati Arcade at Nana Chowk, which was the tallest building in the country until a few years ago, is already way behind in the reach-for-the-sky race.
No choice but vertical?
The reason Mumbai is going vertical is that it is the only solution. Builders and architects are concentrating on skyscrapers primarily because they are convenient — you can create a lot of real estate out of a relatively small ground area. High-rises seem to be the only option for a congested city like Mumbai.
Architect Hafeez Contractor, the pioneer of superstructures in Mumbai, says, “We have to accept high-rises as fait accompli. Mumbai has a population of 18 million and the area is only 470 sq km; when you are looking at such a large population over a small area of land, vertical is the only way to go.” He predicts that the city’s population will increase to 30 million in the years to come. “How will Mumbai deal with this rise? The only answer for Mumbai is to increase the FSI (Floor Space Index), only when we do it will the city get on its own feet and earn more. Right now, there are illegal constructions and they are utilising the facilities of the city.”
Suburbs rising
If Mumbai is growing into the sky, the suburbs are not far behind. The 33-storey Heritage building, constructed by the Hiranandani Group at Powai, happens to be the tallest in the suburbs. A staunch believer in high-rises, Surendra Hiranandi, Managing Director, Hiranandani Constructions, echoes Contractor’s view. He adds, “We have the lowest FSI in the world and it is time we get higher FSI for better development. For the housing problems in Mumbai to be solved we need to go vertical. A fairytale solution is to have one’s cottage with a vegetable garden, but that is just not possible in India. Low-rises are a luxury and perfect for rich countries while for developing countries it is high-rises. I believe that high-rises are a solution not only for Mumbai but for India.”
Interestingly though, high-rises are an expensive proposition for the builders too. Real-estate consultant Sunil Bajaj says, “As you increase the number of floors, the proportionate construction cost of the building goes up substantially. But with high-rises, residents get good ventilation and natural light, space for wide roads, open spaces, adequate parking, provision for drainage, children’s parks, while the builders get better rates for their projects.” According to Bajaj, people today are upwardly mobile and high-rises are a worldwide phenomenon.
High pressure
But much as the developers are bullish about going vertical, there are others who are sceptical about the unchecked growth. Like architect Mukesh Mehta, who believes that infrastructure is the lifeline of a city and it shouldn’t be put under pressure. “We need to go vertical but this is not a permanent solution. At some point even these spaces will be exhausted. The island city of Mumbai is already developed, now we need to develop accessibility to the mainland, concentrating on places like Borivili (western suburb of Mumbai) and Navi Mumbai (a satellite township). What needs to be done is to provide better infrastructure like transportation, as buildings, small or tall, will always come up.”
It’s not only Mumbai but also its counter-magnet satellite city across the creek — Navi Mumbai — that is going vertical with a vengeance. The entire 8-km stretch of Palm Beach Road, with mangroves on one side, is dotted with more than 100 high-rises on the other side. “Palm Beach Road is the Queen’s necklace of Navi Mumbai, and the high-rises are its sparkling jewels,” says Bajaj.
Meanwhile, Neev group has announced the construction of a 32-storey building called Ivory Tower in the centrally located Prabhadevi area.
Company head Jitendra Jain said the prime location would make it convenient for buyers to commute to the commercial hubs of the city. The project will sprawl across 2.13 lakh sq. ft.
Some of the group’s other projects include Darshan Heights — a residential tower at Elphinstone; Shree Jayant Darshan — a niche 24-storey tower at Nana Chowk; and Darshan Pride — a 19-storey residential property at Tardeo. All the projects are in the heart of Mumbai city.
The Hindu Business Line, September 18, 2009, Life, Page 1
Space-starved metro sees the only way to go, and grow, is up. A slew of 50-plus-storey buildings are rising right in the heart of the city..
Aruna Rathod
From mill lands to malls and from shanties to skyscrapers, Mumbai’s skyline is changing. In just a matter of months, a string of 50-plus-storey buildings will tower up in the heart of the metropolis. Take, for instance, areas like Lalbaug, Parel and Sewri, which until a few years ago were middle-class settlements housing mill workers and lower income groups, but now have apartments that cost upwards of Rs 5 crore.
Lower Parel itself is in the middle of a metamorphosis, with old dilapidated structures being pulled down to make way for sprawling malls, glossy office buildings and skyscrapers to house the well-heeled. Its newest landmark is the 65-storey Indiabulls Sky, offering ‘private residences’ with all the attendant luxuries, of course at a price. Just a stone’s throw away, the 75-storey Jupiter Mills Tower is coming up as also the 80-storey Raheja Platinum and Waves buildings in Worli, followed closely by the 65-storey Dynamix-Balwas project at Marine Lines, and the 60-storey twin towers in Tardeo. The 45-storey Shreepati Arcade at Nana Chowk, which was the tallest building in the country until a few years ago, is already way behind in the reach-for-the-sky race.
No choice but vertical?
The reason Mumbai is going vertical is that it is the only solution. Builders and architects are concentrating on skyscrapers primarily because they are convenient — you can create a lot of real estate out of a relatively small ground area. High-rises seem to be the only option for a congested city like Mumbai.
Architect Hafeez Contractor, the pioneer of superstructures in Mumbai, says, “We have to accept high-rises as fait accompli. Mumbai has a population of 18 million and the area is only 470 sq km; when you are looking at such a large population over a small area of land, vertical is the only way to go.” He predicts that the city’s population will increase to 30 million in the years to come. “How will Mumbai deal with this rise? The only answer for Mumbai is to increase the FSI (Floor Space Index), only when we do it will the city get on its own feet and earn more. Right now, there are illegal constructions and they are utilising the facilities of the city.”
Suburbs rising
If Mumbai is growing into the sky, the suburbs are not far behind. The 33-storey Heritage building, constructed by the Hiranandani Group at Powai, happens to be the tallest in the suburbs. A staunch believer in high-rises, Surendra Hiranandi, Managing Director, Hiranandani Constructions, echoes Contractor’s view. He adds, “We have the lowest FSI in the world and it is time we get higher FSI for better development. For the housing problems in Mumbai to be solved we need to go vertical. A fairytale solution is to have one’s cottage with a vegetable garden, but that is just not possible in India. Low-rises are a luxury and perfect for rich countries while for developing countries it is high-rises. I believe that high-rises are a solution not only for Mumbai but for India.”
Interestingly though, high-rises are an expensive proposition for the builders too. Real-estate consultant Sunil Bajaj says, “As you increase the number of floors, the proportionate construction cost of the building goes up substantially. But with high-rises, residents get good ventilation and natural light, space for wide roads, open spaces, adequate parking, provision for drainage, children’s parks, while the builders get better rates for their projects.” According to Bajaj, people today are upwardly mobile and high-rises are a worldwide phenomenon.
High pressure
But much as the developers are bullish about going vertical, there are others who are sceptical about the unchecked growth. Like architect Mukesh Mehta, who believes that infrastructure is the lifeline of a city and it shouldn’t be put under pressure. “We need to go vertical but this is not a permanent solution. At some point even these spaces will be exhausted. The island city of Mumbai is already developed, now we need to develop accessibility to the mainland, concentrating on places like Borivili (western suburb of Mumbai) and Navi Mumbai (a satellite township). What needs to be done is to provide better infrastructure like transportation, as buildings, small or tall, will always come up.”
It’s not only Mumbai but also its counter-magnet satellite city across the creek — Navi Mumbai — that is going vertical with a vengeance. The entire 8-km stretch of Palm Beach Road, with mangroves on one side, is dotted with more than 100 high-rises on the other side. “Palm Beach Road is the Queen’s necklace of Navi Mumbai, and the high-rises are its sparkling jewels,” says Bajaj.
Meanwhile, Neev group has announced the construction of a 32-storey building called Ivory Tower in the centrally located Prabhadevi area.
Company head Jitendra Jain said the prime location would make it convenient for buyers to commute to the commercial hubs of the city. The project will sprawl across 2.13 lakh sq. ft.
Some of the group’s other projects include Darshan Heights — a residential tower at Elphinstone; Shree Jayant Darshan — a niche 24-storey tower at Nana Chowk; and Darshan Pride — a 19-storey residential property at Tardeo. All the projects are in the heart of Mumbai city.
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