DENOTIFIED SEZS TO REFUND SOPS
Amiti Sen, New Delhi
The Economic Times
Developers of denotified special economic zones (SEZs) will have to refund tax sops given by the government, according to new rules on the anvil, a government official said. The government has found it necessary to draw up rules for denotification of SEZs after some developers recently sought permission to close projects due to the economic slowdown and contraction in demand.
The new rules are likely to disallow denotification if a considerable amount of construction has happened in the zone or if units have come up there. Denotification would be voluntary.
A SEZ developer gets a number of tax sops, including exemption from customs duties and excise on goods used in the project and from payment of income tax. “All the sops enjoyed by the developer have to be necessarily paid back with interest before the denotification is allowed. This will be a prominent part of the rules,” the official said.
The rules will be kept flexible to deal with fresh issues raised by new cases, the official said, on the condition of anonymity. “Once the rules are framed by the government, they would act as a guide for the board of approval (BoA) for SEZs to deal with denotification applications. As and when the board feels the need, appropriate changes or additions could be made to the rules,” he added.
The BoA for SEZs, which is chaired by the commerce secretary and includes members from finance, revenue, home and agriculture departments, decides on all applications related to SEZs, including approval, notification as well as denotification.
There would also be no denotification if the developer does not want it. “There would be no coercion. If developers are law-abiding and have not broken any rules, then the government cannot denotify their zones,” the official added.
Earlier this month, real estate major DLF got in-principal approval to denotify four of its IT/ITES SEZs. The government will formally denotify the zones once DLF pays back all the tax saved, pegged at Rs 6-7 crore, through exemption from customs, excise, service tax and income tax. The amount is being verified by the commerce department.
Raheja Universal has also applied for denotifying its IT/ITES SEZ in Navi Mumbai, and reducing by half the size of its second SEZ in the region. “Once we have the denotification rules in place, it will be easier for the BoA to decide on cases of denotification as they will have set rules to follow.
We would also be adhering to the law ministry’s view that if something can be legally notified, there should also be provisions for its denotification,” the official added. As of March 31 2009, the government has formally approved 568 SEZs in the country, of which 311 have been notified and ready to start operations, with 90 already operative.
GREATER NOIDA GETS ITS FIRST IT PARK
Ashok Kumar, Prachi Raturi Misra & Saikat Neogi
The Financial Express
Wegmans Industries Pvt Ltd has completed construction of an IT park in Greater Noida, near Delhi. This is a part of the Business Park, which envisages a four-star hotel, shopping malls and residential areas as well.
“The IT park, which forms part of a business park, has been completed as the first phase of the project. In the second phase, there would be a mall, 200 service apartments and a four-star hotel. This ten-acre project will see an investment of Rs 250 crore,” says Surendra Kumar Gupta, chairman, Wegmans Industries.
Elaborating about his plans, he says, “The entire earthquake resistant business park will also have studio apartments to supplement the four-star hotel.”
Gupta believes that the IT park will usher in a new phase of development in the NCR region. “This IT Park will give direct employment to about 5,000 people, and also generate indirect employment in the area,” he says.
Talking about the prospects of the business park amid economic downturn, Gupta says that India will continue to be the IT leader because of cheap availability of skilled manpower. “IT is down but not out and we will always have a competitive edge because of low-cost engineers in India,” says Gupta. He adds that high-end products are in good demand owing to the comprehensive range of services.
TELECOM FIRMS BAIL OUT IT PARKS
D Govardan
Financial Chronicle
A pulsating IT & ITeS sector has changed Chennai’s skyline over the past five years. IT parks have sprang up everywhere, including the congested T Nagar, in suburbs such Guindy, Manapakkam and the city’s outskirts like OMR (the city’s IT corridor also called Old Mahabalipuram Road) and Ambattur.
Property developers opted to develop IT parks (both STPI and SEZ), leading to an oversupply, which put pressure on lease rentals.
Suddenly, when the global downturn struck, and order books started thinning, the IT parks found few takers.
Thankfully, the telecom industry, growing at a scorching pace, has provided a glimmer of hope to commercial property developers in Chennai.
With the government issuing new licences and permitting some of the existing players to enter new circles, the commercial property market has once again started buzzing with activity. Though nowhere comparable to the space appetite of the IT sector, the telecom sector, nevertheless, has enthused property developers.
“Earlier, IT companies used to drive the absorption of space. Now, telecom companies are doing it,” says Rajesh Babu, chief consultant, Recs Group, a fast growing property advisory firm based out of Chennai.
Telecom players such as Sistema, Datacom, Idea and Swan Telecom have already leased IT space, varying between 20,000 sq ft and 60,000 sq ft across the city. For instance, Swan Telecom (Etisalat) had taken 60,000 sq ft on lease at India Land in Ambattur.
Support service providers such as call centres and tower operators too have joined the fray. Indus Tower has taken on lease 20,000 sq ft in an IT Park in Ikkaatuthangal.
“The trend is likely to improve with more players set to join the fray by launching their services. Some of these players are also likely to establish their back office operations in the city,” says Rajesh Babu. “Chennai is a popular destination for business houses across sectors. These telecom players too will prefer to have a base in Chennai, even while expanding their operations across Tamil Nadu,” he added.
While a majority of telecom players prefer taking up space in the 20,000–40,000 sq ft range, the support service providers are going in for smaller spaces. Still, these cumulatively account for large space absorption without drawing the market’s attention.
“Thanks to the new licences and circles, we have seen an influx of telecom companies. They are looking at only IT parks that have 100 percent power back-up and better infrastructure,” says Jaggy Marwaha, head of leasing, RMZ Corp, a Bangalore-based property developer with IT parks in Chennai and other cities.
At least four telecom companies seem to have already taken up spaces in RMZ Corp’s IT park, just off OMR at Perungudi. These include Datacom and Swan Telecom. Companies such as Unitech are looking for suitable spaces. “Telecom is one industry that continues to show considerable resilience and is absorbing space,” says Marwaha. Until the revival of IT/ITeS sector, property developers seem happy to dial up telcos for letting out space.
STATE CLEARS PROPOSALS WORTH RS. 10,958 CRORE
Bangalore
The Hindu
The State Government on Wednesday cleared 24 projects with an investment of Rs. 10,958 crore. These projects are expected to provide employment to 60,138 people.
The approval was granted at a meeting of the State High Level Clearance Committee held here under the chairmanship of Chief Minister B.S. Yeddyurappa.
The investment proposals include four iron and steel firms to be set up at an estimated cost of Rs. 3,999.47 crore; a 435-MW thermal power plant to be set up by the Chennai-based Surana Power Ltd. in Raichur at a cost of Rs. 2,398 crore.
Two wind power projects — one with a capacity of 24 MW and another with a capacity of 10 MW — too were cleared to be set up in Belgaum and Gadag districts respectively. The Belgaum-based Vishwanath Sugar Limited, a company owned by the family members of Horticulture Minister Umesh Katti, has got permission to enhance its sugar mill’s crushing capacity from the present 2,500 tonnes of cane per day to 5,500 tonnes.
Proposals for setting up an ITES park with an investment of Rs. 459 crore and an ITES Special Economic Zone with an investment of Rs. 615 crore were also cleared at the meeting, which was attended by several Ministers.
The district-wise break-up of the investment proposals shows that Raichur has got clearance for the highest investment of Rs. 2,398 crore followed by Haveri (Rs. 1,800 crore) and Bagalkot (Rs. 1,500 crore). Bangalore city has got two projects with an investment of 1,090.31 crore.
COIMBATORE HAS TO TIDE OVER SLUGGISH PHASE IN REALTY
Coimbatore
The Economic Times
Laxity in promoting Coimbatore as next IT destination after Chennai, time-consuming approval process, speculative land prices, conservative nature of people and lack of political clout are some of the key reasons identified behind the sluggish growth in real estate in the techcity.
Speakers at a forum organised by Confederation of Indian Industry (Coimbatore) and Jones Lang LaSalle Meghraj (JLLM) here on Tuesday. However, believed the realty sector has enough potential and it is poised to pick up growth in about six months to one-year.
In his presentation on Coimbatore Edge, Ramesh Nair, managing director of JLLM, Chennai and Hyderabad regions said branding Coimbatore, as a single entity is very important for the growth of the city. Also, the city has the capabilities to be promoted as a highly promising alternative IT/ ITES and a biotech destination.
"There is a huge potential for local, national as well as international developers in the real estate sector in Coimbatore," Abhishek Kiran Gupta, Head – Research, JLLM said. He cited high literacy rate, more number of people graduating out of many renowned colleges and the city’s contribution to the growth in the per capita income of the country.
"Coimbatore is a self-made city and we haven’t had a trigger point yet. If only the city had got an IT park five years ago when Chennai got it in 2000, it would have propelled a greater growth today," said Ashok Bakthavathsalam, managing director, KG Information Systems.
D R Sekar, chairman, Builders Association of India (BAI), Coimbatore Chapter added that getting approvals for land and buildings have been a difficult and laborious process in Coimbatore and whole of Tamil Nadu.
"Compared to other neighbouring states, the approval process takes a long time in TN and therefore all promoters are shying away from investing in the state," he said, adding a single window system is the need of the hour.
Rajesh B Lund, vice president of Confederation of Real Estate Developers Association of India (TN) said, apart from the delay in approvals, the market fell when the new projects were about to take-off. "It led to a lull in the construction industry," he added.
Of the proposed seven SEZs in Coimbatore, only three including Tidel Park are under construction now. Likewise, many companies evinced interest to build malls in the city but today only two projects – Brooke Fields and Fun Republic are getting ready. "The lack of night life in Coimbatore and the delay in IT infrastructure has led to slowdown among retail mall developers," said A Sridharan, managing director, Covai Propery Centre.
"Coimbatore is not a modern city and it is also conservative and not used to mall culture. But, after these two malls start operations, people will get used to it," added Sekar. Also, with the new generation starting to work, the city is bound to catch up with experiencing a new culture", he said.
On land values, Rajesh Lund said though prices have dropped drastically compared to the all-time high in 2007-08, the landowners still stick to the high prices and are not willing to sell lands. About the city attracting big investments, he added, once infrastructure falls in place investments would automatically flow in. He also hoped that non-resident Coimbatoreans would return to the city and invest here. Ashok added that with the opening of the Tidel Park and the IT-SEZ in Keerenatham village, nearly 16,000 seats would be created in another 1 to 1.5 years time.
"If these new professionals are to come to the city, then there would be huge demand for affordable housing and also serviced apartments," he added. Already leading promoters in the city have planned to construct budget houses costing Rs 15 lakh to Rs 20 lakh each.
HDFC branch head S Ramesh Kumar expected the market to pick up since the costs have come down. "Also with the fall in interest rates , a large number of people would be attracted to real estate now," he said, adding the future trend also points to a reduction in interest rates.
