Chanakya Volume I Issue II

8/14/2019 Chanakya Volume I Issue II

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ISSUE 2 May 07VOLUME 1Unveiling Indian Ports 1The Great Indian SEZStory....................... 2SEZ Fact Sheet......2

Chanak aADDRESSING THE QUEST FOR KNOWLEDGE AND PLANTING TH

SEEDS FOR THE SPRIT OF VISIONEERINThe Unveiling Indian Ports

The growth potential of the portss directly dependent on growth inworld output, world trade, andmaritime trade over the period998-2007, world output is

xpected to expand 4.1% pernnum. During 2005, the volumef world trade increased 7.2%, asompared with a growth of 10.7%n 2004. High oil and metals traderove the increase in trade.

or Indias 12 major ports, totalraffic increased 10.3% during006 to 423.41 mt. Total trafficas increased at a 3-year CAGR of0.5% and a 5-year CAGR of 8%.n terms of TEUs, total trafficncreased 9% during 2006 to 4.61MTEU.

About 80% of total volume of portsraffic handled is in the form of drynd liquid bulk, with the residualonsisting of general cargo,

ncluding containerized cargo. Oil

raffic is the major form of liquidulk traffic, accounting for around3% of total major ports traffic.

Other major traffic comprises ironre (17%), and coal (4.5%).

Container traffic of various itemsonstitutes around 15% of trafficandled at major ports and 16.3%or minor ports driven mainly by anncrease in trade in oil, iron ore,oal and other merchandise

xports.

By the end of the 10th Five Year Planperiod in 2006-07, aggregate capacityin major ports is anticipated to reach

470.60 mtpa as against projectedtraffic of 415 mt. The Indian port trafficis expected to increase at a 12-15%per annum for the next two to threeyears.

Competition

At present there are 12 major ports

and 139 minor ports in India.Vishakapatnam port is by far thelargest port in India with the volumehandled last year of 55.80 mt followedby Chennai (47.25mt) and Kandla(45.91mt). In minor ports, Gujarat hasthe maximum traffic of 95.8 mt whichis 71% of traffic at minor ports. Otherminor ports are in Andhra Pradesh(10.7%), Maharashtra (9%), and Goa(6.2%).As on March 2005, 13 privateor captive projects with a capacityaddition of about 47.6 mtpa at aninvestment of about Rs.26.62 billion

have been completed/ operationalised,while 24 others with a capacityaddition of around 100.68 mtpa and aninvestment of Rs.79.10 billion are atvarious stages of evaluation andimplementation.

Operational Efficiencies

The share of idle time at berth to total

time for major Indian ports wasactually on the rise since the decade of1980 and reached 42.8% in 1993-4and fell to 24% currently. The average

turnaround time for major Indian ports

FinancialsAll major ports put together made anoperating surplus of Rs.1852 crores in 2005

the per ton handling cost of the ports hasdecreased to Rs.74.4 in 2005.

ConclusionThe demand for handling is been increasingwith booming trade growth. With

improvements in operating efficiencies theport margins are likely to improve

impressively.

Chennai Real EstateGetting Crowded .......3

Port Snippets.........3

Economic Indicators3

Increasing Value ofRupee...................... 3Commercial Real Estatea new beginning........4Growing Home LoanRates....................... 4

ongestion and monopolistic situation of major ports, offers a huge growthpportunity to minor ports with their sleek structure and best in efficiency

arameters.

Retail to RevolutionizeReal Estate...............4


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The Great Indian SEZ Story

A great concept if implemented can aid Indiato reach her global economic ambitions.

Rs.1,000,000,000,000 orRs.1 trillion is the quantumof investment cleared by

Indian Government inMarch 06 in SEZs!

Lately SEZs are in news forall the wrong reasons.

Believe me! This article isabout creating anawareness of the benefits.

Global Scenario

Globally one of the earliestand most successful SEZ

was founded by theChinese in the early 1980s.This early SEZ, Shenzhen,has developed from a smallvillage into a thriving cityof over 10 million people

within20 years. Followingthis example, SEZs wereestablished by severalcountries, including India,Iran, Jordan, PolandKazakhstan, the Philippinesand Russia.

According to World Bankestimates, as of January 2007there are more than 3,000projects taking place in SEZs in I20 countries worldwide!

Indian Context

There are 3,186 operational unitsin 11 functional SEZs in India,providing employment to 1.10lakh persons. Exports from SEZshave increased from US$3.1billion in 2003-04 to US$4.1billion in 2004-05. SEZs havemanaged to attract investments

worth US$2.7 billion in the lasteleven months since the SEZrules were notified. The 63 SEZsnotified are expected to attractinvestments of US$14 billion.The Soros Group of the legendryGeorge Soros has evinced

interest in investing in IndianSEZs. Investors from Japan andSingapore, who have beenholding their investments in thelast decade, will now be enteringthese SEZs with hugeinvestments. While 60% of the

SEZs notified are in IT andITeS, a number of multi-product and sector specificSEZs in the area ofpharmaceuticals, bio-technology, chemicals,petrochemicals, textile,automobile and components,

electronics andengineering have alsobeen notified lately. The

lions share of the SEZs

was received by the foursouthern states with APand Karnataka leadingthe pack.

InvestmentOpportunities

No other commercialpolicy of the Governmenthas received such athump-up response from

the corporate titans andinvestment world. In less

than 10 months of theannouncement of thepolicy 600 proposals byprivate companiesenvisaging an investmentof US$22 billion in the 2-3 years have either beenapproved or awaitinggovernment clearance.ASSOCHEM hasestimated that SEZs will

create 15-17 lakh jobs inthe next 5 years andaccelerate the export

growth by 25%consecutively for the next10 years.

SEZs- Cash Cows

The most striking featureof the SEZs is the fact

Expected investment in the 63 notified SEZs are US$13.6 billion and expected togenerate employment to 15,75,500 persons

If all the 234 proposals get fructified the total investment would be to the order ofUS$74 billion and would generate 40,00,000 additional jobs

Total land requirement of all these SEZs is 1750 sq.km which is less than 0.1% of thetotal agriculture land in India and 0.005% of the total land area of India.

Exports from the notified SEZs alone are expected to cross US$25 billion by 2008-09which is 24.8% of total Indian export in 2005-06.

There are 5 SEZs in China that contribute to 10.7% of total Chinese exports.Guangdong the largest SEZ of china received approximately 25% of total FDI into

China.

SEZs FACT SHEET

that it offers the firmsequal opportunity toleverage its corecompetencies.

The SEZ promoted by theAdani group, the MundraSEZ and Adani ChemicalSEZ are expected toreceive an investment ofover US$2.7 billion. Theselect upcoming SEZs inTamil Nadu, Nokia andFlextronics are likely toprovide employment to15,800 persons by 2007end.

Conclusion

SEZs are like many goodideas, which is distortedand corrupted by political

motives, but which if donewell can jump-start Indiaglobal economic ambitions


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The demand for good real estatein Chennai has been pushing the

prices as if there is no tomorrow.

Thanks to the increasing number IT

and ITeS companies, Chennai

needs an additional 15 million ft2

of A grade office space in the next

two years.

According to property surveys,Chennai will require at least 50,000

new homes by 2020. With such a

strong demand for houses, there is

a stiff competition in the market

which has seen a spate of national

and international players entering

the market. The list includes

Rs.220 billion Alliance Group that is

all set to develop a 300-villa

project west of Chennai. The villa

4,200 ft2 home costing about Rs.6

crores.

will cost in between Rs.6o lakh to Rs.5Crores. Another player Vishranti Homes

is believed to be the costliest of all

residences with a Real estate market in

India is currently valued at $14 billion

and its annual growth rate is turned out

to be 30 per cent. Property market of

South cities is flourishing as no other.

Tamil Nadu real estate has attracted an

investment of worth Rs.30 billion in

2006-07. There are around 20 new

residential projects to be announced in

the area of Velacheri and Perungudi

which will add a stock of 2000 units in

the next two years. Mahendra City and

Singapore Township will add another

3000 units by the end of next year.

Conclusion

As the Chennai real estate market offers

high returns, the influx of national and

international players would increase in

the near future. Competition would be

the new mantra of the trade. Let the

fittest survive.

Economic Indicators

Mar07 Feb 07

Bank Credit 30% 29.6%

Deposits 25% 23.2%

Money Supply 22.1 21%

IIP 10.9% 11.1%Apr07 Mar07

Forex Reserve (bn) $187.21 $200.32

US$/Rs. Ex. Rate 41.89 44.09

Home Loan Rate 10.75% 10.25%

Forward Premium 6.28% 3.68%

The rupee is been appreciatingagainst the US dollar for the pastfew weeks. It has touched an alltime high of 41.89 beforestabilizing at 42 and odd in thepast week.

What repercussions it will have

on the real estate market? Theimpact of the appreciating rupeeis manifold on the real estatemarket.

India cannot afford to loose itsexport competitiveness with theappreciating Indian Rupee. Thiswill force RBI to intervene in the

market by buying dollars, sellingrupee.

Once RBI starts selling rupee theMoney supply (M3) in the

market will increase. This ialready evident with themoney supply increasingfrom 21% to 22.1%. This i

further likely to increase bythe end of April 08. This

force the inflation tincrease.

RBI will again intervene witan increase in CRR which wiaffect the interest rate. Witan increase interest ratespecially home loan ratethe demand for real estate ilikely to get impacted.

Increasing Value of Rupee -cause for concern

PORTSNIPPETS

As per GoI estimateIndia needs US$ 320billion investment in tnext 5 years ininfrastructure includinUS$13.5 billion in its 1major ports

On an average it takes3 days to unload and

reload a ship in Indianports against 8 hours HK ports.

In the next 5 yrscontainer traffic slatedto grow at 15.5% andcargo at 7.7%

MoS has set a target tacquire 3.9 million GRincluding 0.265 millionGRT for coastal shippiat an investment of

Rs.16,200 crores

Chennai Real Estate Getting

Crowded

Chennai is already a host to many Real Estatebiggies of India. The once conservative marketis set for unprecedented growth.


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Commercial real estate in India isturning milestones into steppingstones. Thanks to the increasingdemand from the IT and ITeSsector that continues to be the

primary driving force in the citiessuch as Pune, Hyderabad, Chennai,Bangalore, Mumbai and Delhi.Estimated demand from IT/ITESsector alone is expected to be150mn ft2 of space across themajor cities by 2010.

As per the recent data from TieLeung, the sector (IT and ITeS)accounted for 75% of the totaloffice space absorption in Pune inthe last quarter. The IT hub of thecountry, Bangalore continues to

excel at the same pace if not more.According to real estate consultantCushman & Wakefield, the Indiancommercial space absorption inApril 06 to March 07 is 40 millionft2 and Bangalore alone accountedfor 35.5% of this with theabsorption of 14.2 million ft2.Chennai takes the distant secondposition within India for the largestabsorption at 6.5 million ft2.Bangalore remains to be thenumero uno of the demand for

commercial space. This is the thirdlargest absorption of commercialspace in the world.

Delhi and NCR seen absorption of6.2 million ft2 which is a more than

double the last years absorption.The countrys financial capitalMumbai occupied 5 million f2 area,

followed by Hyderabad at 3 millionft2, Pune at 2.6 million ft2 andKolkata at 1.5million ft2.

Believe me, we havent seenanything yet! The commercial realestate developments in India are toreach the best of its phase in thewake of upcoming infrastructureactivities. With the retail revolutionpicking steam we are on for an

explosive growth. The total retailspace in India is set to go up to 90million ft2 in2007, according to areport Malls of India. Morehypermarkets, more franchises,and a spreading out to Tier IIcities, as per the report on retailmarkets in India by Ernst andYoung, will seethe retailspacesegment leading the wayforcommercial property in 2007.

RBIs tough monetary measureshave led to banks hiking their

prime lending rates to 13-14%levels. Till about 18 months back,

the interest rate on the floating-rate home loans used to bearound 7.75%. Now, its around10.75%. An individual earningRs.50,000 per month, at an

interest rate of 7.75%, would geta loan of around Rs.26.7 lakh, tobe repaid over 20 years. All theconditions remaining the same,at an interest rate of 10.5% theloan eligibility would come downto around Rs.21.7 lakh.

Any further rate hikes will reduce demandfor housing resulting in cooling down thereal estate prices. As a fall-out of hike ininterest rates, credit is expected to grow ata moderate pace of 20-25 % unlike 30%reported last year.

Demand for retail assets especiallymortgages and other big ticket loans likereal estate will decelerate. Growth in retail

assets is expected to come down from thepresent 40 per cent to about 24 per centand realty loans will fall even sharply from30-35 per cent to almost half rate of 15-20per cent.

This has already shown on real estatecompanys valuations in the stock markets.Parsvnath Developers fell 58.33% , ShobhaDevelopers fell 36.80% and MahindraGesco, subsidiary of M&M, also tumblednearly 60%. The trend is likely to continuefor a while. Watch the Space.

Growing Home Loan Rates to affectReal Estate Growth

Team Chanakya

SubramanyamHead Strategic PlanningPh: 044 2454 1111 (extn-304

D.Joel K PandianDGM-Strategic Planning

Ph: 044 2454 1111 (extn-306

Anup ChaudhryAM- Strategic PlanningPh: 044 2454 1111 (extn-308

N.Gayathri

SecretaryPh: 044 2454 1111 (extn-315

Commercial Real Estate a New Beginning

Retail To Revolutionize

Real Estate

A Retail Consumption of US$127billion (Rs.500,000 crores) will

require about 600 700 million

ft2 of additional retail space by

2011.

Current Projections onconstructions (Malls) are just

about 200 million ft2 leaving a

supply gap of almost 400 500

million ft2.

Investment to the tune ofUS$10-15 billion is required to

make up this demand supply

gap.

Additional investment of US$8-10 billion required in retail fit-

outs and related equipment.

This space is required across1000 cities in India and not

confined to the Metros.

Documents

Chanakya Volume I Issue II