Golden Gujarat

Special Feature

Golden Gujarat

Golden Gujarat

01 Jun 2011 Long Read

The construction industry is in top gear in this vibrant state, says Janaki Krishnamoorthi.

For starters, just take a look at these facts and figures: In the past decade, Rs 99,805 crore has been invested in infrastructure in Gujarat, and the investment planned for the next decade is Rs 1,180,912. In November 2010, the Union Ministry of Commerce and Industries accorded approvals to 60 special economic zones (SEZs) in Gujarat, and the total proposed investment by SEZ developers will amount to approximately Rs 2,67,373 crore. During the Vibrant Gujarat Global Investors Summit (VGGIS) in January 2011, memorandums of understanding (MoUs) worth $450 billion were signed. And more are in the pipeline, with several companies like Reliance Industries, Hindustan Construction Company, Binani Cement and Adani Group evincing interest in projects ranging from power and ports to chemical and cement plants.

This is no flash in the pan – indeed, it has been the trend in the state for nearly a decade now, especially since 2003, when the government began to organise the biennial VGGIS. Little wonder then, that the state has made amazing progress in the past few years in various industrial segments, leading to its all-round development.

"Gujarat accounts for only 5.96 per cent of Indias total area but 22 per cent of the countrys total investment," says Industries Commissioner of Gujarat, Bidyut Swain. "It has emerged as one of the leading industrialised states in India, contributing nearly 16.1 per cent to the countrys industrial output. During the Tenth Five Year Plan (2002-2007), the Gross State Domestic Product (GSDP) was 10.4 per cent at constant prices. In 2008-09, the GSDP grew at 10.2 per cent at constant prices. The targeted GDP for the Eleventh Five Year Plan (2007 to 2012) is 10.2 per cent as set by the Government of India," he says, adding that the augmentation in the manufacturing, power, communication and construction sectors has contributed immensely to the growth process in 2009-10.

Plans are afoot to align, upgrade and enhance other sectors as well, many of which are concentrated in specific areas having emerged under the governments cluster development schemes. For instance, textiles and related manufacturing are largely in Ahmedabad; engineering is concentrated in Vadodara; gold, jewellery and salt-related industries are located in Rajkot; and chemical and allied industries are in the Ankleshwar and Dahej region.

Infrastructure in step

The remarkable industrial and economic growth naturally calls for enhanced infrastructure. This realisation led the government to establish the Gujarat Infrastructure Development Board (GIDB) in 1995 and give it a statutory status by enacting the Gujarat Infrastructure Development (GID) Act 1999.

"Gujarat is a state where infrastructure development has kept pace with economic development," maintains AK Sharma, Chief Executive Officer, GIDB. "In fact, infrastructure is driving growth in many sectors. For example, ports are driving port-linked industries, while SEZs and roads are driving industrial investment and institutional development in far-flung areas. Gujarat was the first state in the country to enact a law outlining the system of public-private partnership (PPP) in infrastructure projects and is a frontrunner in the development of infrastructure," he says.

Some key private sector initiatives in the state include development of Mundra, Pipavav and Hazira ports; Gujarat Chemical Port Terminal – Indias only chemical port; the Ahmedabad-Mehsana and Vadodara-Halol highways; Watrak and Zadeshwa bridges; the Gujarat State Wide Area Network and Info City. Forty-nine projects under PPP totaling an investment of Rs 26,670 crore have been implemented between 1998 and 2010 – the largest in the port and roads sector. Another 104 projects are in the pipeline.

The state is keen on and committed to transferring its expertise and track record in PPP in physical infrastructure to the social infrastructure sector. "While the focus on building robust physical and industrial infrastructure continues, a number of projects including slum rehabilitation, water management, multilevel parking, bus terminals, tourism projects, hospitals and educational institutions have also been taken up in the PPP mode in the social sector," reveals Sharma.

Realty gains

Evidently large-scale infrastructure projects, IT parks, SEZs and urbanisation have been the major driving force behind the construction boom in Gujarat. "The real-estate graph is on the rise owing to the industrial revolution, development supportive policy initiatives and encouraging living standards," affirms Jaxay Shah, Vice-President, Confederation of Real Estate Developers Associations of India (CREDAI). "The growing demand for real-estate brokers in the region says it all."

At the recently concluded VGGIS 2011, plans for real-estate projects figured prominently in proposed investments, with builders from across India evincing their interest in them. "Through VGGIS, the Gujarat Government aims to attract investments of over Rs 10,000 crore in the construction industry and this will create new opportunities," adds Shah. "Around 50 members of CREDAI have signed investment agreements worth Rs 15,000 crore at the recent summit, mostly for housing projects."

The Gujarat Government has many more plans to further boost the real-estate segment. These include a recently announced policy for slum development by private developers, plans to set up special investment regions (SIRs) with world-class infrastructure and premium civic amenities and creating twin cities on the lines of New York and New Jersey. "These cities would be designed on a human scale with affordable mass transportation systems, houses and congestion-free wide roads," elaborates Swain. "While the government announced plans for a larger metropolitan authority for Ahmedabad Gandhinagar, the cities of Prabhas Patan-Somnath, Surendranagar-Wadhwan, Bharuch Ankleshwar and Surat-Navsari are slated to be the next set of twin cities."

Developers drive in

It is not only the local builders who are cashing in on the construction boom. Developers from all over India have been trooping into Gujarat, including renowned companies like Tata Housing, Godrej Properties, India Bulls, K Raheja , DLF, Everest Developers, Hiranandani Group, Ackruti City, Sahara Housing, Ajmera Group, Acme Group, Emmar and Mahindra Lifespaces, who are investing in housing, hospitality and infrastructure in various cities like Ahmedabad, Vadodara and Surat. Some of them are also joining hands with local developers. Two factors underlying this shift are lower land costs and the single-window clearance policy of the government.

"There are several factors that entice developers to Gujarat, such as its highest GDP growth rate, stable policy regime, high quality infrastructure and rapid urbanisation," says Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing Development Company Ltd (THDCL). "In 1991-2001, Gujarat witnessed a growth rate of 33 per cent in urbanisation compared to 21 per cent in the country. The governments outlay for urban development for 2010-11 is Rs 30 billion. In the past five years, there has been an approximately tenfold increase in the budget of the Urban Development Department. The state government is very supportive in terms of investment in the real-estate sector; as a result, Gujarat has the second largest number of projects in the country."

THDCL has signed an MoU with the Gujarat Government to invest an amount of Rs 1,000 crore for developing two integrated townships. The company has also entered into a strategic partnership with Arvind Ltd, and together, they have floated a 50:50 JV for the project. The JV will develop an integrated township spread over 134 acre in the western outskirts of Ahmedabad that will include residential, commercial and retail spaces, a hospital, school and other civic amenities. "Today, with infrastructural development at its peak and real estate witnessing steady growth, we envisage a phenomenal rise in the demand for both residential and commercial complexes all over the region," adds Banerjee. "This is why we decided to expand our presence in Gujarat." Shah seconds this, saying, "The IT sector boom and industrial development have increased job opportunities leading to the influx of people looking for business growth, employment and a prosperous life. NRIs coming back to their motherland, particularly NRI techies, have also boosted the demand for high-end flats and world class facility-equipped commercial complexes"

Players, projects, places

Clearly, developers are rising to meet the surging demand. While commercial projects are vying to benchmark themselves to international standards, residential projects are trying to meet the demands of both the premium and affordable segments, varying from small developments to large townships and mixed developments. Many of the developments are in and around Ahmedabad with some spilling over to Vadodara, Surat, Bhavnagar and Rajkot.

Apart from the Tata-Arvind township, Tata Housing has plans for one more project in Gujarat, which is at a nascent stage. Other major projects include Shantigram, Adani Groups integrated township located near the Narmada Canal, Ahmedabad, which will have residential (including some for low-income groups) and commercial complexes with a golf course, cric-ket stadium with pavilions, an Olympic-size athletic track and football ground apart from other common amenities. This group also plans to set up an integrated township in Mundra and Surat. Gokul Group, an Ahmedabad-based conglomerate, has forayed into realty with Swa, its residential project near Chandkheda in Ahmedabad. Spread over 60 acre, it will house around 190 plots with a business centre, helipad, primary clinic, café, clubhouse and hypermarket.

The Godrej Garden City project located in Jagatpur village in Ahmedabad is in its third phase of development. "The project has witnessed record sales in all three phases launched till date," states Milind Korde, Managing Director, Godrej Properties Ltd. "This is amongst the 16 projects selected for the Climate Positive Development Programme by the Clinton Climate Initiative (CCI) worldwide. Spread over 250 acre, it will house over 13,000 apartments and villas, commercial spaces with scenic landscaping and open areas. We also plan to create facilities for education, healthcare, recreation, hospitality, retail and banking within the development. It will be a world-class, sustainably designed city within a city that gives residents an efficiently planned and designed development to live, work and play." The master plan has been created by world-renowned architects Skidmore, Owings and Merrill and construction is being carried out by L&T.

Other major projects include Parshwanath Esquare, Ahmedabad; Alpha One Ahmedabad; Apple Woods, Ahmedabad; Kensville, Ahmedabad and Mahindra Spaces Mahindra World City, Dholera (township).

Many more are in the pipeline. Hiranandani Group has reportedly acquired nearly 25 acre of land in Ahmedabad with plans to develop a township. Ackruti City, which is in the process of signing an agreement with the Gujarat government for redevelopment of four old bus depots at Ahmedabad and Mehsana through PPP, is planning to get into residential and commercial developments in the future. "This will happen after two to three years," says Naveen Soni, Head PR & Investor Relations, Ackruti City. "Against the depot redevelopment, we will receive a preset that we will use to develop residential or commercial projects."

Owing to the rapid pace of growth, real-estate prices in prime areas are rising, but there is a price correction in the offing, according to Banerjee. "It is a known fact that NRIs are among the major investors in Gujarat residential property and this makes real-estate developers focus on luring them to invest. The real-estate market is giving a mixed response. Investors from outside Gujarat are pumping in money to secure land. They believe there is a bright future for real estate in the long run in Ahmedabad. However, the overpriced market also foresees a slight correction in the residential segment."

Effects on the equipment industry

The construction boom has had an impact on allied industries too, including the equipment manufacturing industry. Apart from increasing demand for machinery in general, the emphasis is on sophisticated modern equipment. And manufacturers have geared up to cope with the demand. Kiran Pandya, Managing Director, Capious Roadtech Pvt Ltd, says, "We have increased our production capacity and added a few more machines for asphalt as well as concrete, keeping in mind the future domestic and international market."

Mitul A Patel, Managing Director, Apollo Infratech Pvt Ltd, concurs, "At present, equipment manufacturers are able to meet the demand. Our company is one of the fastest growing; we provide the latest quality equipment. Not only do we have sufficient stock of equipment to meet market demand, our production plans, which are reviewed every 15 days, are also capable of meeting any future demand."

For this company, too, Gujarat holds an important place. "Being a trade and business centre for ages, the state has an edge over its counterparts," Patel says. "Heavy urbanisation – there is a town or city every 30 km – and industrialisation helps create a financially viable environment for big infrastructure projects, and all of them need the kind of machinery we manufacture. Now, the construction industry needs to be strictly monitored and regularised for quality and strength; if stricter rules and norms are in place, people will automatically switch to automisation from unscientific traditional methods of construction."

Others, too, have put forward their suggestions to make Gujarat more attractive and vibrant to realty investors. Some of these suggestions include better connectivity and transport and reduction in the number of NOCs (around 40 are now required) to ease the project approval process. But, while there is evidently room for improvement all round, there is complete consensus on one point: the construction industry is in top gear in Gujarat.

What makes Gujarat an ideal destination for business?

"Infrastructure development has kept pace with economic development." - AK Sharma, Chief Executive Officer, GIDB

"The Urban Development Department has seen a tenfold increase in its budget in the past five years." - Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing Development Company Ltd (THDCL)

"CCI has selected Godrej Garden City for the Climate Positive Development Programme."- Milind Korde, Managing Director, Godrej Properties Ltd

"Heavy urbanisation and industrialisation help create a financially viable environment for big infrastructure projects."- Mitul A Patel, Managing Director, Apollo Infratech Pvt Ltd.

"We have increased our production capacity keeping in mind the future domestic and international market." - Kiran Pandya, Managing Director, Capious Roadtech Pvt Ltd

"Gujarat contributes nearly 16.1 per cent to India's industrial output."- Bidyut Swain, Industries Commissioner, Gujarat

"Through VGGIS, the government aims to attract over Rs 10,000 crore investments."- Jaxay Shah, Vice-President, CREDAI

"We will receive a preset against the depot redevelopment plan for residential or commercial projects." - Naveen Soni, Head PR & Investor Relations, Ackruti City

Quick Bytes:

• Gujarat has witnessed amazing progress in the past few years.
• The state accounts for 22 per cent of the country's total investment.
• Infrastructure development has kept pace with economic development.
• Lower land costs and the single window clearance policy of the government is attracting developers from all over India.
• The state has seen a surge in the number of real estate projects.

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Golden Gujarat June 2011
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