Empowering projects, finance can up Maharashtra’s GDP

Empowering projects, finance can up Maharashtra’s GDP

Maharashtra is known as the growth corridor of India. It is the second most populous and third largest state by area in the country. With a population of about 112 million (equal to 12th most populous country), 52 million or about 46 per cent of the state’s population falls under the age group of ...

Maharashtra is known as the growth corridor of India. It is the second most populous and third largest state by area in the country. With a population of about 112 million (equal to 12th most populous country), 52 million or about 46 per cent of the state’s population falls under the age group of Rs 1 lakh crore were registered during September 2020 and March 2021. Industrialisation: Maharashtra generates a huge amount of employment in the country and has a resilient economy due to its diversified industrial base. “What’s more, 143 of the Indian Fortune 500 companies are headquartered here,” shares Puri. He adds that about Rs 1.7 lakh crore of exports in FY2021 happened through the state. With 31,000 operational factories as of 2020, the state provides employment to 2.8 million workers. It houses ~3.9 lakh companies, 1,200 software companies and 31 SEZs across diversified sectors. Array of ongoing projects There are over 1,500 opportunities worth more than Rs 30 lakh crore across various sectors of Maharashtra. Evidently, the state’s proposed mega projects across the spectrum provides large scale investment and development opportunities. MAHARASHTRA: PROPOSED MEGA PROJECTS ACROSS SPECTRUM Transport – 501 opportunities worth Rs 11.3 lakh crore Rs 1.1 lakh crore Mumbai-Ahmedabad High Speed Rail Project Rs 0.3 lakh crore Navghar-Balavali Multi Modal Corridor Development Project Rs 0.2 lakh crore Pune Airport Development Project Logistics – 108 opportunities worth Rs 0.4 lakh crore Rs 470.4 crore Wardha Dry Port Development Project Rs 180.2 crore Kalyan-Dombivli Water Supply Project Rs 327.3 crore Jalna Dry Port Development Project Water and Sanitation – 123 opportunities worth Rs 0.6 lakh crore Rs 0.1 lakh crore Goshikhurd (NP) Irrigation Project Rs 0.1 lakh crore Par-Tapi-Narmada Linking Development Project Rs 3,011.3 crore Damanganga-Pinjal Linking Development Project Real Estate – 83 opportunities worth Rs 0.3 lakh crore Rs 0.3 lakh crore Palava Industrial Township Rs 1,000.9 crore Nashik Residential Township Project Rs 500.5 crore Smart Commercial-Residential Township Energy – 60 opportunities worth Rs 1.2 lakh crore Rs 0.1 lakh crore Electricity Distribution for Mukhyamantri Saur Krushi Pump Yojana Rs 0.2 lakh crore HVDC Bipole Link between Western Region Rs 0.1 lakh crore LT AG Connection to HVDS Development Project Social Infrastructure – 63 opportunities worth Rs 1.2 lakh crore Rs 0.5 lakh crore Affordable Housing Construction Project Rs 0.4 lakh crore Credit Linked Subsidy Scheme Project Rs 0.1 lakh crore Beneficiary led Construction Project Communication – 15 opportunities worth Rs 13,950 lakh crore Rs 8,850 crore 4G Services by MTNL Rs 3,669.6 crore Mobile Services in 7,287 Villages Rs 1,103.9 crore Mobile Service Provision at MHA identified locations Food processing and agriculture – 59 opportunities worth Rs 906.5 lakh crore Rs 201.1 crore Phaltan Sugar Project Rs 35.2 crore Palghar Dairy Project Rs 26 crore Nashik Mineral Water Project Media and entertainment – 28 opportunities worth Rs 6,867.4 lakh crore Rs 2,614.0 crore Dadasaheb Phalke Film City Project Rs 68.9 crore Gangapur Dam Convention Centre Project (Nashik) Rs 45.2 crore Pimpri-Chinchwad Cultural Centre Project Source: Anarock Property Consultants Real estate: Attractive financing opportunities As the largest real estate market of India, the sector in Maharashtra is a key enabler of growth. It is the second highest contributor (28 per cent) to India’s FDI equity inflows. It has the lion’s share in supply and absorption. “The state accounts for 53 per cent of the total sales and 46 per cent of the total supply in the residential segment in India in the top 7 cities,” says Puri. “So, half of India makes for the other half. This is how significant Maharashtra is in terms of supply and demand. Moreover, the upcoming supply in the next three years is currently valued at Rs 1.63 lakh crore.” The commercial segment accounts for ~27% of the total office stock and offers opportunities for future REITs. Furthermore, with more than 16,000+ dilapidated buildings in Mumbai, there are also ample of significant opportunities for re-development. And, the state has a large and credible developer base that can enable this growth. Dharavi Redevelopment Project One of the pet projects of the state is the Dharavi Redevelopment Project. Known to be Asia’s biggest slum redevelopment plan worth Rs 28,500 crore, this project will change the Mumbai Metropolitan Region’s (MMR) real estate landscape. “I hope it actually hopes to see the light of the day,” says Puri. “It is a Rs 28,500-crore project and will hugely impact 67,000 beneficiary families, who will get 350 sq ft of permanent legal built-up space if this project comes through.” Data centres Mumbai is strategically located to take advantage of under sea cables and India’s largest players have their bases in Mumbai. “Data centres is one area in Maharashtra, particularly in Mumbai, that is doing really well,” avers Puri. What’s more, Mumbai and Pune account for 50 per cent (~295 MW) of the total IT power capacity. Besides, there has been strategic and private equity (PE) investments worth Rs 4,095 crore in last one year. Logistics India has warehousing stock of 77 million sq ft as of 2019 across its top 8 cities. Of this, MMR accounted for 19 per cent of the total stock, second after the NCR. Major warehousing locations in the state include the Bhiwandi, Panvel and Taloja regions. Furthermore, the reclassification of the land along the Mumbai-Nashik highway is expected to open new avenues of growth in New Bhiwandi. “A number of players like GIC, IndoSpace, ESR, have large developments undertaken and are continuing to construct in Maharashtra,” notes Puri. The platform created between GIC and ESR alone is Rs 5,625 crore, as per data from Anarock. Efficient financing modes Reforming the existing modes of financing can act as a catalyst for the development of infrastructure projects and enhance the financing and monetisation routes to increase the availability of long term capital. Municipal bonds and asset monetisation are the two most popular ways of financing projects, says Puri. He adds, “Municipal bonds is a fantastic way to be able to finance from the government’s side. If these are structured well, they are a great way to be able to finance projects. Further, many of the public sector and state governments can sell their assets and be able to utilise the proceeds for greenfield expense.” Puri suggests: Improving infrastructure financing: Capital infusion, DFI; emphasis on PPP projects, robust tariff and user-charges; and promote bond financing. Municipal bonds: Promote indirect central assistance (eg: interest subvention/credit enchantement) vis-à-vis direct cash subsidy. Value capture financing: Emphasis on cross subsidisation through land monetization; and robust policy around TDR. Asset monetization: Funds generated to be ring-fenced for future greenfield expansions; an important source of funds recognised for financing NIP; and 3-5 per cent expected share. Navigating the complexities involved Speaking about efforts to rejuvenate private sector investments, Puri suggests: PPP models in new growth sectors such as hospitals, warehousing, smart city, railways and affordable housing; acknowledging and encouraging asset monetisation as an important source of finance; exempting interest, dividend and capital gains on investment made in infrastructure projects; and create financial institution dedicated for providing funding to long gestation projects. He notes that the proposal made in Budget 2021 to make dividend payment to REIT/InvIT exempt from TDS is a positive move. “Further, if we have to navigate on the financial front, there has to be better coordination and collaboration between the states and the central government, and only then will we be able to see a lot more possibilities of funding coming in from international resources on these projects,” says Puri. The way forward As the way forward, Puri recommends the following: Improve physical and social infrastructure to support the future growth. Decentralise the growth which is currently concentrated in four to five major cities. Focus on developing Tier-II cities on the lines of Mumbai and Pune. Follow the growth model of NCR for the de-densification of Mumbai. Incentivise the re-development schemes aggressively in Mumbai. Unlock growth in high employment digital economy. Develop solar and wind farms to harness clean energy. - SERAPHINA D’SOUZA

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