Smart cities to cre­ate new realty mar­kets

Ex­pected to lead to de­mand for tech­nol­ogy-en­abled ser­vices, some­thing that’s a big pos­i­tive for IT/ITeS firms

HT Estates - - HTESTATES -

The Budget is all about smart cities, FDI and SEZs. It al­lo­cates ₹ 7,060 crore f or 100 smart cities. Build­ing 100 smart cities is the vi­sion of prime min­is­ter Naren­dra Modi and is a strong mea­sure that will tackle In­dia’s grow­ing ur­ban­i­sa­tion prob­lem and re­duce pres­sure on ex­ist­ing cities. The con­struc­tion of such cities will mo­bilise em­ploy­ment, de­velop in­fra­struc­ture and cre­ate new real es­tate mar­kets.

“Al­lo­ca­tion of funds is a step in the right di­rec­tion. How­ever, in or­der to as­cer­tain spe­cific im­pact, we have to await the spe­cific in­for­ma­tion on the lo­ca­tions, mas­ter plans and the de­vel­op­ment of sup­port­ing in­fra­struc­ture fa­cil­i­ties,” says San­jay Dutt, ex­ec­u­tive man­ag­ing di­rec­tor, South Asia, Cush­man and Wake­field.

This will have very pos­i­tive im­pli­ca­tions for real es­tate across all seg­ments, namely res­i­den­tial commercial, re­tail and hos­pi­tal­ity. Smart cities, by def­i­ni­tion, im­ply con­sid­er­able de­mand for tech­nol­ogy-en­abled ser­vices, and this is a big pos­i­tive for IT/ITeS com­pa­nies in In­dia. Sig­nif­i­cantly, as much as one- third of the coun­try’s de­mand for of­fice space em­anates from this sec­tor, says Anuj Puri, chair­man and coun­try head, JLL In­dia.

How­ever, for the smoother ex­e­cu­tion of the tar­get, ex­ist­ing land Act should be amended to make the ac­qui­si­tion easy and sim­pler, says Sachin Sand­hir, MD, RICS, South Asia.

FDI

For­eign in­vestors all this while have been cau­tious about in­vest­ing in In­dia’s real es­tate sec­tor due to which de­vel­op­ers in the coun­try have to de­pend largely on do­mes­tic cap­i­tal for a sub­stan­tial part of the fund­ing, which of­ten cov­ers the cost of land ac­quired, ex­penses dur­ing the ap­proval of the project and the con­struc­tion of units. Keep­ing the larger vi­sion of cre­at­ing smart cities and hous­ing for all, the govern­ment has pro­posed the re­duc­tion in built-up area from 50,000 square me­tre to 20,000 sq m and min­i­mum cap­i­tal­i­sa­tion from 10 mil­lion to 5 mil­lion. This is def­i­nitely a pos­i­tive step for the hous­ing sec­tor. The re­duc­tion in built-up area and size of projects will al­low mid- sized and smaller de­vel­op­ers with good track records bet­ter ac­cess to for­eign di­rect in­vest­ment and boost af­ford­able hous­ing in the coun­try. At present, group-hous­ing projects (apart­ments) are el­i­gi­ble for FDI if the to­tal built-up area is at least 50,000 sq m.

This would en­able FDI play­ers to take up projects in both Tier 1 (where land was scarce for projects re­quir­ing 50,000 sq m built-up area) and Tier 2 and 3 cities where such projects were com­mer­cially not at­trac­tive due to erst­while size and cap­i­tal re­quire­ments. FDI in­ter­est should also pick up with tax clar­ity on REITs which should en­able in­tro­duc­tion of REITs in later half of the year.

Re­viv­ing SEZs

The fi­nance min­is­ter’s com­mit­ment to re­vive in­ter­est in Spe­cial Eco­nomic Zones (SEZs) is a wel­come an­nounce­ment. SEZs as a con­cept are geared to­wards mak­ing In­dia a man­u­fac­tur­ing hub and gen­er­at­ing job op­por­tu­ni­ties. At the mo­ment no clar­ity has been pro­vided on the ex­act steps the govern­ment will be tak­ing to re­move the op­er­a­tional and other bot­tle­necks.

“Whilst we await more clar­ity on the is­sue of SEZs, our un­der­stand­ing is that there will be no im­pact on SEZ land parcels that have ei­ther been re­turned or the land-use changed to res­i­den­tial. We ex­pect the govern­ment to mainly fo­cus on SEZs that are cur­rently strug­gling or are in the pipe­lines”, says San­jay Dutt of Cush­man and Wake­field.

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