Unveiling Indian Ports

1 ISSUE 2 VOLUME 1 May 07

The Great Indian SEZ
Story....................... 2

SEZ Fact Sheet ...... 2

Chennai Real Estate

Getting Crowded ....... 3

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

Economic Indicators3

Increasing Value of
Rupee...................... 3

Chanakya

Commercial Real Estate
a new beginning........ 4

Growing Home Loan
Rates....................... 4

Retail to Revolutionize
Real Estate............... 4

ADDRESSING THE QUEST FOR KNOWLEDGE AND PLANTING THE

SEEDS FOR THE SPRIT OF VISIONEERING
The Unveiling Indian Ports
Congestion and monopolistic situation of major ports, offers a huge growth
opportunity to minor ports with their sleek structure and best in efficiency
parameters.

By the end of the 10th Five Year Plan

The growth potential of the ports period in 2006-07, aggregate capacity
is directly dependent on growth in
in major ports is anticipated to reach
world output, world trade, and
470.60 mtpa as against projected
maritime trade over the period
traffic of 415 mt. The Indian port traffic
1998-2007, world output is
is expected to increase at a 12-15%
expected to expand 4.1% per
per annum for the next two to three
annum. During 2005, the volume
years.
of world trade increased 7.2%, as
compared with a growth of 10.7%
Competition
in 2004. High oil and metals trade
drove the increase in trade.
At present there are 12 major ports
and 139 minor ports in India.
For India’s 12 major ports, total
Vishakapatnam port is by far the
traffic increased 10.3% during
largest port in India with the volume
2006 to 423.41 mt. Total traffic
handled last year of 55.80 mt followed
has increased at a 3-year CAGR of
by Chennai (47.25mt) and Kandla
10.5% and a 5-year CAGR of 8%.
(45.91mt). In minor ports, Gujarat has
In terms of TEUs, total traffic
the maximum traffic of 95.8 mt which
increased 9% during 2006 to 4.61
is 71% of traffic at minor ports. Other
MTEU.
minor ports are in Andhra Pradesh
(10.7%), Maharashtra (9%), and Goa
About 80% of total volume of ports
(6.2%). As on March 2005, 13 private
traffic handled is in the form of dry
or captive projects with a capacity
and liquid bulk, with the residual
addition of about 47.6 mtpa at an
consisting of general cargo,
investment of about Rs.26.62 billion
including containerized cargo. Oil
have been completed/ operationalised,
traffic is the major form of liquid
while 24 others with a capacity
bulk traffic, accounting for around
addition of around 100.68 mtpa and an
33% of total major ports traffic. Financials
investment of Rs.79.10 billion are at
Other major traffic comprises iron All major ports put together made an
various stages of evaluation and
ore (17%), and coal (4.5%). operating surplus of Rs.1852 crores in 2005
implementation.
the per ton handling cost of the ports has
Container traffic of various items decreased to Rs.74.4 in 2005.
Operational Efficiencies
constitutes around 15% of traffic
handled at major ports and 16.3% Conclusion
The share of idle time at berth to total
for minor ports driven mainly by an The demand for handling is been increasing
time for major Indian ports was
increase in trade in oil, iron ore, with booming trade growth. With
actually on the rise since the decade of
coal and other merchandise improvements in operating efficiencies the
1980 and reached 42.8% in 1993-4
exports. port margins are likely to improve
and fell to 24% currently. The average
turnaround time for major Indian ports impressively.
 The Great Indian SEZ Story
A great concept if implemented can aid India
to reach her global economic ambitions.
that it offers the firms
electronics and equal opportunity to
engineering have also leverage its core
According to World Bank been notified lately. The competencies.
estimates, as of January 2007 lion’s share of the SEZs
there are more than 3,000 was received by the four The SEZ promoted by the
projects taking place in SEZs in I southern states with AP Adani group, the Mundra
20 countries worldwide! and Karnataka leading SEZ and Adani Chemical
the pack. SEZ are expected to
Indian Context
receive an investment of
Investment over US$2.7 billion. The
Rs.1,000,000,000,000 or There are 3,186 operational units Opportunities select upcoming SEZs in
Rs.1 trillion is the quantum in 11 functional SEZs in India,
Tamil Nadu, Nokia and
of investment cleared by providing employment to 1.10 No other commercial Flextronics are likely to
Indian Government in lakh persons. Exports from SEZs policy of the Government provide employment to
March’ 06 in SEZs! have increased from US$3.1 has received such a 15,800 persons by 2007
billion in 2003-04 to US$4.1 thump-up response from end.
Lately SEZs are in news for billion in 2004-05. SEZs have the corporate titans and
all the wrong reasons. managed to attract investments investment world. In less Conclusion
Believe me! This article is worth US$2.7 billion in the last than 10 months of the
about creating an eleven months since the SEZ announcement of the SEZs are like many good
awareness of the benefits. rules were notified. The 63 SEZs policy 600 proposals by ideas, which is distorted
notified are expected to attract private companies and corrupted by political
Global Scenario investments of US$14 billion. envisaging an investment motives, but which if done
The Soros Group of the legendry of US$22 billion in the 2- well can jump-start India’s
Globally one of the earliest George Soros has evinced 3 years have either been global economic ambitions.
and most successful SEZ interest in investing in Indian approved or awaiting
was founded by the SEZs. Investors from Japan and government clearance.
Chinese in the early 1980s. Singapore, who have been ASSOCHEM has
This early SEZ, Shenzhen, holding their investments in the estimated that SEZs will
has developed from a small last decade, will now be entering create 15-17 lakh jobs in
village into a thriving city these SEZs with huge the next 5 years and
of over 10 million people investments. While 60% of the accelerate the export
within20 years. Following SEZs notified are in IT and growth by 25%
this example, SEZs were ITeS, a number of multi- consecutively for the next
established by several product and sector specific 10 years.
countries, including India, SEZs in the area of
Iran, Jordan, Poland pharmaceuticals, bio- SEZs- Cash Cows
Kazakhstan, the Philippines technology, chemicals,
and Russia. petrochemicals, textile, The most striking feature
automobile and components, of the SEZs is the fact

SEZs FACT SHEET

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

If all the 234 proposals get fructified the total investment would be to the order of
US$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 the
total 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 2008-09
which 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.
 Chennai Real Estate Getting
Crowded
PORT
Chennai is already a host to many Real Estate
SNIPPETS
biggies of India. The once conservative market
is set for unprecedented growth.

will cost in between Rs.6o lakh to Rs.5

Crores. Another player Vishranti Homes’
is believed to be the costliest of all
residences with a Real estate market in
The demand for good real estate India is currently valued at $14 billion
in Chennai has been pushing the and its annual growth rate is turned out
prices as if there is no tomorrow. to be 30 per cent. Property market of
As per GoI estimate
Thanks to the increasing number IT South cities is flourishing as no other. India needs US$ 320
and ITeS companies, Chennai Tamil Nadu real estate has attracted an billion investment in the
needs an additional 15 million ft2 investment of worth Rs.30 billion in next 5 years in
of A grade office space in the next infrastructure including
2006-07. There are around 20 new
two years. US$13.5 billion in its 12
residential projects to be announced in
major ports
the area of Velacheri and Perungudi
On an average it takes
According to property surveys, which will add a stock of 2000 units in 3 days to unload and
Chennai will require at least 50,000 the next two years. Mahendra City and reload a ship in Indian
new homes by 2020. With such a Singapore Township will add another ports against 8 hours in
strong demand for houses, there is 3000 units by the end of next year. HK ports.
a stiff competition in the market
In the next 5 yrs
which has seen a spate of national Conclusion container traffic slated
and international players entering to grow at 15.5% and
the market. The list includes As the Chennai real estate market offers cargo at 7.7%
Rs.220 billion Alliance Group that is
MoS has set a target to
high returns, the influx of national and
all set to develop a 300-villa acquire 3.9 million GRT
international players would increase in including 0.265 million
project west of Chennai. The villa the near future. Competition would be GRT for coastal shipping
4,200 ft2 home costing about Rs.6 the new mantra of the trade. Let the at an investment of
crores. fittest survive. Rs.16,200 crores

Increasing Value of Rupee -

Economic Indicators cause for concern

The rupee is been appreciating

Mar’07 Feb’ 07 against the US dollar for the past
few weeks. It has touched an all
Bank Credit 30% 29.6% time high of 41.89 before
stabilizing at 42 and odd in the market will increase. This is
Deposits 25% 23.2% past week. already evident with the
money supply increasing
Money Supply 22.1 21% What repercussions it will have from 21% to 22.1%. This is
on the real estate market? The further likely to increase by
IIP 10.9% 11.1% impact of the appreciating rupee
Apr’07 Mar’07 the end of April 08. This will
is manifold on the real estate force the inflation to
market. increase.
Forex Reserve (bn) $187.21 $200.32
India cannot afford to loose its RBI will again intervene with
US$/Rs. Ex. Rate 41.89 44.09 export competitiveness with the an increase in CRR which will
appreciating Indian Rupee. This affect the interest rate. With
Home Loan Rate 10.75% 10.25% will force RBI to intervene in the an increase interest rate
market by buying dollars, selling especially home loan rates
Forward Premium 6.28% 3.68% rupee. the demand for real estate is
likely to get impacted.
Once RBI starts selling rupee the
Money supply (M3) in the
Commercial Real Estate a New Beginning
commercial space. This is the third
Commercial real estate in India is largest absorption of commercial
turning milestones into stepping
space in the world.
stones. Thanks to the increasing
demand from the IT and ITeS
sector that continues to be the
Delhi and NCR seen absorption of Retail To Revolutionize
6.2 million ft2 which is a more than
primary driving force in the cities
such as Pune, Hyderabad, Chennai,
double the last year’s absorption.
The country’s financial capital
Real Estate
Bangalore, Mumbai and Delhi.
Mumbai occupied 5 million f2 area,
A Retail Consumption of US$127
Estimated demand from IT/ITES
followed by Hyderabad at 3 million billion (Rs.500,000 crores) will
sector alone is expected to be
ft2, Pune at 2.6 million ft2 and
150mn ft2 of space across the require about 600 – 700 million
Kolkata at 1.5million ft2.
major cities by 2010. ft2 of additional retail space by
Believe me, we haven’t seen 2011.
As per the recent data from Tie
Current Projections on
anything yet! The commercial real
Leung, the sector (IT and ITeS) constructions (Malls) are just
estate developments in India are to
accounted for 75% of the total about 200 million ft2 leaving a
reach the best of its phase in the
office space absorption in Pune in
wake of upcoming infrastructure supply gap of almost 400 – 500
the last quarter. The IT hub of the
activities. With the retail revolution million ft2.
country, Bangalore continues to
picking steam we are on for an
Investment to the tune of
excel at the same pace if not more.
explosive growth. The total retail US$10-15 billion is required to
According to real estate consultant
space in India is set to go up to 90
Cushman & Wakefield, the Indian make up this demand supply
million ft2 in 2007, according to a
commercial space absorption in gap.
report ‘Malls of India’. More
April 06 to March 07 is 40 million
Additional investment of US$8-
hypermarkets, more franchises,
ft2 and Bangalore alone accounted 10 billion required in retail fit-
and a spreading out to Tier II
for 35.5% of this with the outs and related equipment.
cities, as per the report on retail
absorption of 14.2 million ft2.
This space is required across
markets in India by Ernst and
Chennai takes the distant second
Young, will see the retail space 1000 cities in India and not
position within India for the largest
segment leading the way for confined to the Metros.
absorption at 6.5 million ft2.
commercial property in 2007.
Bangalore remains to be the
numero uno of the demand for

Growing Home Loan Rates to affect

Real Estate Growth
Any further rate hikes will reduce demand
for housing resulting in cooling down the Team Chanakya
real estate prices. As a fall-out of hike in
interest rates, credit is expected to grow at
a moderate pace of 20-25 % unlike 30% Subramanyam
reported last year. Head Strategic Planning
RBI’s tough monetary measures Ph: 044 2454 1111 (extn-304)
have led to banks hiking their Demand for retail assets especially
prime lending rates to 13-14% mortgages and other big ticket loans like D.Joel K Pandian
levels. Till about 18 months back, real estate will decelerate. Growth in retail DGM-Strategic Planning
the interest rate on the floating- assets is expected to come down from the Ph: 044 2454 1111 (extn-306)
rate home loans used to be present 40 per cent to about 24 per cent
around 7.75%. Now, it’s around and realty loans will fall even sharply from Anup Chaudhry
10.75%. An individual earning 30-35 per cent to almost half rate of 15-20 AM- Strategic Planning
Rs.50,000 per month, at an per cent. Ph: 044 2454 1111 (extn-308)
interest rate of 7.75%, would get
a loan of around Rs.26.7 lakh, to This has already shown on real estate N.Gayathri
be repaid over 20 years. All the company’s valuations in the stock markets. Secretary
conditions remaining the same, Parsvnath Developers fell 58.33% , Shobha Ph: 044 2454 1111 (extn-315)
at an interest rate of 10.5% the Developers fell 36.80% and Mahindra
loan eligibility would come down Gesco, subsidiary of M&M, also tumbled
to around Rs.21.7 lakh. nearly 60%. The trend is likely to continue
for a while. Watch the Space.