Realtors are an upbeat lot these days, with the government likely to lift the 5,000-hectare cap on mega special economic zones. An empowered group of ministers is set to take up the case on February 4. Naturally, builders and property consultants are keenly watching the scenario and evaluating what the after-effects will be on the real estate sector and the social environment if the cap is actually lifted.
According to Anuj Puri, country head and chairman, Jones Lang LaSalle Meghraj, ?The 5000-hectare land ceiling for SEZs was inconsistent with some of the more progressive policies now bulwarking India?s competitiveness vis-?-vis countries like China. Scale is of essence when it comes to upgrading the country?s exports market. This move will allow companies with approved SEZ projects to optimally utilise their land holdings. Significantly, it will now be possible for them to include vital infrastructural resources such as air freight hubs and ports. This will enable the smooth operation of these SEZs and rationalise their environmental impact on surrounding communities. In pure real estate terms, the liberation of land holdings from the fetters of ambiguity is always a positive step towards increased transparency.?
DLF is developing SEZs in Bangalore and other southern markets using over 5,000 hectares of land at each of these zones, apart from a proposed 8,097-hectare zone in Gurgaon. Competitor Unitech is also developing huge tracts of SEZs in India. Meanwhile, Reliance Industries is currently developing about 10,000 hectares of SEZ in Navi Mumbai apart from a 10,000-hectare zone in Jhajjar, near Goregaon. Mahindra Lifespaces Developers Ltd, too, has started developing infrastructure over 3,000 acres in Jaipur, for which it has already lined up a few takers. Incidentally, Mahindra Lifespaces was the first company to set up a 1,500-acre SEZ ? in Chennai ? two years ago. This SEZ is fully sold out and companies such as BMW, Ascendas have set up their commercial establishments. While Mahindra Lifespaces has already set up residential buildings in the Chennai SEZ, more residences are expected to come up in this SEZ.
Pawan Malhotra, CEO, Mahindra Lifespaces, says ?We expect about one lakh people to work in the Chennai SEZ in a few years. In our upcoming Jaipur SEZ, since we will have a base of light engineering and handicrafts business, we believe over half-a-million people will start working here in the next five years. Companies such as Infosys have already started working in this SEZ and as the infrastructure is getting ready, we expect more companies to start their operations here.?
According to Malhotra, today, efficiency is the buzzword in any industry and specifically in the real estate sector. ?The relaxation of the 5,000-hectare cap will help provide fast approvals for builders to start their development operations within SEZs. Besides, builders will be able to integrate township development in order to facilitate good living conditions for all the residents, apart from making good use of commercial establishments, especially for IT/ITES companies, which can start their operations as well.?
According to recent industry reports, about 763 SEZs have been approved by the government and, with the lifting of the 5,000- hectare cap, opportunities for developing multi-product SEZs will increase. Looking at the scenario, Malhotra says, ?We, too, would look at setting up SEZs over 5,000 hectares or more of land area in the near future. For this, the Thane markets in Mumbai are very lucrative. In the process, farmers residing in SEZ areas beyond 5,000 hectares will have to be taken along by the developers in order to take care of their social needs, depending upon the area needs through outright purchase. Or, one has to make them partners in the SEZ development operations. This is going to be a learning experience, both for the developers as well as the farmers. We strongly believe that in doing so, the distance between farmers and the SEZ developers will be bridged and the ryots would be absorbed as active participants.?
Industry sources firmly believe that once the cap is lifted, Singapore-based Ascendas, which had held talks with the commerce ministry to set up a multi-product SEZ, will definitely look at expanding the area size of its project. However, a section of analysts believes that if SEZs get more than 5,000 hectares, farm life may be compromised. ?Given that SEZ development will happen beyond the restricted area, where will the farmers live?? according to an industry expert.
According to Hemant Shah, chairman, Akruti City, ?If such huge tracts of land are acquired from the open market based on the market prices, then there should not be any opposition or issues from developers. The move will basically encourage developers to acquire land in excess of the current ceiling. Currently, we are developing five SEZs in Mumbai and Bangalore apart from the three in Pune with an area size of approximately 25 acres to 150 hectares.?
Dhaval Ajmera, director, Ajmera Group of Companies says, ?Relaxation of the 5,000-hectare cap will most likely boost the ultra-mega, multi-product SEZ plans and projects like airports and ports, which need land size much in excess of 5,000 hectares. With the relaxation of the cap, many developers will have an interest in big multi-product zones. This would now also include projects on social amenities and SMEs, apart from large industrial and commercial activities.?
As for the rationale behind the move, Ajmera says the logic behind the ceiling was to check forceful eviction of people occupying identified land for building SEZs. However, once the new Land Acquisition Act is passed and a relief and rehabilitation package is fully implemented, there would be no need for the ceiling. ?The government needs to act fast as the biggest challenge for private developers lay in acquiring large tracts of land, meeting all contiguity norms without government help. This would surely hamper the flow of investments and development of mega-projects in the country.?
?We would, in the next financial year, embark on a 80-lakh sq ft project to develop corporate office space and elite residential homes in Kanjurmarg (Mumbai), which is the third central business district declared by the MMRDA.? There are three such districts declared by the central government in Mumbai. It includes South Mumbai, the Bandra Kurla Complex and Kanjurmarg.
On his part, Puri explains that there has been growing awareness about the fiscal benefits of SEZs. With the relaxation of the ceiling, more and more companies will accept the model, which represents a very feasible level of services standardisation. ?The first movers with approved applications for SEZ status will become the price determinants than those in their wake will follow – and they will demand premium occupancy rates. It is possible that the overall cost of SEZ occupancy will rise. However, this market segment is still at a nascent stage and it is too early to predict.?
What seems certain is that, if the cap is lifted, locations in and around SEZs will see a considerable hike in property rates as more and more players will join the fray in a space ?boom?.
