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.

Rs.1,000,000,000,000 or
Rs.1 trillion is the quantum
of investment cleared by
Indian Government in
March’ 06 in SEZs!
Lately SEZs are in news for
all the wrong reasons.
Believe me! This article is
about creating an
awareness of the benefits.
Global Scenario
Globally one of the earliest
and most successful SEZ
was founded by the
Chinese in the early 1980s.
This early SEZ, Shenzhen,
has developed from a small
village into a thriving city
of over 10 million people
within20 years. Following
this example, SEZs were
established by several
countries, including India,
Iran, Jordan, Poland
Kazakhstan, the Philippines
and Russia.
The Great Indian SEZ Story
A great concept if implemented can aid India
to reach her global economic ambitions.
According to World Bank
estimates, as of January 2007
there are more than 3,000
projects taking place in SEZs in I
20 countries worldwide!
Indian Context
There are 3,186 operational units
in 11 functional SEZs in India,
providing employment to 1.10
lakh persons. Exports from SEZs
have increased from US$3.1
billion in 2003-04 to US$4.1
billion in 2004-05. SEZs have
managed to attract investments
worth US$2.7 billion in the last
eleven months since the SEZ
rules were notified. The 63 SEZs
notified are expected to attract
investments of US$14 billion.
The Soros Group of the legendry
George Soros has evinced
interest in investing in Indian
SEZs. Investors from Japan and
Singapore, who have been
holding their investments in the
last decade, will now be entering
these SEZs with huge
investments. While 60% of the
SEZs notified are in IT and
ITeS, a number of multi-
product and sector specific
SEZs in the area of
pharmaceuticals, bio-
technology, chemicals,
petrochemicals, textile,
automobile and components,
that it offers the firms
electronics and equal opportunity to
engineering have also leverage its core
been notified lately. The competencies.
lion’s share of the SEZs
was received by the four The SEZ promoted by the
southern states with AP Adani group, the Mundra
and Karnataka leading SEZ and Adani Chemical
the pack. SEZ are expected to
receive an investment of
Investment over US$2.7 billion. The
Opportunities select upcoming SEZs in
Tamil Nadu, Nokia and
No other commercial Flextronics are likely to
policy of the Government provide employment to
has received such a 15,800 persons by 2007
thump-up response from end.
the corporate titans and
investment world. In less Conclusion
than 10 months of the
announcement of the SEZs are like many good
policy 600 proposals by ideas, which is distorted
private companies and corrupted by political
envisaging an investment motives, but which if done
of US$22 billion in the 2- well can jump-start India’s
3 years have either been global economic ambitions.
approved or awaiting
government clearance.
ASSOCHEM has
estimated that SEZs will
create 15-17 lakh jobs in
the next 5 years and
accelerate the export
growth by 25%
consecutively for the next
10 years.
SEZs- Cash Cows
The most striking feature
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

The demand for good real estate
in Chennai has been pushing the
prices as if there is no tomorrow.
Thanks to the increasing number IT
and ITeS companies, Chennai
needs an additional 15 million ft2
of A grade office space in the next
two years.
According to property surveys,
Chennai will require at least 50,000
new homes by 2020. With such a
strong demand for houses, there is
a stiff competition in the market
which has seen a spate of national
and international players entering
the market. The list includes
Rs.220 billion Alliance Group that is
all set to develop a 300-villa
project west of Chennai. The villa
4,200 ft2 home costing about Rs.6
crores.
Crores. Another player Vishranti Homes’
is believed to be the costliest of all
residences with a Real estate market in
India is currently valued at $14 billion
and its annual growth rate is turned out
to be 30 per cent. Property market of
As per GoI estimate
South cities is flourishing as no other. India needs US$ 320
Tamil Nadu real estate has attracted an billion investment in the
investment of worth Rs.30 billion in next 5 years in
infrastructure including
2006-07. There are around 20 new
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
which will add a stock of 2000 units in 3 days to unload and
the next two years. Mahendra City and reload a ship in Indian
Singapore Township will add another ports against 8 hours in
3000 units by the end of next year. HK ports.

In the next 5 yrs
Conclusion container traffic slated
to grow at 15.5% and
As the Chennai real estate market offers cargo at 7.7%

MoS has set a target to
high returns, the influx of national and
acquire 3.9 million GRT
international players would increase in including 0.265 million
the near future. Competition would be GRT for coastal shipping
the new mantra of the trade. Let the at an investment of
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 real estate in India is
turning milestones into stepping
stones. Thanks to the increasing
demand from the IT and ITeS
sector that continues to be the
primary driving force in the cities
such as Pune, Hyderabad, Chennai,
Bangalore, Mumbai and Delhi.
Estimated demand from IT/ITES
sector alone is expected to be
150mn ft2 of space across the
major cities by 2010.
As per the recent data from Tie
Leung, the sector (IT and ITeS)
accounted for 75% of the total
office space absorption in Pune in
the last quarter. The IT hub of the
country, Bangalore continues to
excel at the same pace if not more.
According to real estate consultant
Cushman & Wakefield, the Indian
commercial space absorption in
April 06 to March 07 is 40 million
ft2 and Bangalore alone accounted
for 35.5% of this with the
absorption of 14.2 million ft2.
Chennai takes the distant second
position within India for the largest
absorption at 6.5 million ft2.
Bangalore remains to be the
numero uno of the demand for
Growing Home Loan Rates to affect
Real Estate Growth
RBI’s tough monetary measures
have led to banks hiking their
prime lending rates to 13-14%
levels. Till about 18 months back,
the interest rate on the floating-
rate home loans used to be
around 7.75%. Now, it’s around
10.75%. An individual earning
Rs.50,000 per month, at an
interest rate of 7.75%, would get
a loan of around Rs.26.7 lakh, to
be repaid over 20 years. All the
conditions remaining the same,
at an interest rate of 10.5% the
loan eligibility would come down
to around Rs.21.7 lakh.
commercial space. This is the third
largest absorption of commercial
space in the world.
Delhi and NCR seen absorption of Retail To Revolutionize
6.2 million ft2 which is a more than
double the last year’s absorption.
The country’s financial capital
Real Estate
Mumbai occupied 5 million f2 area,
A Retail Consumption of US$127
followed by Hyderabad at 3 million billion (Rs.500,000 crores) will
ft2, Pune at 2.6 million ft2 and
require about 600 – 700 million
Kolkata at 1.5million ft2.
ft2 of additional retail space by
Believe me, we haven’t seen 2011.

Current Projections on
anything yet! The commercial real
constructions (Malls) are just
estate developments in India are to
about 200 million ft2 leaving a
reach the best of its phase in the
wake of upcoming infrastructure supply gap of almost 400 – 500
activities. With the retail revolution million ft2.
picking steam we are on for an
Investment to the tune of
explosive growth. The total retail US$10-15 billion is required to
space in India is set to go up to 90
make up this demand supply
million ft2 in 2007, according to a
gap.
report ‘Malls of India’. More

Additional investment of US$8-
hypermarkets, more franchises,
10 billion required in retail fit-
and a spreading out to Tier II
outs and related equipment.
cities, as per the report on retail

This space is required across
markets in India by Ernst and
Young, will see the retail space 1000 cities in India and not
segment leading the way for confined to the Metros.
commercial property in 2007.
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
Ph: 044 2454 1111 (extn-304)
Demand for retail assets especially
mortgages and other big ticket loans like D.Joel K Pandian
real estate will decelerate. Growth in retail DGM-Strategic Planning
assets is expected to come down from the Ph: 044 2454 1111 (extn-306)
present 40 per cent to about 24 per cent
and realty loans will fall even sharply from Anup Chaudhry
30-35 per cent to almost half rate of 15-20 AM- Strategic Planning
per cent. Ph: 044 2454 1111 (extn-308)
This has already shown on real estate N.Gayathri
company’s valuations in the stock markets. Secretary
Parsvnath Developers fell 58.33% , Shobha Ph: 044 2454 1111 (extn-315)
Developers fell 36.80% and Mahindra
Gesco, subsidiary of M&M, also tumbled
nearly 60%. The trend is likely to continue
for a while. Watch the Space.