Montek asks private sector to contribute US$ 500 billion for infra projects

NEW DELHI: Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, has made it clear that the GDP growth target of 8 per cent during the 12^th Plan period would have to be scaled down if the private sector fails to contribute half of the estimated US$ 1 trillion investment in infrastructure development.

Inaugurating FICCI’s India PPP Summit 2013 on Monday, Ahulwalia said, “Private sector participation in infrastructure PPP projects have grown substantially from 10 per cent of the required investment in the 10^th Plan period to 37 per cent during the 11^th Plan. In the 12^th Plan period (2012-2017), no less than 50 per cent of the estimated investment would have to necessarily come from the private sector as there are zero prospects of the government being able to finance such projects. If it can’t be done then we had better lower the growth projection.”

He urged the private sector to share and absorb the risks that are normally associated with model concession agreements under the PPP model and expressed his regret that very little thinking has been done by the private sector on such agreements.

On the issue of non-delivery of statutory clearances on time for PPP projects, a clear thinking has to emerge on what a concession agreement should entail. Any penalty to be imposed on the government, would be resisted within the government, he said and added that due diligence in the matter was required to be done in the next two years.

He urged the private players to figure out how ‘force majeure’ provisions in concession agreements are to be handled. It is important to clearly spell out what exactly is needed to be built in by way of ‘force majeure’ in contracts.

Most contracts contain force majeure provisions although they are not generally considered in detail by companies when they are negotiating a contract. As they are drafted to cover unusual or unexpected events they are not frequently relied upon.

In his special address, Dr. Arvind Mayaram, Secretary, Department of Economic Affairs, Ministry of Finance, underlined the need for adequate resources to maintain the existing infrastructure, while scouting for funds for creating new assets.

He said both the government and the private sector were beset with the problem of lack of institutional capacities to management concession agreements over a 20-year period and it was high time to have a re-look at such capacities for managing and maintain ing PPP projects.

He said once the construction of a project is over and it gets stablised, there should be easy exit for a developer and the ease for a competent facility manager to come in.

Dr. Mayaram also emphasized the need for more regulators of different infrastructure sectors

with clearly defined Terms of Reference. “Regulators have to be empowered and be independent of both the parties to a contract,” he said.

The inaugural session was also addressed by Hari Sankaran, Chairman, FICCI Infrastructure Committee and Managing Director, IL&FS; Dr. A Didar Singh, Secretary General, FICCI and Mr. Abhaya Agarwal, Partner and Leader - PPP, Ernst & Young LLP.

Boffi enters India, to form separate subsidiary for other Asian markets

Boffi SpA, the 80-year-old Italian brand specializing in luxury kitchens, bathrooms and wardrobe items, is likely to form a subsidiary to manage businesses in Asian markets more independently.

The Asian subsidiary is expected to be formed by end of 2013, said Roberto Gavazzi, chief executive officer of Boffi.

“The centre of activity for Boffi is shifting towards Asia. We are definitely planning to expand in key Asian markets, including China, Hong Kong, Seoul, Singapore, Sydney,” he said.

Early this month, Boffi opened its first shop in Delhi, in partnership with the Bhartiya Group, which has ventures in fashion and real estate. Boffi has opened a 4,000 sq. ft single-brand store in Mehrauli, New Delhi.

“We have plans to open more shops in India, especially in cities like Mumbai and Bangalore We may look for a different partner for the Mumbai market,” added Gavazzi.

Boffi is known for meticulous processes that ensure the durability of their products. However, it may explore the Bangalore market with Bhartiya Group as the Indian partner already has a good presence in the southern market.

“In our stores in London, Paris and Geneva, where many Indians have second homes, we have sold many products to them. Of course, the challenge is to be able to do it right, partner with the right people, to understand and serve this market well. The Boffi store in New Delhi is pretty much the same as you’d find in London or Paris, in the type of presentation and decoration,” said Gavazzi.

Boffi, which operates through partnerships with local firms in the Asian markets, is planning to open company-owned shops in China. “Finding good partner in China is a tough task. We have tried with a few, but none of them was satisfactory. There’s hige scope in China. We may now open our own shops in China,” Gavazzi added.

Over the next 3-5 years, Boffi hopes to get atleast 2-3% of its revenue from India. Currently Asian markets accounts for about 15% of Boffi’s 65 million euro revenue globally. Typically, Boffi sells 1,300 kitchen in a year. “About 15 kitchen an outlet is good enough for us. We are not in the volume game,” he added.

Hyundai Construction Equipment in expansion mode

Hyderabad:  Hyundai Construction Equipment India is considering manufacture of a wider range of construction industry equipment in the country by setting up additional lines, a media report said. 

Currently, the company manufactures excavators from its Rs 400-crore Chakan plant in Maharashtra. It has the capability to make 5,000 excavators a year from the plant after investing Rs 55 crore last year. 

Ki Young Kong, Managing Director, told Business Line that, “The construction sector in India may be passing through a tough phase now but it won’t be long before the sector gathers momentum. We believe that from next year on, the pace of growth will accelerate.” 

“To address the market, we will have to expand and set up another plant within two years. Sectors such as roads, mining, irrigation, quarrying are likely to drive the growth,” he said. 

The South Korean company currently lays focus on excavators but sells other equipment imported from other markets. “We are keen to play a larger role by manufacture of backhoe loaders, wheel loaders and compaction equipment,” he said. 

He was in the city to inaugurate a new 3S dealership and host a meeting of customers and local dealers. “Hyderabad is one of the biggest market for the construction segment and we have nearly 20 big construction company clients here,” he said. 

“In fact, the sales of construction equipment were down by 20 per cent in the first quarter. Yet, we believe after the monsoon, the sales volume will pick up. The overall construction equipment industry is estimated to be about $3 billion,” he said. 

The company closed last year with a turnover of Rs 1,000 crore and expects to see a growth of about 10 per cent closing with Rs 1,100 crore this year, the report further said. 

Dheeraj Panda, Head Marketing, said: “Last year, we sold over 2,400 excavators. Within five years we hold No. 3 position with 18 per cent market share in India. We are looking to achieve 2,800 units of excavators this year, of which we have sold around 600 units in the first quarter of this year.”

Indiabulls’ annual sales zooms to Rs 3000 crore

Indiabulls Real Estate's sales bookings rose by 51 per cent to Rs. 3,002 crore during the last fiscal year, while the annual rental income grew by 37 per cent.

In an analyst presentation, the company said its net debt has increased to Rs. 1,195 crore as on March 31 as against Rs. 1,134 crore at the end of 2011-12 fiscal. However, gross debt rose to Rs. 1,633 crore from Rs. 1,351 crore.

Indiabulls Real Estate also informed that it has acquired 220 acres in Gurgaon and Panvel in the last fiscal year, taking the company's total land bank to 3,592 acres including 2,588 acres of Special Economic Zone (SEZ) in Nashik.

Indiabulls noted that it has recognised revenue of only Rs. 1,110 crore during 2012-13 out of total sales of Rs. 3,002 crore, "creating large backlog for future revenues."

The total saleable area under construction is 19.44 million sq ft as on March 31 this year and of that 11.98 million sq ft has been sold for sales value of Rs. 8,370 crore.

The company said 7.46 million sq ft remains to be sold with an estimated value of Rs. 12,215 crore at ongoing rates.

Mumbai-based company has 31 ongoing projects totalling 72.86 million square feet. It has presence in Maharashtra, National Capital Region and Chennai.

Lodha and Indiabulls cut luxury home prices by 15 per cent in Mumbai

Two leading realtors in Mumbai have announced cutting prices of luxury apartments in Mumbai up to 15 per cent, which may trigger a price war in this segment.

Lodha Group and Indiabulls Real Estate seem to have kick-started the most awaited exercise of easing in property prices with around 10-15% lower price tags.

In a bid to attract buyers in a slow market, both have launched their premium offerings at around Rs 25,000 per square feet, against earlier prices of Rs 28,000-30,000 per square feet, according to a media report.

Lodha Group has recently launched the first phase of its Blue Moon project on a 17.5-acre parcel acquired from DLF at an effective price of around Rs 23,000-25,000 per sq ft. Indiabulls Real Estate has also now launched Sky Forest project at Lower Parel at a base price ofRs 22,000 per sq ft, says a report from investment bank JP Morgan, says a TOI report.

According to Indiabulls Real Estate, an all-inclusive price at Sky Forest is Rs 25,000 per sq ft, including floor rise and charges for preferred view. Indiabulls has also thrown in a 20:80 financing scheme, where the customer can pay 20% at the time of booking and the rest at the time of possession.

"For Lower Parel residential properties, a price point of around Rs 25,000 per sq ft is not a bad offering, it's competitive; especially when some other properties in the extended vicinity are still going at around Rs 28,000-30,000 per sq ft," said Om Ahuja, CEO of residential services at Jones Lang LaSalle India.

According to him, prices in Lower Parel had touched even Rs 32,000 per sq ft at the peak of 2008. Since 2011, only four major launches have taken place in this market where few developers have land parcels, and therefore many market observers see this as a direct price war between two major developers.

Market experts see this as a good opportunity for prospective home buyers even as developers rush to clear their inventory. Lodha's strategy to offer competitive pricing with configuration tweaking did help the developer get a good response to its volume play. The company claims to have received over 1,300 applications worth Rs 6,000 crore from prospective buyers, against 750 units launched in phase I.

Lower Parel, Mumbai's central-most part, earlier known for its textile mills, is now transforming into a district of malls and commercial complexes along with most ambitious high-rise residential projects. Relaxed development norms in 1992 for mill lands in this area resulted in the rise of new commercial and residential space.

Will it be the beginning of property bubble burst in Mumbai? Only time will tell.