India Economic Zone Plans in Conflict
Politicians of the extreme left and right have joined with representatives of the International Monetary Fund and the head of India's Central Bank to oppose the SEZs.
So why are they - and a wide cross-section of other people - so opposed to an initiative that on paper at least provides for special export-promoting industrial areas with superior infrastructure facilities and tax concessions?
The enclaves are meant to showcase the country's manufacturing prowess and its burgeoning services sector, especially its world-class enterprises in the area of information technology.
Critics of the proposed SEZs say that rather than promote prosperity, the zones will in fact create economic hardship because they would be built on prime agricultural land, without adequate compensation for farmers.
They say that the zones would become "islands of affluence in a sea of deprivation", only serving to exacerbate India's already wide regional imbalances.
The communists - who provide crucial "outside" support to Mr Singh's minority government - lay emphasis on the farmers' interests, arguing the case strongly for more compensation.
Their view is shared by some senior members of the government, including Sonia Gandhi, widow of former Prime Minister Rajiv Gandhi and head of the Congress party. She said recently that the government must safeguard the interests of the farmers "under any circumstances".
All this puts great pressure on Commerce and Industry Minister Kamal Nath.
Mr Nath's critics also include the Finance Minister, Palaniappan Chidambaram, who has publicly stated that he fears the central government could stand to lose billions of dollars of tax revenue because of the special concessions given to firms that will operate in the SEZs.
The SEZ act was passed by parliament last year, but became controversial after the Commerce and Industry Ministry released detailed rules and guidelines.
Critics of the government said these rules should have been finalised before granting approval "in-principle" to the SEZ projects.
The first export processing zone - or free trade zone as they were earlier known - in Asia was built near the western Indian port of Kandla more than four decades ago.
But things have changed a lot since then, and the authorities say that they want to emulate the success of SEZs operating in Shenzhen and Pudong - in Hong Kong and Shanghai respectively.
Both have become huge urban agglomerations of concrete and steel, and both have generated huge amounts of cash. Each year, exports from Shenzhen alone exceed India's total exports.
Unlike China, which has developed only six large export-oriented industrial areas, the Indian government has approved the establishment of over 170 SEZs and many more are in the pipeline.
Source:http://news.bbc.co.uk/1/hi/wo...
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RBI to Review Decision of Lending to SEZs
The Reserve Bank of India is likely to review its directive to commercial banks on treating loans to Special Economic Zones at par with real estate projects.
"RBI is likely to re-examine the issue of lending to SEZs," official sources said.
The central bank had last month clamped down banks' financing of SEZs by directing them to treat exposure to such projects as lending to commercial real estate.
However, earlier this month the RBI had in a master circular included SEZs in the list of infrastructure projects that would be eligible for priority sector lending.
Bankers had also sought clarifications on how to treat lending to infrastructure projects in SEZs.
Sources said the RBI could prescribe a graded structure of risk weights for bank finance to SEZs or lower the risk weights for lending to infrastructure projects in SEZs.
Following the RBI's decision, Commerce Minister Kamal Nath had taken up this issue with Prime Minister Manmohan Singh.
The Commerce Ministry, as well as SEZ developers, argue that the RBI's decision would substantially reduce bank funding for SEZ projects. It would also lead to a rise in interest rates for SEZs, as commercial real estate has a higher risk weight and requires higher provisioning by banks.
Indian Real Estate Rewards Investors
India will have at least 50 property-related initial public offerings in the next year as the real estate industry booms, according to Anish Jhaveri, the head of equity sales at HSBC Holdings in India.
"With the opening of the real estate sector, there's a lot of need for funds," Jhaveri said in a recent interview in Hong Kong. "The government has been giving very proactive support to the whole sector."
The real estate market in India is worth about $12 billion and is growing at about 30 percent a year, Ernst & Young said in a report last month commissioned by the Federation of Indian Chambers of Commerce and Industry. Rising incomes, easy financing and population growth are driving demand for housing and luring overseas investors.
"The appetite for real estate IPOs will be there," K.K. Mital, chief investment officer at Escorts Asset Management in New Delhi said a phone interview Friday. "The young work force is looking for real estate investment, and the financing is available - the banking system is supporting this growth."
Indian billionaire Kushal Pal Singh's real estate company, DLF Universal, is seeking to revive the biggest Indian share sale once regulators decide on a complaint by shareholders. The New Delhi-based company plans to submit offer documents to regulators, paving the way for an offering by early December, Saurabh Chawla, the finance vice president of DLF, said in a phone interview Friday.
India is short of 20 million housing units, according to a study by Housing Development Finance. That shortage will get worse, according to UBS analysts, citing the growing population and increasing affluence. Asia's fourth-largest economy grew 8.9 percent in the three months to June from a year earlier.
Demolitions Raised Mall Prices
Demolitions of unauthorised buildings in the Indian capital, Delhi/ New Delhi even the suburbs, top retailers are shifting to upcoming malls, leading to a sharp rise in property prices and rentals.
As the Municipal Corporation of Delhi (MCD), pushed by a Supreme Court order, prepares to seal over 45,000 commercial buildings operating in residential areas, a good number of fashion designers are preparing to shift out of their existing business locations.
Sharma had a showroom in MG-I on the Delhi-Guragon road, the hub of fashion stores that was demolished by MCD in February.
Earlier, he used to pay around Rs.60,000 a month as rent for the MG-I showroom but now has to shell out around Rs.200,000.
'The prices have gone up because there are not many good places where designers can start a showroom, so we are being charged hefty prices for the space,' he said.
Taking note of the demand for high-standard malls, especially after the continued sealing and demolitions, real estate developers like the DLF Group are constructing swanky malls along the Delhi-Gurgaon road, which could see a second life as the fashion destination of Delhi.
'We are constructing a mall on the MG road as it was the centre of Delhi's fashion industry. Though the mall is under construction people have booked space at a rate of Rs.175 per square foot,' said a DLF manager who did not want to be named.
Agreeing that property prices have gone up steeply in the capital, mall developers say the trend would continue for a while.
'We are charging Rs.150 per square foot area for rent and Rs.500,000 per square foot in case of lease,' said Aarti, senior manager of East Delhi Mall.
The sealing drive had been undertaken following an order of the court to put a stop to the misuse of residential properties for commercial purposes.
Source:http://news.monstersandcritic...
NRIs Set Up Trusts to Manage Money in India
Non-Resident Indians are setting up trusts in India to manage their money and ring fence a part of their wealth. Since January, more than 10 NRI families from the Middle East, Hong Kong, Thailand and countries with unfriendly political regimes like Fiji have hired professional trustees in India. The money put into such trusts is being invested in Indian stocks and other local assets.
Besides the India story, which is driving several NRIs to allocate a bigger slice of their investment here, they think buying stocks through a trust is easier than the portfolio investment scheme (PIS). Some of the portfolio managers in brokerages and wealth management divisions of large banks are also marketing the trust route to their NRI clients.
Corporate trustees and other providers of trust services have been selling the concept of trust as a succession planning tool to local high net worth individuals for a few years now. The interest from NRIs, however, is fairly recent.
Significantly, the money from different kinds of NRI bank accounts can also be transferred to a trust for investment in assets in India. Since money can be repatriated from NRI bank accounts, subject to certain norms by the Reserve Bank of India, the trust can also repatriate the money.
In other words, whatever rules apply to a particular account, the money sourced from that account would apply to a trust. According to Shefali Goradia of the legal and tax counselling firm, Nishith Desai Associates, a trust is a more tax-transparent structure than a holding company.
SOURCE:http://www.timesnow.tv/articl...
