Investment in India

Indian power sector abuzz with plans of fresh investment into several projects

The government being bombarded with proposals from overseas investors for new power and infrastructure projects recently augurs well for the Indian economy. Governments—both local and central—are providing incentives and initiating projects in the public-partnership (PPP) mode. Only second to Gujarat in receiving investments in 2009, Orissa lately has been the focus of attention of most overseas investors, according to a recent study released by an industry body. Several projects have already been announced in the country – pertaining to solar power, renewable energy, solar photo-voltaic units etc. According to official sources, while ACME Tele-powers would set up a 100 Mw solar thermal power plant in Bolangir/Khurda district, GRD Power Private Ltd has plans to set up a 25 Mw solar thermal power plant in Khurda. Upcoming projects include six solar photo-voltaic power projects with an aggregate generating capacity of 105 Mw too, which have been given the go-ahead by the Orissa state level technical committee (STC).
 
Among the other projects that have received approval by Orissa STC including EIO Six Orissa Private Ltd (20 Mw, Bolangir) are Cambridge Energy Pvt Ltd (5 Mw, Ganjam), Abacus Holding Private Ltd (5 Mw, Nawarangpur), Green O Projects (10 Mw, Khurda) and Green O Lite (5 Mw, Kalahandi). The total envisaged capacity in the solar power sector has now increased to 294 Mw from 64 Mw earlier.

The Indian subsidiary of French energy giant Areva too has contracted a deal from Larsen and Toubro to offer solutions at the 1,200 MW power facility at Malwa in Madhya Pradesh. Mumbai-based L&T is adopting greening measures by venturing into wind and hydro power generation. The power major has prepared a blueprint for building wind power projects in Gujarat, Maharashtra and Tamil Nadu for captive use. It is also investing around Rs 8,000 crore for setting up 700-800 MW of hydro power projects in Himachal Pradesh, Uttarakhand and Arunachal Pradesh, according to official sources. The projects are expected to go onstream in the next four-five years.

According to Ernst and Young, the Indian Government has identified the need for US$ 500 billion in infrastructure spending between 2007 and 2012. Various efforts of the Indian Government such as Public Private Partnerships (PPP), Green Energy, Ultra Mega Power Projects and Viability gap funding are being viewed as potential investment opportunities providing stimulus to the growth of Indian infrastructure sector.

There is also the market expectation that the Budget 2010-11 to be announced by the Finance Minister, Dr Pranab Mukherjee on February 26, 2010, will focus on spending in some specific sectors. Several market experts believe that the Budget will largely focus on infrastructure and give some sops to the power sector. This will thereby benefit construction, road, power and equipment companies. The government is further considering a plan to levy between 11 per cent and 14 per cent across-the-board import duty on foreign generation equipment—based on a report by Planning Commission member Arun Maira—who is heading a government panel looking into ways of bolstering domestic manufacturing of power equipment.

 

Indian Realty demand amongst overseas investors beginning to revive

 The Real Estate Scenario

The Indian real estate sector seems to be on course to some revival in 2010 after the global recessionary onslaught. An estimated 25 million non-resident Indians (NRIs) living in 130 countries have remitted US$ 52 billion upto December 2009. According to the World Bank report on Migration and Development Brief, India topped the list of countries in remittance flow followed by China and Mexico.  One of the major sectors attracting inflows from NRIs has been Indian realty. Real estate analysts and property consultants such as Knight Frank India suggest that in the wake of the economic downturn faced by the Gulf region, most overseas Indian investors are looking forward to investment opportunities in real estate in India especially in Tier-2 cities, backed by growth in infrastructure in South Indian cities of Bengaluru, Chennai and Hyderabad, apart from luxury destinations in the National Capital Region, Mumbai etc.

According to housing finance companies (HFCs) and banks offering home loans to NRIs/PIOs in Dubai, there has been an unexpected surge in demand for residential property across Indian cities. One of the factors necessitating such demand is the return of the NRIs back home owing to uncertainties in jobs overseas, impacted by the global slowdown. Most of these NRIs are looking for home loans as they are unable to get loans locally due to the tight liquidity situation across US. Also, another factor that is currently boosting overseas Indians’ confidence is the government’s foreign direct investment (FDI) policy that permits FDI up to 100 per cent from foreign/NRI investor under the automatic route. Indian banks have begun to offer attractive NRI housing schemes to accommodate the housing needs of NRIs. Interest rate is only slightly costlier for NRIs - 0.25 per cent to 0.50 per cent more than Indian residents. The Reserve Bank of India (RBI) had earlier relaxed the provisioning norms for the real estate sector last year, giving banks the freedom to restructure real estate loans.

Recent Developments

A few developments in the Indian Realty scene have been encouraging and helped in turning the tide. Some public offerings (IPOs) such as DB Realty have met with good response from investors. With recovery gathering pace and the stock market giving good returns, several realty firms are trying to garner funds for expansion as buyers are slowly return. They expect to raise funds either through PE funding or from capital markets through initial public offerings. Currently, around 16 real estate and infrastructure firms’ public issues, including Emaar MGF and Sahara Prime City, are in the pipeline in the market.
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The real estate arm of ETA Ascon Star will launch an integrated township project near Chennai in 2010 as it looks to tap strong demand for property in India.  Further, a revival in the realty sector has added to investor confidence, though the trend took more time to become apparent in Bangalore than in Mumbai. This trend has helped both Sobha Developers and DLF consolidate their holdings and offer more value to investors. Red Fort Capital, a private equity fund (PE) focussing on India’s real estate sector, has an allocation of over US$ 400 million for the Indian real estate market. The PE has already made more than 10 investments so far in India into residential, commercial, logistics and hospitality assets.
The government—having already mandated Energy Conservation Building Code (ECBC) norms for state-owned buildings for reduction in emissions by buildings—is also likely to make it mandatory for private commercial buildings and luxury residential by 2011, according to government officials. This would definitely help Indian real estate companies create and offer more value for money for all investors alike.