New October 2013 – January 2014 Infra-RE Insights From the real … · 2016. 12. 2. · Infra-RE...

In this editionIn focus

Smart city — the future picture ............................. 2

Back to square one in roads sector — from PPP to EPC ....................... 5

Valuation of debt funds — pragmatism vs convenience ..................... 7

Buys and ties

Infrastructure ................... 9

Real estate ..................... 11

Infra-RE InsightsOctober 2013 – January 2014

India real estate and infrastructure update

From the real estate and infrastructure sector desk

Dear readers,

We are pleased to present the latest edition of EY Infra—RE newsletter, covering insights on the Infrastructure and Real Estate sectors where we feature two articles separately one for Real Estate and one for Infrastructure each.

In this edition, the “In Focus” section presents two articles. The first article, “Smart city — the future picture”, discusses the concept of Smart cities in several countries which are adopting this trend and how their respective governments are taking appropriate steps towards the future picture of smart cities. This article highlights India taking a step ahead in this direction along with bringing out global best practices as to how new smart cities are being planned and also how existing cities are being made smarter. In the second article, “Back to square one in roads sector — from PPP to EPC”, we bring out the latest issues and challenges in road sector where the focus is again shifting to EPC from PPP model.

In this newsletter edition, we also feature a guest article titled, “Valuation of debt funds — pragmatism vs convenience”, co-authored by Mihir Gada, Associate Director, Ernst & Young LLP, which discusses unconscious (mis)notion in valuation of debt fund. The article then narrates practical aspects to be considered in such valuation.

Moreover, this edition covers significant deals and investments in the real estate and infrastructure sectors in the last few months.

We hope you enjoy reading this edition of EY Infra—RE Insights. It is our constant endeavour to make this publication more insightful for you, and we would appreciate your comments and suggestions in this regard. You can write to us at [email protected].

Gaurav KarnikPartner, Tax and Regulatory ServicesEY, India

2 | Infra-RE Insights October 2013 - January 2014

Smart city — the future pictureThe challenges and opportunities that come with rising urbanization across the world have given birth to the concept of smart cities. Globally, urbanization is on the rise with around 200,000 people adding to the urban population every day10. India is not far behind, with an estimated 300 million people expected to be added to its urban population in the next 20 years, taking the total percentage of the population residing in its cities to 40% from 31.2% in 201111. Moreover, changing urban dynamics are leading to unprecedented demographic, economic, social and environmental challenges. Growing cities are increasing the demand for water, transportation, waste management and power. In the next decade, the demand for middle-level and low income housing in Indian cities is expected to rise significantly. These challenges have to be dealt with new development models, since existing cities are not capable of handling this high rate of urbanization. For a city to cope with these challenges and deliver a high quality of urban living, it has to be energy-efficient and have an efficient and sustainable transport infrastructure. Such cities are known as “smart cities” and are managed

and monitored by cutting edge information and communications technology.

Several countries have adopted the smart city trend to cope with rising populations and are either developing new cities from scratch or building an extension to these. They are also looking at making some existing cities “smarter.” Several ICT players are working with governments on this initiative. Accurate assessment of existing cities is the first crucial step, as many unplanned ones may not qualify for conversion to smart cities. In November 2013, the Smart city council, a world body that promotes smart cities, launched its Smart City Readiness Guide, a comprehensive roadmap, which will help authorities assess a city’s readiness to become a smart city.

What is special about a smart city?A smart city functions with increased efficiency by deploying high-quality street lights, smart grids, energy-efficient buildings, a smart traffic management system and an efficient water management system. It solves issues of traffic jams, wasted energy, dark corners or crimes, and has a quick emergency response system in place. Due to its enhanced efficiency, a smart city utilizes its infrastructure capacity much better than a normal one.

Examples of smart city features that help to improve their efficiency12:

• Employing smart city features and techniques have helped 99% of trains in Taiwan to run on time, reduced the traffic gridlock in downtown Stockholm by 20% and have resulted in Amsterdam’s Schiphol Airport moving 20 million more bags every year with a smarter baggage system.

• The city of Rio de Janeiro has automated alerts for emergencies, e.g., flood- and landslide-related forecasts, to reduce reaction times.

• Barcelona’s authorities are planning to introduce lamp-posts, which will not only provide light but also identify and transmit data to provide valuable information on real-time free parking spaces, the anticipated waiting time for parking in important buildings and attractions. It is expected that they will even send alerts on suspicious groups of people.

• One of the global IT giants in India is trying to track a traffic jam by analyzing the mobile phone density in the area.

Cutting edge technology is in synergy with planned infrastructure, resulting in the efficient cities.

In focus

3Infra-RE Insights October 2013 - January 2014 |

Global smart citiesGlobally, new smart cities are being built from scratch and some existing ones are being transformed into smart cities.

New smart cities,13,14,15

Masdar — UAE

Masdar is located in Abu Dhabi and is planned to cover an area of around 6.0 sq.km. It seeks to become a global hub for renewable energy and clean technologies. The project cost is estimated at around US$27 billion. Work on the project began in 2008, but its completion deadline was shifted to 2025 due to delays. In order to consume less energy to take advantage of wind, the city is being built on a base of 9 meters above ground level. It will not have any cars, but will have a fleet of driverless cars to transport people through tunnels. Once completed, Masdar city is expected to house around 50,000 people and 1,500 businesses that primarily focus on environmentally friendly products. It is estimated that around 60,000 people will commute to the city every day.

Songdo — South Korea

Another smart city that is being built from scratch is Songdo in South Korea. It is being built by a private sector American-Korean consortium on around 6.0 sq.km of reclaimed land at a cost of US$35 billion. The project is expected to be completed in 2017 and will house around 65,000 people. Approximately 300,000 people are expected to commute to the city every day. As in the case of most smart cities today, Songdo will be monitored and controlled by a central location for functions including utilities, security, transport system and parking.

PlanIT Valley — Portugal

PlanIT is an approximately €10 billion project, which is expected to be completed in 2015. The city is located in Portugal and will house around 225,000 people. Leading technological companies have come together to build it. With millions of sensors built into every building and at all other locations, it is expected to optimize its energy consumption and reduce urban congestion. Its infrastructure will be monitored with adjustable flows for electricity, water, transport and public roads.

Santander — Spain

To make the city “smart,” several thousand sensors have been attached to street lamps, poles, building walls and are even buried beneath the asphalt of parking lots. These sensors multi-task and measure important parameters such as light, pressure, temperature, humidity, even the movements of cars and people. The city has a centrally located computer, which compiles and analyzes data, and provides alerts on traffic jams, accidents, dimming of street lights, watering of parks, etc. Several apps are used on smart phones to access crucial data, which helps residents in their daily lives. These measures have transformed Santander into a digital city.

Dublin — Ireland

Dublin is one of the oldest cities in Europe and some parts of the city are protected under a policy that does not allow building of new roads. However, the congestion has led to the city council deciding to convert it into a smart city while maintaining its historic nature. The city council has partnered with IBM to improve the efficiency of the city’s infrastructure without any major re-development. For IBM, it is not a commercial venture, but a research- based one where both the parties will benefit. Information is being collected from several sources including road sensors and GPS updates from the city’s 1,000 buses. This data is projected on a digital map and analyzed to make the transport system efficient. Apart from the traffic management system, IBM, in alliance with the city council, is also analyzing data on water, energy use and on development of smarter social care.

Existing cities being made smarter16,17 ,18 Some existing cities that plan to transform themselves into smart cities:


DMIC — smart city

The Delhi-Mumbai Industrial Corridor (DMIC) project aims to build a Dedicated Freight Corridor (DFC) between Delhi and Mumbai, with 24 manufacturing cities and several smart communities/cities along this corridor, which covers six states. Three smart cities have been announced in Gujarat and will be located at Detroj, Dholera and Bahucharaji. The first smart city will come up in Detroj on 1,200 hectare of land; the Dholera smart city will be built on an area of 87,000 hectare in the country’s first special investment region. IBM and Cisco have been handed over the contract to make the city smart with modern technologies. The State Government also has plans to run a 110 km superfast train service between Dholera and Ahmedabad, through technical collaboration with a Japanese company. According to its plan, Dholera will have centralized digital control of all infrastructural facilities including water, power and gas through an underground sensor system reporting to a central control room. The city, with modern sensors and controlled features, will not witness any traffic jams, theft or wastage of water or power.

Several other smart communities have been planned under DMIC, e.g., Shendra in Maharastra, Changodar in Gujarat and Manesar in Haryana. Several international IT giants and utility consultants have been hired to set up these cities and operationalize them. They are planned to provide adequate power and water, and have efficient systems for smart grids and digital systems to control utilities centrally.

Smart cities in India19,20 Although the smart city concept is still new to India, there have been initiatives by government and private developers to build smart cities in the country.

The Government is planning to develop smart cities under the Jawaharlal Nehru National Urban Renewal Mission Phase-II. Under its guidelines, every state will have a minimum of one smart city with IT-enabled services for transport and utilities. Existing cities with a population of around 0.5 million will be eligible for this transformation. The National Institute of Urban Affairs (a research, training and information-dissemination wing under the Urban Development Ministry) and the Austrian Institute of Technology have partnered to execute this project.

Is development of smart cities a distant goal for India?The idea of a smart city seems appealing, considering the issues faced by cities due to rapid urbanization in India. It also appears to be a one-stop solution for all urban population-related worries and a weapon against the infrastructure lacuna in providing a good quality of life to residents. However, most smart city projects would be multi-billion dollar ones, which would require large areas of land. These massive investments will have to be primarily made by the Government and a lot would depend on continuation of policies on development of smart cities. For instance, in China, several local governments and as many as 150 Chinese cities came up with several smart city plans, but the majority of the projects faced a slowdown due to limited funding and lack of the Government’s commitment, which led to companies being cautious about their investments. Smart

projects invite huge investments, which cannot be driven by a single entity, and therefore, there has to be an integrated model for funding when local and central governments, banks and financial institutions as well as private investors join hands. Furthermore, these projects require sophisticated engineering, complex project management, and collaboration of several agencies and companies involved in construction, engineering and technology.

What lies aheadSmart cities are the need of the day and if various stakeholders coordinate in sync, smart cities will be a reality in India and various issues currently faced by cities will be a thing of the past. For a city to be lively and thriving it should be able to accommodate several income groups, and therefore, the Government should build these cities, considering the mixed income groups residing in the city. Furthermore,

there has to be a single-window approval system available for all smart city projects, to enable these to receive legal clearances and support in the minimum possible time or they may meet the same fate as several other mega projects in the country.

Under the JNNURM scheme, the Government is even considering existing cities that can be converted to smart ones. However, unlike in western countries, where the majority of existing cities are planned, India has only a few planned cities. Therefore, a detailed study should be undertaken of existing cities to check the feasibility of converting these to smart cities, since their capacity varies widely and many would not even qualify.

While it remains to be seen how far India can go toward creating world-class smart cities, a start has been made at Detroj and Dholera. The path is now set to establish more smart cities in the country.


Back to square one in roads sector — from PPP to EPC

The road sector has spearheaded the infrastructure growth story in India during the past decade. The National Highways Authority of India (NHAI) embarked on a massive public-private partnership (PPP) regime and private players also showed a keen interest in investing in the sector. Expectations of high returns, the entry of new players in industry and contractors becoming developers fueled aggressive bidding. This intense competition in the sector resulted in single projects witnessing close to 20–25 bidders in 20111. Subsequently, NHAI had a successful year and awarded around 7,957 km in 2011–12. Out of the 51 projects awarded by the authority, 31 were for a premium paid to NHAI2.

The onset of 2012–13, however, seemed to be a speed-breaker to this progress. The slowdown in the economy, affecting traffic, high interest rates, delays in financial closures (due to reduced availability of funds) and the slow pace of execution (due to delay in land acquisition, clearances and approvals) adversely affected investors’

In focus

sentiment. The authorities were unable to find enough bidders in such a precarious scenario. For out of the 1,500 km of highways to be built under build, operate, and transfer (BOT) in the first quarter of 2012–13, players submitted bids for only around 100 km3. With the financial position of many developers ending in the red, the situation worsened over the year. Lenders were also unwilling to invest further due to huge debts on developers’ balance sheets. As a result, the Government could only award 1,115.75 km (11 projects) on BOT against a target of 7,464 km for 2012–134.

The weak financial position of players, delays in clearance of projects and low estimated traffic density seem to have made BOT projects in the road sector unviable, which adversely affected the pace of development of road infrastructure in the country. Players are looking at exit routes from existing projects and not further investments. NHAI aimed to award 9,000 km in 2013–14. This seems to be a tall order, given the adverse conditions5.

Government to go back to EPC model As a major shift from the earlier NHAI mandate of awarding PPP projects wherever possible, it now plans to award 5,000 km on EPC in 2013–146. At the

beginning of the financial year, The Ministry of Road Transport and Highways decided that 50% of the projects would be taken up on an EPC basis due to the lackluster response it was getting on PPP projects7.

EPC was a prominent mode of awarding projects earlier and close to 3,055 km was awarded through this mode in 2005–06. However, ever since, the authorities have managed to award less than 500 km through the EPC route, while BOT continued to attract increasing interest from the private sector.

The road sector has now reached the cross-roads, where it is looking at the EPC route to salvage the situation. Under this route, the entire project cost will be borne by government funds, while the developer will undertake execution. According to industry estimates, the Government will have to spend around INR400 billion to develop roads through EPC8. Private players struggling under debt burdens are also expected to prefer this model, since the risk- mitigation time horizon of EPC projects is shorter than of BOT projects. EPC will unbundle risks and limit private players’ exposure to only construction-related risks. It will also help in reducing uncertainty in the business environment by eliminating factors including traffic-related projections, changes in policies, development of competing road, etc., over the long term.


Faster financial returns under the mode will also enable private companies to churn their resources more frequently to generate better returns.

Considering the above, the Ministry of Road Transport and Highways decided to adopt the EPC mode for national highway projects, which are not viable on a PPP basis. The Twelfth Five Year Plan also envisages construction of 20,000 km of two-lane national highway projects through the EPC mode. This mode of construction is to ensure implementation of projects to specified standards, with a fair degree of certainty relating to cost and time. It is also expected to enable a transparent, fair and competitive roll-out of national highway projects9.

Is EPC the ultimate solution?Although the current economic scenario has paved the way for the EPC route, this may not prove to be a sustainable long-term solution. The Government is facing a fiscal deficit and funding may be restricted going forward, hindering development of roads in the country.

Furthermore, EPC only solves the financial aspect of the challenges faced by developers while other issues remain unsolved. Even in the case of road projects being undertaken in the EPC model, the issue of land acquisition and availability of approval still remains valid. The recent increase in input costs due to a blanket ban on sand-mining and quarrying has rendered estimation of costs difficult. These issues may affect the profit margins of EPC contractors. Since EPC contracts have a fixed price, private players may evince less interest under these circumstances and still be cautious against incurring such losses.

Future outlook As elucidated above, opting for EPC will only solve the issue of financial stress and not other issues faced by contractors. It is a case of once bitten twice shy, with developers who have suffered losses in BOT still staying away from new PPP or EPC projects. The future of road development, therefore, demands improved investor sentiment in the sector. This will require a deep understanding of risk management, efficient planning, realistic traffic estimates, responsible bidding, timely execution and approvals for ensuring the profitability of projects.

In the past, the Government has followed a single-blanket approach, which may lead to difficulties in a dynamic business environment. The need of the hour is a judicious mix of the two (BOT and EPC) modes, decided on for each project on a case to case basis. Authorities need to focus on formulating solutions for these issues. Changing economic conditions prompt a revision of policies. There is a need for coordination among authorities and a mutual understanding fostered among the parties involved.

The Indian Government also needs to think beyond conventional methods to face impending challenges. To mitigate the issue of lack of funds, it needs to deepen India’s corporate bond market and increase funding sources. Transport sector-specific lending agencies on the lines of the Power Finance Corporation and Rural Electrification Corporation should be created to design and provide loans that cater to the sector’s need.

Therefore, switching to the EPC mode may provide short-term solace, but revival of the sector requires prompt action with respect to reforms and policy changes on the Government’s part.


Guest article– by Mihir Gada, Associate Director, Transaction Advisory Services, EY

Valuation of debt funds — pragmatism vs convenience

“People are just as attracted to truth as they are to convenience and expediency.” – Pope Francis

Today, most private equity deals in real estate are devoid of equity characteristics. They have fixed returns or guaranteed IRR, although with an equity kicker (and this kicker is so uncertain that industry players generally tend to forget about it). Therefore, in the case of NAV/ portfolio reporting to investors, what fund managers should be doing is a million dollar question. Since portfolios have fixed returns, fund managers generally tend to value them at book value + interest accrued due to either convenience or confusion.

There have been instances where a very high fixed return instrument has become an NPA and an instrument carrying moderate fixed returns has traded in the market at a premium to the book value + accrued interest. Sound corporate governance demands that NAV/portfolio valuation is disclosed to investors by fund managers, based on data available and considering the boundaries of fairness. While valuing debt instruments issued to

funds by real estate companies is not an easy proposition, valuing them on their book value + accrued interest also seems unreasonable. A pragmatic approach could be to recognize the inherent risk in owning debt instruments and capture the risk in a valuation model.

There is always the risk of real estate companies being able to service debt instruments by paying interest and repaying principal. The factors that need to be considered in quantifying the risk include:

What is the brand image of the developer in the end market? A developer with a strong customer base, a favorable brand appeal and a diversified asset portfolio has a reduced risk of default or delay.

• Has the developer defaulted to other lenders/funds? Was the default deliberate? A developer with credibility in the financial community can secure refinance, which reduces the chance of default. Furthermore, the credit rating of any instrument/ project of the developer should be considered carefully if the developer is likely to pursue litigation to stop recovery by a fund.

• How is the principal project (for which funds were advanced) performing? The cash flows of an underlying project are generally the first charge/defense

available for debt funds, and therefore, aspects such as location, approval status, delay in development, product pricing and sales velocity should also be considered.

• What is the security/collateral available in the event of default?

• What are other alternatives available in the event of default?

All these aspects should be considered holistically and the various instruments forming part of a debt fund should be arranged in their order of priority. Debt instruments that are considered low risk, based on a review of factors mentioned above, should be ranked higher and those that are considered risky lower.

The next step lies in estimating cash flows likely to be received by the fund from ownership of each debt instrument. The estimate should be based on what is likely to happen. Therefore, if there is the likelihood of a delay in receipt of interest money or in repayment of the principal, this should be factored in projected cash flows. Similarly, if there is likely to be prepayment (with or without a premium), this should also be considered. Needless to say that if there is any likelihood of an equity “kicker” becoming crystallized, this should also be factored in its projected cash flows.

The estimated cash flows should then be


discounted to arrive at the value, based on a fair discount rate. This rate can be higher than the normal discount rate/mean IRR for debt instruments that get a lower ranking. Similarly, the discount rate can be lower than the normal discount rate or mean IRR for debt instruments that get a higher ranking. There will be some subjectivity inbuilt in estimating higher or lower discount rates than the normal discount rate, but investors would appreciate consistency in quantifying subjective parameters and an attempt by debt funds to quantify the risk inherent in their debt portfolios. The discount rate should be independent of the coupon or interest rate or fixed return the debt instruments will generate.

The net present value of future cash flows to be received by a debt fund from ownership of each debt instrument, using a fair discount rate, should form the basis for valuation.

In conclusion, while valuing the portfolios of debt funds on the basis of principal outstanding + interest accrued may seem convenient, it may not meet the benchmark for reasonableness. Fairness demands that debt funds should consider all the qualitative and quantitative aspects while reporting their NAV/portfolio valuation to investors.

“The only thing that overcomes hard luck is hard work.” — Harry Golden.


Buys and ties

Infrastructure

CompletedEntity Nature of transactions Additional details

SBI Macquarie Infrastructure Trust (SMIT)21

SMIT has acquired a 74% stake in a Trichy road project developed by Shapoorji Pallonji and IJM of Malaysia for around INR2.8 billion.

The project involves four-laning a 92.75km stretch on National Highway (NH) 45. It commenced commercial operations in September 2009.

Tata Power Limited (TPL)22 TPL acquired AES Saurashtra Windfarms Private Limited (ASWPL), a subsidiary of US-based AES Corporation, through its subsidiary Tata Power Renewable Energy Limited (TPREL). ASWPL has a 39.2 MW wind energy farm in Gujarat.

The wind energy farm is fully operational since January 2012.

IL&FS Engineering and Construction Company Limited (IECCL)23

IECCL has formed a JV with GPT Infraprojects Limited (GIL) to design and construct an INR1.4 billion rail flyover near Ganjkhwaja in Uttar Pradesh for the Dedicated Freight Corridor Corporation of India (DFCCIL).

The project is to be completed in 30 months, and is awarded on a design and build lump-sum basis.

SEW Infrastructure Limited (SIL) and Navayuga Engineering Company Limited (NECL)24

SIL and NECL have sold their 67% stake in their JV SPV Barawani Tollways Private Limited to Malaysian company UEM Group’s subsidiary Uniquest Infra Ventures Private Limited (UIVPL), in order to improve the liquidity and strengthen the overall financial position of the venture.

The total cost of the project is INR7.8 billion.

GMR Energy Limited (GEL)25 GEL has entered into a joint development agreement with International Finance Corporation (IFC) to jointly develop a 600 MW Upper Marsyangdi-2 hydropower project in Nepal. The estimated cost of the project is US$1.0 billion.

The project has completed all survey, investigation and feasibility studies and has received a majority of clearances from the Government of Nepal.


Infrastructure (cont’d.)


Welspun Infra Projects Private Limited (WIPPL)26

WIPPL, the infrastructure arm of Welspun Corp Limited (WCL), sold its 39.9% stake in its JV Leighton Welspun Contractors India Private Limited (LWCIPL) for INR6.2 billion to its JV partner Leighton Holdings Limited (LHL). WCL intends to use proceeds of stake sale for reducing debt and deleveraging the balance sheet.

WCL plans to make a profit of INR290.0 million from the sale. The entity has been renamed to Leighton India.

Bharat Heavy Electricals Limited (BHEL)27

BHEL, Hindustan Salts Limited (HSL), Power Grid Corporation of India Limited (PGCIL), Satluj Jal Vidyut Nigam (SJVN), Solar Energy Corporation of India (SECI) and Rajasthan Electronics and Instruments (REI) have signed an MoU to develop a 4-Gigawatt (GW) Ultra Mega Solar Power Project (UMSPP) in Rajasthan.

The project is part of India’s 20-GW solar capacity goal programme by 2020. The JVC will be incorporated as a public limited company under Department of Heavy Industries (DHI).

JinBhuvish Power Generations Private Limited (JPGPL)28

JPGPL signed a MoU with Korea South-East Power Company Limited (KOSEP), a subsidiary of government-run Korea Electric Power Corporation, to develop a thermal power project in Maharashtra. The INR34.5 billion project is expected to be operational by 2016.

KOSEP holds 40% equity stake in the project. Lenders include PTC India Financial Services, Rural Electrification Corporation, Power Finance Corporation and India Infrastructure Finance Company.

Welspun Energy Limited (WEL)29 WEL signed a MoU with the Government of Punjab to develop a 150 MW solar power project in Punjab with an investment of INR13.5 billion, expected to be operational by 2017.

Welspun is already developing a 35 MW solar power project in Punjab.

In the making?Entity Nature of transactions Additional details

Adani Ports and Special Economic Zone Limited (APSEZL)30

APSEZL plans to acquire stake in Dhamra Port in Odisha for INR50.0 billion from its current operator Dhamra Port Company Limited (DPCL), for its second phase of expansion and will also act as a consultant in the project.

Citibank NA is advising Dhamra Port on potential stake sale and a deal is estimated to be concluded soon.

National Hydroelectric Power Corporation (NHPC)31

NHPC plans to enter into JVs with private entities for setting up greenfield hydro-power projects (HPPs), and 17 companies including Reliance Power, Gammon India and KSK Energy have shown interest in the projects.

NHPC intends to own at least 51% stake in the JVs.

National Thermal Power Corporation (NTPC)32

NTPC plans to acquire seven private thermal power projects from developers seeking to exit the sector. The projects have a combined capacity of 2,000 MW, and are at various stages of development.

NTPC announced that it would finance the acquisitions through 70% debt and 30% equity, and that it has access to funds at a low interest rate of 8%.

National Hydroelectric Power Corporation (NHPC)33

NHPC signed an agreement with the Government of Kerala to set up an 82 MW wind power project in Kerala. The project is estimated to cost INR5.0 billion and is expected to be operational by 2016.

The project would be developed on a build, own, operate and transfer basis.


Real estate


Prestige Estates Projects Limited (PEPL)34

PEPL has tied up with Disney India to develop residential township project spanning 102 acres in Whitefield, Bengaluru.

The project would consist of 3,400 apartments and over 200 villa units.

Sobha Developers Limited (SDL)35

SDL has entered into a joint development agreement with Lakshmi Machine Works Limited (LMWL) to develop residential apartments in Coimbatore, in order to develop the land in its two sick units.

The project is expected to be completed in 2015-16.

Godrej Properties Limited (GPL)36

GPL has merged its two subsidiaries Godrej Sea View Properties Private Limited (GSVPPL) and Godrej Nandi Hills Project Private Limited (GNHPPL) with itself, in order to consolidate operations of wholly-owned subsidiaries and eliminate multiple operating entities.

The SPVs GSVPPL and GNHPPL were formed to develop residential projects in Chennai and Bengaluru respectively.

Ashiana Homes Private Limited (AHPL)37

AHPL has formed a 50:50 JV with Landcraft Developers Private Limited (LDPL) to develop an INR6.0 billion residential project spread across 14 acres in Gurgaon.

The projects would consist of 750 units, and it is expected to realize sales of INR10.0 billion from the project.

Shapoorji Pallonji and Company Limited (SPCL)38

SPCL, the flagship company of the Shapoorji Pallonji Group, has formed a 20:80 JV with Canada Pension Plan Investment Board (CPPIB), with an initial investment of US$500.0 million.

CPPIB considers India a key growth market and one of its long-term investment destinations.


GPL has acquired 49% stake in Godrej Developers Private Limited (GDPL) from private equity firm Red Fort Capital. GDPL is developing the IT park project ‘Godrej Genesis’ at Kolkata.

GDPL has become wholly-owned subsidiary of GPL after this transaction.

Tata Housing Development Company Limited (THDCL)40

THDCL has entered into a joint development agreement with Arvind Limited to develop a residential project on the outskirts of Ahmedabad, focussing on high end customers. The township would be spread across 58.5 million square feet (msf).

The project would consist of villas priced between INR15.0 million – INR50.0 million


GPL has entered into a JV with Mumbai-based Ador Group to develop a residential project spread across 6.7 acres of land in Mumbai, Maharashtra.

GPL plans to develop 0.8 msf of residential space through this deal.

Brigade Enterprises Limited (BEL)42

BEL has signed an agreement with InterContinental Hotels Group (IHG) to develop 10 Holiday Inn Express hotels in southern India, which would be owned by BEL and managed by IHG.

The first two hotels under this partnership will open in Bengaluru in early 2017, while the remaining eight hotels are scheduled to open within the next four to seven years.

Brigade Enterprises Limited (BEL)43

BEL has formed a JV with Government of Singapore and Investment Corporation (GSIC) to develop residential project spread across 9.3 acres of land in Bengaluru, with a developable area of 1.6 msf.

The units are estimated to be priced between INR8.5 million – INR12 million.

Lodha Developers Limited (LDL)44

LDL has signed an agreement with Trump Organization of the property developer Donald Trump, to develop luxury residential project ‘Trump Tower’ in Mumbai, Maharashtra. The project is estimated to cost INR1.6 billion – INR1.7 billion.

The tower would be located in a 17.5-acre land ‘The Park’, being developed by LDL in Worli, Mumbai.

Tata Realty and Infrastructure Limited (TRIL)45

TRIL has partnered with Tata Asset Management Limited (TAML) to launch an INR6.0 billion domestic real estate fund invest in income generating assets such as malls, office complexes.

The fund is expected to close by January 2014.


Real estate (cont’d.)



GPL has entered into a joint development agreement with Oasis Buildhome Private Limited (OBPL) to develop a residential project spread across 13.8 acres on the Northern Periphery Road (NPR) in Gurgaon, with 1.2 msf of saleable area.

This is the fourth project launched by GPL in NCR since it has entered the region, and second in FY14.

Mantri Developers Private Limited (MDPL)46

MDPL has formed a 50:50 JV with global investor Xander Group to develop a residential township in Bengaluru.

The project would consist of 9,000 apartments, and is expected to be launched in early 2014.

DLF Limited47 DLF Limited sold 60% stake in its wall curtain subsidiary Star Alubuild Private Limited (SAPL) to building materials and housing equipment manufacturer LIXIL Corporation of Japan. SAPL’s founder also sold his 10% stake to LIXIL. The total deal was valued at INR800 million.

This is the first major investment by LIXIL in Indian real estate market.

Omaxe Limited48 Omaxe Limited has tied up with Intercontinental Hotel Group (IHG) to develop Holiday Inn hotel in New Chandigarh, where will undertake the construction of the hotel which will be managed by IHG.

Omaxe Limited plans to invest INR2.0 billion in the construction.

International Recreation Parks Pvt Ltd (IRPPL)49

IRPPL, a venture between Unitech Limited and International Amusement Limited (IAL) has tied up PVR Limited for running a 15-screen multiplex and with a Mexico-based family entertainment company KidZania SA for an edutainment theme park in Noida. Both projects would be spread across 0.15 msf.

Both the projects are expected to open to public by 2015. The deals were handled by CB Richard Ellis.

Supertech Limited50 Supertech Limited has tied up with UK-based design firm yoo Worldwide, for executing the interior design of two luxury housing projects in Gurgaon. The projects consist of 400 apartments and villas each.

The projects would be designed under two brands ‘Jade Jagger for yoo’ and ‘Steve Leung & yoo’.

Prestige Estates Projects Limited (PEPL)51

PEPL has tied-up with Disney Consumer Products (India) to develop a residential township project consisting of Disney-themed homes spread across 102 acres in Bangalore.

The project consists of 3,428 apartments and 271 villas.


In the making?Entity Nature of transactions Additional details

Nitesh Estates Limited (NEL)52

US-based private equity Xander Group is planning to invest INR3.0 billion in NEL to develop a commercial project on a land spread across 8 acres in Koramangala, Bengaluru.

NEL had purchased the land for INR3.8 billion.

Shriram Properties Limited (SPL)53

Xander Group is planning to acquire an Information Technology Special Economic Zone (SEZ) at Chennai from SPL for INR6.9 billion.

The SEZ forms part of a larger 6.0 msf mixed-use development spread across 58 acres of land.

RMZ Corp Holdings Private Limited (RCHPL)54

South India-based IT park developer RCHPL is planning to buyout a mixed-use project from Goldman Sachs, spread across 1.0 msf in Bengaluru for over INR4.0 billion. Goldman Sachs owns 74% stake in the project.

The project consists of a 230-key Four Seasons hotel, 110 luxury branded residences, 60,000 sq ft of luxury retail space, and 1.5 msf of office space.

Lotus Green Developers Private Limited (LGDPL)55

NCR-based LGDPL plans to sell a 50% stake in its various residential projects to private equity firm Red Fort Capital (RFC) for INR10.0 billion.

RFC plans to invest 37% of its total investment in two existing projects, one in Gurgaon and another on the Yamuna Expressway.

Lotus Green Developers Private Limited (LGDPL)56

NCR-based LGDPL plans to sell 50% stake in its various residential projects to private equity firm Red Fort Capital (RFC) for INR10.0 billion.

RFC plans to invest 37% of the total investment in two existing projects, one in Gurgaon and another on the Yamuna Expressway .

Unitech Limited57 Unitech Limited is planning to sell 100% stake in a 250-room hotel in Noida and a 200-room hotel in Gurgaon for an estimated INR6.0 billion, to divest its commercial properties to offload debt.

The transactions are expected to be completed by the end of FY14.

Shiram Properties Limited (SPL)58

SPL is planning to sell 49% stake in two residential projects to Amplus Realty Fund and Aditya Birla Real Estate Fund for INR1.67 billion.

SPL is looking to raise INR10.0 billion for our spread across the southern region.


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