by Paul Joseph
January 21, 2011
Uncategorized
Industrial growth has reached beyond Bangalore urban district and is now expanding in Nelamangala taluk. “There is tremendous demand for industrial land in this region,” says a senior official in KIADB. “We are working towards making Dobaspet, one of the largest industrial areas here,” he adds. Focus on small towns With the geographical boundary of the city changing its contours quite frequently and with the demand for jobs growing, the focus of the Department of Industries and Commerce has been to identify taluks and envisage their potential for investments. A study conducted by them in Nelamangala taluk alone showed a potential for investments of around Rs 128 crores in 915 units in tiny and small scale sectors and a potential for investment of around Rs 1,038 crores in 122 units in large and medium scale industries from 2006-11. Whether this projected investment of Rs 1,166 crores, creating employment for 60,000 people has been achieved in the last five years remains debatable, but the Dobaspet industrial area has been expanding from 1995 and is spread over four phases today. Lowers rentals, manpower available “There is a lot of scope to decongest Peenya, and Nelamangala taluk must be considered for its excellent connectivity now that the elevated NH to Tumkur is functional,” says S M Hussein, industrialist in Peenya and former President of the Peenya Industrial Area Association. “There is potential for easy availability of manpower and lower rentals in Nelamangala region. Logistics will be helped to a great extent if this happens,” says Hussein. While the current rentals in Peenya are around Rs 10-12 per sqft and said to be very steep, rentals in Nelamangala are in the region of Rs 5-6 per sqft. The Dobaspet Industrial Area in particular, which began functioning on April 21, 1995, has now grown to four phases. Located a mere 20 km from Nelamangala on the Tumkur route, it houses 475 large-scale fabrication units such as wind turbine blade product manufacturers, transformer manufacturers and even a hazardous waste management plant. The growth trajectory has been steady in the development of these four phases in Dobaspet. Phase II came into being in 2005, and Phase III two years later in 2007. The final notification for Phase IV has now been published. All this indicates a steady growth for industries here. “The elevated NH to Tumkur has given a major thrust to connectivity here,” says S Yogamurthy, industrialist in Peenya. “It has not only reduced traffic density drastically, it has also brought down the travel time.” Focus on Nelamangala Largest industrial area Dobaspet Phase I-IV is tipped to be the largest industrial area in the region 20 km from Nelamangala, 50 km from Bangalore Phase I – 276.55 acres (61 units) Phase II – 67.05 acres (7 units) Phase III – (also known as Somapura Phase I): 1,314 acres (407 units) Phase IV – 1,300 acres (final notification already published) Agri export zones Bangalore Rural District is covered under three Agri Export Zones (AEZs) for gherkins, rose onion and flowers. There is potential for agro processing and agri exports. The facilities created here can handle around one million flowers a day. Investment destination Bangalore Rural District is an emerging investment destination for industrial segments such as pharmaceuticals, biotechnology, automobiles and auto components, aerospace, apparel, machine tools, precision components, tooling, food processing, floriculture etc, because of the proximity to Bangalore and due to the constraints on the availability of land in Bangalore Urban District. QUICK BYTES THE ROAD TO TUMKUR HAS SEEN THE DEVELOPMENT OF MANY INDUSTRIAL BELTS IN ITS VICINITY THE DOBASPET INDUSTRIAL AREA WHICH IS NOW IN ITS FOURTH PHASE OF DEVELOPMENT, IS TIPPED TO BE THE LARGEST INDUSTRIAL AREA IN THIS REGION THE ELEVATED STRETCH HAS AIDED LOGISTICS SUPPORT TO THE INDUSTRIES ALONG THE ROUTE
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by Paul Joseph
November 16, 2010
Uncategorized
While higher land prices and raw material costs could put profitability of companies under pressure, a steep rise in borrowing costs is likely to hurt demand. The BSE Realty index fell 11 per cent over the last month and eight per cent over the week as real estate companies reported margin pressures in the September quarter. To add to the problems, the Reserve Bank of India (RBI) toughened stance on rising asset prices. Also, doubts are being expressed about a pick-up in volume due to high prices. “A drop in volumes due to high prices could lead to working capital issues for some players”, said an analyst. The RBI’s measures – lowering the loan to value ratio and higher provisioning for luxury home and teaser loans –are likely to have a minor impact, say analysts. The sector also faces spiraling costs, which have dented the profitability of India’s largest listed players. High land prices, construction costs and muted sentiment could hurt plans of companies such as Emaar MGF which are looking to come out with initial public offers (IPOs). Though the credit policy was negative for the sector, some realty experts, such as Sanjay Dutt, CEO, Business, Jones Lang Lasalle Meghraj, believe it will have a moderate impact. According to them, most conservative financial institutions and banks have already become cautious on home loans. Analysts say key urban markets such as Mumbai and Delhi will be impacted by higher provisioning for home loans of Rs 75 lakh and above. Given the price increase and higher construction costs (due to labour shortage and rising cement and steel prices) and lower sales in markets such as Mumbai, the norms will be an additional burden for the builders. With developers withdrawing the 10:90 (10 per cent upfront and the rest on possession) schemes, analysts believe they are likely to bring down the size of the houses or look at lowering prices. While banks have not yet raised rates, analysts believe home loan rates may rise 50 basis points, increasing the borrowing cost. Overall, higher prices and rising costs could hurt demand. According to analysts, Mumbai-based developers (Orbit etc) and others such as DLF, Unitech and Sobha will be impacted given their exposure to premium housing. High raw material costs and paucity of labour have led to spiralling of expenditure for leading developers. Unitech and DLF, India’s top realty players, saw raw material costs double year-on-year in the September quarter, while consolidated revenues rose 26.5 per cent and 39 per cent, respectively, for the duo. Construction costs were up 38 per cent for DLF on a sequential basis. DLF, which saw earnings before interest, depreciation, tax and amortisation margins drop 900-basis points on a sequential basis to 42 per cent in the quarter, says the drop on account of variation in the product mix is temporary and the company is likely to end the year with margins in the 45-50 per cent range. Developers say cost pressures are likely to stabilise, but higher land prices and subsequent pricing are the key concerns. Analysts say developers that have outsourced projects with fixed contracts or whose projects are nearing completion will be less impacted as compared to those which are yet to start their projects. They say developers are no longer chanting the affordable housing mantra and are focusing on premium or luxury projects which, given high land prices and construction costs, make more sense. However, volume holds the key and needs to be monitored. The stock prices of realty companies could see more downward pressure if volumes don’t take off. In addition to higher sales volumes, successful listing of some big-ticket IPOs would reflect interest in the sector, said analysts. While Oberoi Realty and Prestige Estates managed to raise Rs 2,200 crore recently, Emaar MGF’s IPO would be closely watched, given that this would be the company’s fourth attempt to list. While most analysts are bearish on the sector per se, they advice a selective approach. In terms of picks, analysts are putting their faith on DLF, Sobha (26 per cent upside each) and Anant Raj Industries (39 per cent).
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