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Andhra Pradesh’s port-powered success

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With an enviably strategic location and a wealth of highly educated workers, the Indian state of Andhra Pradesh is planning a slew of new sea and airports to complement its smart cities and economic zones.

Strategically located on the Bay of Bengal, Andhra Pradesh is India’s seventh largest state by area, and its leaders claim it has the potential to be the country’s gateway to the rest of Asia through port-led development.

Situated on the south-eastern coast and with a population of more than 54 million people, the state has one of India’s fastest growing economies. GDP expanded by an average of more than 13% annually between 2011 and 2016, and by 11.2% in 2017, and total GDP now stands at about $125bn. The state attracted FDI inflows totalling $18.47bn between April 2000 and March 2019, according to India’s Department for Promotion of Industry and Internal Trade.

Andhra Pradesh has one of the longest coastlines of any Indian state, at 975 kilometres, and is developing four new sea ports. As well as a greenfield international ‘aerotropolis’ at Visakhapatnam, the state is planning seven smaller airports. A large seaport is planned at Dugarajapatnam, located in Nellore district in the south-east of the state. It would cover a 2000-hectare area and involve an investment of $1.2bn under a public-private partnership. In August 2019, Indian conglomerate Adani Group said it was holding talks to acquire Krishnapatnam port, another deep-water port in the Nellore district, for $775m, which would be expanded if the acquisition goes ahead.

Dual capitals

In 2014, Andhra Pradesh was ‘bifurcated’, or split into two new Indian states: Telangana and the remaining Andhra Pradesh (also known as Seemandhra). Hyderabad is the biggest city in Telangana, with a 6.8 million population. Amaravati – a planned city covering 217 square kilometres whose foundation stone was laid in 2015 – is the ‘de jure’ capital of Andhra Pradesh, while Hyderabad is the ‘de facto’ capital. The metropolitan area of Amaravati encompasses the cities of Guntur and Vijayawada.

Andhra Pradesh’s main cities include Visakhapatnam (often shortened to Vizag), with 1.7 million inhabitants; Vijayawada, with a population of about 1 million; and Guntur, with 750,000 people.

“Andhra Pradesh is a good place to establish a company,” says Srinivas Raju, plant operations director at Lixil India, a subsidiary of the Japanese sanitary ware producer Lixil, located in West Godavari, about 90 kilometres from Vijayawada. “The cost of labour is cheaper in India than in other Asian countries. The state also has abundant electricity; power cuts never take place here. It also has a lot of very good, talented people, and we have had no problem hiring the right people.”

The Lixil plant – which covers 18 hectares – currently manufactures 790,000 sanitary ware units a year but plans to take this number up to 2 million units by employing a further 500 people. About 80% of its products are destined for the US market but Thailand and China are major markets as well. Lixil has invested more than $56m in the West Godavari plant, which it acquired from Sentini Sanitarywares in January 2018.

Andhra Pradesh state has 368 engineering colleges teaching a total 160,000 students; 18 state universities; 400 management schools with 46,500 students; 128 pharmacy colleges with 11,700 students; and 78 industrial training institutes.

Services make up 44% of the state’s economy, followed by agriculture at 34% and industries at 22%. The agricultural sector expanded by 17.8% in 2017, while services grew by more than 9%.

Smarter city

Sri City is a privately owned, integrated smart city located in the south of Andhra Pradesh, close to the border with Tamil Nadu state and 55 kilometres north of the city of Chennai, one of India’s four biggest cities with a population of 10.6 million people. Set up in 2008, Sri City is based on a holistic development model centred around ‘work, live, learn and play’. Spread over more than 3000 hectares, it has been designed to meet international standards in infrastructure development and service delivery.

It includes a multi-product special economic zone, a domestic tariff zone, a free-trade and warehousing zone, and an electronics manufacturing cluster. Sri City is home to more than 185 companies, including 56 foreign firms from 27 countries, including multinationals such as Kellogg’s, Isuzu, Mondelez, Pepsi, Alstom, Kobelco, Foxconn and Danieli. More than 50,000 people work at the park and more than 50% of the workforce is female.

“Sri City is one of the main reasons foreign investors come to the state of Andhra Pradesh,” says Ramesh Subramaniam, president of Sri City Foundation. “The state is highly regarded within India and internationally for its ease of doing business. It is also seen as very stable politically; policies are predictable and consistent.

“We have worked closely with the state government to develop the park and in total the equivalent of $4.2bn has been invested there. Many managers and executives live in Chennai and commute to Sri City. It only takes about 75 minutes by car.”

Attracting manufacturing

Toray Industries India, a subsidiary of Toray Industries, a Japanese company that makes key materials for a range of industries, plans to invest $141m in a manufacturing unit in Sri City. It is the biggest investment in India for the firm, which is the 20th Japanese company to set up a facility at the park. Its 34-hectare site will host two factories, including a polypropylene spun bond plant that will produce the advanced technical textile Meditech, which is used in nappies. It is expected to start commercial production in March 2020.

The other unit is an engineered plastics resin compounding plant that makes raw materials for electrical components used in cars and in electrical and electronic connectors. It started its commercial production in September this year.

“We surveyed more than 150 sites in India and in the end decided on Sri City,” says Ajai Singh Sirohi, head of strategic planning at Toray Industries India. “There is a great team behind the park and they have a really good track record. The land surface is reasonably flat, there is a large land bank, and the park has good infrastructure and maintenance. Four shipping ports are within a 100-kilometres distance. It is close to Sriharikota, India’s equivalent of Cape Canaveral in the US. We decided that if the area is good enough for the country’s space industry, it is good enough for Toray.”

Credits: Fdiintelligence

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2 Comments

2 Comments

  1. Madhu Vasi Reddy

    7th July 2017 at 2:50 pm

    Very good article and publication, we waiting for next publication. thank you

  2. Jawn Staff

    7th July 2017 at 2:50 pm

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Commercial Property

Commercial Office Space Sector Takes Pole Position In Indian Real Estate

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The budget focused on boosting consumer demand, infrastructure development, rural income and manufacturing. Amidst economic gloom, Indian office real estate market performed exceedingly well as compared to other asset classes in this sector during 2019. 

The office market has witnessed multiple large ticket transactions and attracted a substantial amount of investments from various global institutional investors and sovereign wealth funds. In 2019, office assets when compared to residential assets offered high growth and stable returns. 

India’s office leasing proportion rose by 40% Y-O-Y, to an all-time high of 51.6 million sq. ft in 2019. 

 A joint venture between Allianz Group and Shapoorji Pallonji Group saw an acquisition of 2.3 million sq. ft IT SEZ for INR 1,800 crore in Hyderabad. Foreign real estate entities also put up a major show in the Indian real estate spectrum. Tokyo-based Sumitomo Corporation acquired a three-acre plot in the high-profile BKC area for a whopping INR 2,238 crore, where it plans to build an office complex, while the Blackstone Group, an American real estate private equity firm procured the ‘One BKC’ office building for INR 2,500 crore.

These stratospheric investments in the office real estate market speak volumes of the credibility of the Indian real estate sector even in its trying times. 

2019 was a landmark year for commercial real estate. India registered its first REIT in March 2019 when Embassy Office Parks REIT, a joint venture of Embassy and Blackstone Group raised around INR 4,750 crore, in office space with 33 million sq. ft portfolio. It became the largest REIT in Asia. 

India’s office market in 2020, started on a positive note too. DLF leased out around 2 lakh sq. ft office space to social media giant Facebook in Gurugram.

Office space market dynamics

Indices2016 (mn sq.ft)2017 (mn sq.ft)2018 (mn sq.ft)2019 (mn sq.ft)Y-o-Y Growth2019 (%)
Net Absorption33.528.733.246.540%
New Completion36.528.735.751.645%
Vacancy15.1%14%13.5%13%

Source: JLL Research 

Note – Top seven cities are included – Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata

Net absorption of office space across top seven cities grew at 40% Y-O-Y, reaching an all-time high of 46.5 million sq. ft in 2019. Almost 52 million sq. ft of Grade A office space was completed in the FY19, which is 45% growth over FY18. 

In the last half a decade, the office market has witnessed the lowest vacancy level at 13% in 2019. This robust growth in demand for office space is mainly led by IT/ITeS and co-working operators in cities with developed infrastructures. The current momentum in net absorption of office space is expected to continue in 2020, due to a foreseen recovery in economic activities.

The IT/ITeS sector accounted for 42% of total office space leased followed by co-working operators at 14% and subsequently followed by BFSI and Manufacturing/Industrial. Office space leased by co-working operators increased significantly from 8% in 2018 to 14% in 2019 among all sectors. Today there are more than 1,000 co-working spaces in India, making it is the second largest co-working market in the world. The demand for co-working spaces are not only driven by start-ups, but also by bigger enterprises and MSMEs.

City-wise net absorption of office space 

Source: JLL Research

In 2019, Hyderabad, Delhi-NCR and Bengaluru cumulatively witnessed around 70% of total net absorption of office space. Despite muted growth in Q4 2019, Hyderabad registered almost three times net absorption at 10.5 million sq. ft in 2019 against 2018. 

The thriving IT sector in Hyderabad was the main reason behind the surge in demand for office space. With net absorption standing at 10.8 million sq. ft in 2019, Delhi-NCR market took the crown as the leading city in average office space absorption since 2010. Mumbai, Bengaluru, Chennai, and Pune market witnessed decline in overall leasing activity in 2019 in the range of 2-12%.

Strong demand supported the high rental growth prospect in Hyderabad, Bengaluru, Delhi-NCR, and Pune. These cities registered an average rental yield of 5%. The demand for Grade A office space is high in Mumbai but availability is low. This shortage of office space has shot the average rent upwards. Investors are showing great interest in premium office space in Bengaluru and Hyderabad and these markets are also witnessing strong pre-commitment. 

The commercial office sector in India is in a good space, even in a still-recovering real estate market. Flexible work patterns, improved work productivity and cost effectiveness have fuelled the co-working business. 

It is expected that by 2025, around 42% of the Indian population will work in urban centres, and hence the demand for office space will shoot up. This development augers well for the real estate market which is witnessing a paradigm shift in the office space market. 

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Commercial Property

Puravankara Ltd has reported a 41 percent decline in its consolidated net profit

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During the April-December 2019 period, the realty firm’s net profit increased to Rs 88 crore as against Rs 75.57 crore a year ago.

Realty firm Puravankara Ltd has reported a 41 per cent decline in its consolidated net profit at Rs 16.10 crore for the quarter ended December. Its net profit had stood at Rs 27.18 crore in the year-ago period. 

The company’s total income also fell to Rs 528.11 crore in the third quarter of the current financial year from Rs 565.66 crore in the corresponding period of the previous year, the Bengaluru-based firm said in a regulatory filing. 

During the April-December 2019 period, the realty firm’s net profit increased to Rs 88 crore as against Rs 75.57 crore a year ago. 

Total income in the first nine months of 2019-20 rose to Rs 1,797.47 crore from Rs 1,459.64 crore in the corresponding period of the previous year.

Source: PTI – Realitynxt

(Note: The story has been published without modifications to the text. Only the headline and intro have been changed.)

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Commercial Property

Godrej Properties will acquire 26.58 acres land in New Delhi from the Railway Land Development Authority

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The land parcel will be purchased from the Railway Land Development Authority and is situated in the city’s Ashok Vihar area.

Godrej Properties Ltd on Monday said it will acquire 26.58 acres of prime property in the national capital for  ₹1,359 crores.

Terming it one of the largest land transactions in recent past, the Mumbai-based real estate developer said the acquisition value of  ₹1,359 crore will be paid in instalments over several years as stipulated in the tender documents.

The land parcel will be purchased from the Railway Land Development Authority and is situated in the city’s Ashok Vihar area.

“Spread over 26.58 acres, this development will offer about 3 lakh square meters (3.28 million sq. ft.) of development potential and will be developed as a luxury group housing project. The site is surrounded by parks on three sides offering stunning park and city views,” the company said in a statement. 

“We believe this project in central Delhi is one of the most exciting projects in our development portfolio and will contribute significantly to the growth of our business in NCR. We will seek to ensure a landmark project that delivers an outstanding lifestyle for its residents,” said Pirojsha Godrej, executive chairman Godrej Properties, said.

This is the company’s second project in Delhi after the launch of Godrej South Estate in Okhla in 2019. Godrej Properties has developed many residential projects in other parts of the national capital region, including Gurgaon and Noida.

At 0943am, shares of Godrej Properties were down 0.5% at ₹1,135 rupees on the BSE.

Source: LiveMint

(Note: The story has been published without modifications to the text. Only the headline and intro have been changed.)

Credits: Realitynxt

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