Gujarat International Finance Tec City in trouble, seeks government help
May 28, 2013
Source : The Times of India


AHMEDABAD: Gujarat International Finance Tec-City (GIFT) desperately needs funds to extend basic civic infrastructure - drainage, water supply lines, utility duct lines, district cooling system and infrastructure for power supply - across the entire first phase of the GIFT city area. GIFT Ltd has now approached the state government to develop at least 1.1 million square feet of space and even set up a few offices in the GIFT area. This is being done to boost investor confidence and show the government's commitment to the project. The proposal is under consideration by the state government.


Further, GIFT officials concede that most of the MoUs and deals signed for buying space in its two 29-storey towers, exist only on paper. The officials said they have requested the state to use its "good offices" to encourage investors, including public sector financial institutions, to buy space in the GIFT project.


Infrastructure Leasing & Financial Services (IL&FS) had taken the responsibility of developing 7.7 million square feet - the two 29-storey towers are a result of this commitment. Of the net financial assistance of Rs 1,300 crore it needs, GIFT Ltd has been extended a loan of Rs 400 crore by a consortium of 15 banks at 12.5% interest and another Rs 150 crore from Syndicate bank at 11% interest. These loan agreements were sealed recently.


"GIFT board had authorized us to borrow up to Rs 1,000 crore last year. The loans are part of that process. In the first phase, we are supposed to borrow two-thirds of the project cost while one-third has to be raised by sale of development rights. IL&FS has achieved 34% of its commitment by construction of the two towers. We have approached the government to develop 1.1 million square feet. The proposal is being studied by the state government," says GIFT director Ramakant Jha.


One of the basic sources of revenue for GIFT Ltd - IL&FS and the state government are equal partners in this - is the sale of development rights to investors who want to take up projects in more than 886 acre GIFT area. Other than land, the company has equity of Rs 65 crore which is highly inadequate if GIFT Ltd were to seek loans worth Rs 1,100 to Rs 1,300 crore from financial institutions.


"MoUs and deals committed to buying space in our two towers are taking a little time to fructify. We are determined not to lose our pace. We have also requested the state government to use their good offices to motivate corporate and public sector financial institutions to buy space in GIFT project," said a senior GIFT official.


The official adds, "The sale of development rights in GIFT hovers around the rate of Rs 1,250 per square feet, which is a competitive price in the market. We saw that in the next 12 years we would require a minimum of Rs 9,000 crore when a majority of the GIFT infrastructure is in place."


Earlier this year chief minister Narendra Modi had expressed the hope that organised and co-operative sector of the state will benefit from GIFT city which is today designated as the lone International Financial Service Centre (IFSC) in the country. The project area consists of a Special Economic Zone (SEZ) and a Domestic Finance Centre (DFC).

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