Road building revival offers rare hope for India infrastructure overhaul
Jun 18, 2013
Source : DNA


MUMBAI/DELHI: K. Ramchand, managing director at one of India's biggest road builders, is doing something unusual to help dispel the gloom pervading much of the country's infrastructure sector today: bidding for new projects.

His company, IL&FS Transportation Networks Ltd (ILFT.NS), signed a $300 million contract in April to build a six-lane highway. The project will link an eastern industrial zone afflicted by some of India's worst traffic snarls to mining districts such as Dhanbad, the nation's coal capital.

The IL&FS deal marks a sharp turnaround from last year when investor interest in public works plummeted. To rekindle investment in new, modern roads that India badly needs, the government has been rolling out a slew of policy measures, including a strategic shift in how projects are financed.

"Last year, I think, has been a typically bad year," Ramchand said in an interview at a hotel in the business hub of Gurgaon outside New Delhi. "There is definitely an upswing, there is no doubt about it, because I think the mood is much better."

The most significant policy change is that the government has moved away from its much-vaunted but troubled public-private partnership (PPP) model to fund projects.

Under the PPP model, developers finance construction out of their own pocket, often in exchange for the right to charge toll fares.

The government will revert to a form of contract where it funds part of the road building, taking on more of the risk of the project itself, said a top government official, speaking on condition of anonymity.

To give some idea of the scale of the change, the government will fund 70 percent of the 9,600 kilometres (5,965 miles) of road projects that it aims to award this fiscal year.

That is a sharp departure from the goal set earlier by India's Planning Commission to build 60 percent of roads in public-private partnership.

The changes have even drawn the attention of foreign private equity players, with the likes of Macquarie Group Ltd (MQG.AX) looking to acquire completed projects.


India relies heavily on roads to move freight due to its archaic railway network and under-developed river canal system. But its roads are often constricted, pot-holed and choked with traffic, slowing deliveries and hitting competitiveness.

"Road costs in India are higher by about 30 percent," McKinsey said in a report, comparing them with costs in the United States. "This not only results in higher prices and lower competitiveness, but also hampers economic growth."

The government plans to pour $1 trillion into infrastructure over five years. But its efforts to attract private investment have stumbled, partly because of red tape and cautious bankers.

India awarded less than 2,000 kilometres worth of new road contruction contracts in the last fiscal year, against a target of 9,500 kilometres.

To get investment in the sector moving again, the government has tweaked its policy so that developers no longer have to wait for clearance from forest authorities to start construction - a hassle that had stalled projects in the past.

Another boon is the central bank's move to reclassify loans to road builders as secured loans rather than unsecured loans, which would give more comfort to banks to lend to projects.

Il&FS is hoping to add $880 million of new orders this fiscal year, Ramchand said.

Rival Lanco Infratech Ltd (LAIN.NS) said in an interview in May that it aims to sign one or two road projects this year. It last won a contract in 2010.

Another developer, KMC Constructions Ltd, which has a tie-up with the private equity firm 3i Group PLC (III.L), is also scouting for projects to add to its $580 million order book.

"We're looking at the projects, definitely, because this is the time to bid for the projects," said Shashank Shekhar, vice president for business development at KMC.

Latest Realty News

NDMC eases rules for building plans
Jun 18, 2013
DELHI: In a major relief to property owners in north Delhi, the municipal corporation has announced self assessment amnesty for regularization of unauthorized construction in unauthorized regularized colonies. An order in this regard was issued by the North Delhi Municipal Corporation on 14th June.
Virar-Palghar-Boisar: New offerings at an affordable price
Jun 18, 2013
MUMBAI: If affordable housing is what you are looking for in Mumbai, then the Virar-Palghar-Boisar stretch is definitely worth consideration. There are several ongoing projects, offering multiple home options in the range of Rs 27-60 lakhs. Residential projects based in these areas, offer configurations of 1, 2 and 3-BHK units.
BJP-JD(U) split hits sentiment in realty sector in Bihar
Jun 18, 2013
PATNA: The Sunday split in NDA hit the market sentiments, particularly in the real estate sector. But, the prices of available unoccupied flats in multistoreyed apartments in Patna and other cities are not expected to plummet.
Unaffordable Mumbai
Jun 18, 2013
MUMBAI: For Mumbai, the city which has for years carried the unwholesome reputation of being the most over-priced in terms of residential real estate valuations, there is no relief in sight for aspiring home buyers. Over the last four years, property valuations in the financial capital have increased by an average of 66 per cent. All ‘expert’ predictions over the last three years of an imminent correction have proved to be wrong.
AT Branch Manager held
Jun 18, 2013
BHUBANESWAR: The branch manager of district unit of Artha Tatwa (AT) Group was arrested by local police on Sunday for cheating investors of crores of rupees.
Builder arrested for cheating customer
Jun 18, 2013
BHUBANESWAR: A local builder, Birendra Swain, was held by the City Police here on Monday on charges of cheating a customer of Rs 20 lakh.
Realty Bill will make homes costlier, says Credai chief
Jun 18, 2013
MUMBAI: The proposed Real Estate Regulatory Bill is “welcome”, but it may make homes more expensive. Mandatory registration of property before advertising is likely to impact smaller players, says C. Shekar Reddy, National President, Confederation of Real Estate Developers Association of India (CREDAI). But pushing for amendments to the Bill is not his only issue. Staving off taxes charged on deemed profits (the differential amount that arises when the registration value of a property is higher
RBI policy will hurt buyer’s sentiment: MCHI-CREDAI
Jun 18, 2013
MUMBAI: The RBI’s decision to keep the Repo and CRR rates unchanged is letting the entire industries in general and housing industry in particular, down considering the slowdown in the economy.
Unsold houses in Chennai pile up as sales slump
Jun 18, 2013
CHENNAI: Builders across the country have been worried as unsold housing stock have been piling up in the recent months.
SEZs spur growth of residential catchments in Bangalore
Jun 18, 2013
BANGALORE: When the Special Economic Zone (SEZ) Act 2005, supported by the SEZ Rules was introduced in 2006, the idea was to make it easier to establish large, self-contained facilities with excellent infrastructure with the aim to promote exports. As per the guidelines, SEZs can be developed by public or private players or even jointly, by State governments, their agencies, or on the public-private partnership (PPP) model.

Latest Realty News Of State

Realty Talk's