CREDAI Doubtful Over The Success Of MIDC Policy

CREDAI remains doubtful over the success of Maharashtra Industrial Development Corporation’s (MIDC) new SEZ policy. As per the new policy more Special Economic Zones (SEZ) land is provided for housing development.
industrial policy is doubted

CREDAI is doubtful over the success of new industrial policy of MIDC.

CREDAI said that the new industrial policy of the MIDC may not be as successful as it is expected to be. The apex Confederation Of Real Estate Developers remains doubtful over the success of the new policy to develop integrated Industrial Township. CREDAI’s national chief Mr. Lalit Kumar Jain expressed his doubt.

Mr. Jain asked how the policy will be successful as the SEZ lands have failed to take off. He said in a statement that the new policy will fail as long as no concession is offered. Continue reading

DLF got NOC for SEZ Kolkata

Nightscene, Shenzhen 2005
One of the leading real estate developers in India, DLF, has been granted the NOC from the government today, thus the firm will now resume its plan for SEZ, a special economic zone in Kolkata.

After a meeting of the Board of Approval which is the nodal body for SEZ-related matters, Mr. D K Mittal, the Commerce Ministry Additional Secretary told the media that the DLF’s SEZ in Kolkata has been granted re-notification by the Board of Approval.

In June, 2008, DLF had come up with four SEZ projects out of which one was SEZ Kolkata.

DLF have gained this notification after a long struggle since it had to approach the Commerce Ministry for reviving this IT/ITeS tax-free zone. Finally, once the demand for IT/ITES leasing space came up, the company allowed for resuming the project.

Tax benefits for investors

UP Government has declared some tax benefits besides simplifying process for approval of building layouts to increase SEZ investments.
During the meeting, it was planned that units being set up in SEZs will get a rebate on entry tax from June 30. These units will get entry tax wavier like export oriented units. Arrangements have been made for fast approval of layout of buildings.
Unit Approval Committee headed by Noida and Greater Noida officials will approve layouts.
Officials were also ensured that VAT deposited by units set up in SEZ was refunded as these units are exempted from VAT w.e.f. january last year.

Affordable housing is not more affordable for builders

The  sector appears to have found its feet with focus on affordable housing and this may reflect in the June quarter results of the companies. The move has led to higher sales for many companies, but on the other hand, it has also impacted the margins negatively. The reason being that the mid-segment housing is a high volume with low margin business.

It may also be understood that only the residential market has seen a recovery, while the commercial and retail segments are still under stress.

Among all the listed companies, Orbit and Indiabulls Real Estate (IBREL) are expected to show a marginal improvement in sales. With a huge fall in property prices in the luxury segment, Orbit has shown 5% increase in sales. With a 70% YoY decline in revenue, Parsvnath is expected to see the highest fall. DLF and Unitech may follow with 60% and 54% decline, respectively. As a move to generate cash for business activities, both these companies have exited from unviable projects and also sold noncore assets. This would help in completing under-construction projects. Even some large SEZ projects have been shelved.

Many companies have launched new residential projects in affordable housing segment. Though construction costs would be low, EBIDTA margins would decline by 5-10 % average due to sharper decrease in prices. However, companies like Unitech, DLF, HDIL, and Sobha that have raised funds have improved their balance sheet positions and thus lowered their overall finance cost. Average EBIDTA margin for June’ 09 would be 39% as against 43% for March’ 09. Peninsula Land is expected to show positive margin, as the number of projects was very limited, hence leverage was also low.

Despite all the gloom, realty sector is seen to show some improvement in margins. The overall PAT margins for the June quarter will be at 26%. Though real estate sector is one of the major contributors to the over all profit growth for India Inc, yet it is low as compared to the past PAT margins of 35-40 %. However as alternate sources of funds have become available, builders have managed to improve their cash position. Loans have been restructured and thus interest liability has been reduced. Developers like Mahindra Lifespaces, IBREL and Peninsula Land are expected to report PAT margins upward of 30%.