Township FDI a non-starter

The government's move to allow foreign direct investment in integrated township development projects has not yielded much result, with the three projects approved by the Foreign Investment Promotion Board not making much of a headway.

While the $160 million project proposed by Feedback Ventures and Malaysian company Kontur Bintang has been shelved, the other two projects -- the $115 million IT park in Chennai and the $2.9 billion Garden City project in Bangalore -- are awaiting approvals from state governments.

Feedback Ventures, which was building an integrated township in Gurgoan, has decided to discontinue the project.

"We have decided not to go ahead as property development is not our core competence. We will restrict ourselves to advisory roles," Vinayak Chatterjee, chairman of Feedback Ventures, said.

The second project, which is a joint venture between Singapore-based Lee Kim Tah Enterprises and the Indian firm, BP Ventures, has not progressed  beyond the land acquisition stage.

The Royal Garden City project in Bangalore has run into trouble with parts of the proposed 3,000 acre city falling in a green-belt. Further, a 20 km stretch overlaps with the site of the new international airport project in Devanahalli on the outskirts of the city.

"The government is asking us to relocate but we will lose a large amount if we do that. The company has urged the authorities to re-define the green-belt. However, there has been no response to the repeated petitions. We will take a call on the project if we do not get a response from the authorities in 90 days," Colin Benjamin, president and managing director of Royal Indian Raj International Corporation, said.

The problems that have impacted these projects, industry watchers say, are the land entitlement rights and multiple approvals.

"Promoters have to get the project approved by multiple bodies. The process is time consuming and puts pressure on the debts leading to promoters pulling out," Sanjay Verma, joint managing director of Cushman and Wakefield, said.

"The project sizes are large and promoters are unable to cope with the operations even after they get FDI approval," he added.

Reducing the acreage is being seen as one of the ways to make the projects more feasible. "It is the smaller projects involving 2-20 acres that entail an investment of $50-200 million that are doing better. The developers are asking the government to further reduce the acreage limit for township development," a Chesterton Meghraj official said.

As per a study done by the company, only projects involving investments of $700 million are likely to materialise, where as the investment outlook for the year 2005 is nearly $7 billion.

Smaller projects that are making a good move are a $250 million township spreading over 60 acres in Hyderabad being built by CESMA International, a subsidiary of the Singapore government's housing agency, along with the Andhra Pradesh government.

The township consists of about 2,080 flats and is expected to be completed in mid-2005.

A 35-acre project near the Hi-tech City in Hyderabad is also under construction. Malaysia-based developer IJM is developing the township along with Andhra Pradesh Housing Board.

IJM's 500-acre township involving an investment of $350 million in SAS Nagar near Chandigarh is also in an advanced stage.