Forum IT SEZ Draft 29.10.10

8/12/2019 Forum IT SEZ Draft 29.10.10

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Market Research &

DemandAssessment for IT

SEZ at Kolkata


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Market Survey & Demand Assessment Study

Nov 2010

TABLE OF CONTENTS

1.0 EXECUTIVE SUMMARY ............................................................................................................................................. 6

BACKGROUND ......................................................................................................................................................................... 6OBJECTIVE .............................................................................................................................................................................. 6APPROACH &METHODOLOGY ................................................................................................................................................ 6MARKETANALYSIS &DEVELOPMENT OPTIONS ..................................................................................................................... 6PROJECT RETURNS ................................................................................................................................................................. 6CONCLUSION &RECOMMENDATIONS ..................................................................................................................................... 6

2.0 CITY OVERVIEW ......................................................................................................................................................... 7

2.1 INTRODUCTION ............................................................................................................................................................ 72.2 DEMOGRAPHICS .......................................................................................................................................................... 72.3 ECONOMIC INDICATORS .............................................................................................................................................. 8

2.3.1 GDP overview ................................................................................................................................................... 82.3.2 Income overview ............................................................................................................................................... 9

2.4 ECONOMIC BASE AND DRIVERS FOR THE CITY .......................................................................................................... 92.5 EXISTING &UPCOMING INFRASTRUCTURE ............................................................................................................... 13

2.5.1 Existing Infrastructure .................................................................................................................................... 132.5.2 Upcoming Infrastructure Initiatives ............................................................................................................... 15

3.0 PAN INDIA COMMERCIAL REAL ESTATE OVERVIEW ................................................................................... 16

4.0 KOLKATA REAL ESTATE OVERVIEW ................................................................................................................ 18

4.1 OVERVIEW OF MAJOR COMMERCIAL IT/ITESREAL ESTATE IN KOLKATA ................................................................ 184.2 PREVAILING RENTALS AND CAPITAL VALUES IN KOLKATA AND SUBJECT MICRO MARKET........................................ 18

5.0 SITE AND LOCATION ANALYSIS ......................................................................................................................... 20

5.1 ASSESSMENT OF SITE LOCATION ............................................................................................................................. 205.2 IMPORTANT DEVELOPMENTS IN THE SURROUNDING AREA ....................................................................................... 205.3 INFRASTRUCTURE AROUND SUBJECT SITE ................................................................................................................ 215.4 SWOTANALYSIS ...................................................................................................................................................... 22

6.0 EVALUATING THE PROPOSED IT SEZ ............................................................................................................... 23

6.1 OUTLOOK FOR ITSEZIN CURRENT POLICY ENVIRONMENT ..................................................................................... 236.2 MARKET RESEARCH AND DEMAND ESTIMATION ...................................................................................................... 246.3 VACANCY RATE TREND .............................................................................................................................................. 286.4 ANALYSIS OF SUPPLY &ABSORPTION ...................................................................................................................... 296.5 POTENTIAL IT/ITESCOMPANIES LOOKING AT KOLKATA FOR FUTURE EXPANSION &NATURE OF THEIR EXPANSION 346.6 COMMENTARY ON QUANTUM OF DEVELOPMENT WITH RESPECT TO MARKET DYNAMICS......................................... 356.7 OPINION ON DEVELOPMENT AND LEASE PHASING .................................................................................................... 356.8 STEPS TO IMPROVE MARKETABILITY OF THE PROJECT ............................................................................................. 36

7.0 FINANCIAL ANALYSIS ............................................................................................................................................ 37

7.1 ASSUMPTIONS ........................................................................................................................................................... 377.1.1 Area Assumptions ........................................................................................................................................... 377.1.2 Project Development key dates .................................................................................................................... 37

7.1.3 Project Structure Assumptions ..................................................................................................................... 377.1.4 Construction cost ............................................................................................................................................ 387.1.5 Other cost assumptions ................................................................................................................................. 387.1.6 Land development cost .................................................................................................................................. 387.1.7 Revenue assumptions .................................................................................................................................... 387.1.8 Phasing assumptions ..................................................................................................................................... 387.1.9 Project Returns................................................................................................................................................ 397.1.10 Project Balance Sheet ...................................................................................................................................... 17.1.11 Project P&L ........................................................................................................................................................ 27.1.12 Project Cash Flows ........................................................................................................................................... 3


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7.1.13 Project Costing .................................................................................................................................................. 17.1.14 Project Cost ....................................................................................................................................................... 1

8.0 CONCLUSION / RECOMMENDATION .................................................................................................................... 1

CAVEATS AND LIMITATION ................................................................................................................................................ 4

ANNEXURE 3 SITE PHOTOGRAPHS .............................................................................................................................. 6


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Index of Tables

Table 1: List of Abbreviations ................................................................................................................................................. 5Table 2: List of Measurements ............................................................................................................................................... 5Table 3: Project Returns of Proposed Development Options ............................................................................................ 6Table 4: Projected Population Density in KMA in persons per sq. km.: Census 2001 ................................................... 8

Table 5: Economic indicators of Kolkata as on 2001-02 .................................................................................................... 8Table 6: Key Industries .......................................................................................................................................................... 12Table 7: Existing Infrastructure ............................................................................................................................................. 13Table 8: Upcoming Infrastructure Initiatives ....................................................................................................................... 15Table 9: Pan India IT SEZ Supply & Absorption ................................................................................................................ 16Table 10: Pan India STPI Supply & Absorption ................................................................................................................. 16Table 11: Occupied Office Space KeyIT Vendors in Kolkata ........................................................................................ 18Table 12: Delayed Projects ................................................................................................................................................... 18Table 13: IT SEZ Exports ...................................................................................................................................................... 26Table 14: Demand Estimation .............................................................................................................................................. 28Table 13: Grade A IT Building Supply ................................................................................................................................. 31Table 16: Grade A Building Absorption ............................................................................................................................... 34Table 17: Development & Lease Phasing........................................................................................................................... 35Table 18: Area assumptions ................................................................................................................................................. 37

Table 19:Development key dates ......................................................................................................................................... 37Table 20: Project Structure assumptions ............................................................................................................................ 37Table 21: Construction cost assumptions ........................................................................................................................... 38Table 22: Other cost assumptions ....................................................................................................................................... 38Table 23: Land development cost assumptions ................................................................................................................. 38Table 24: Revenue assumptions .......................................................................................................................................... 38Table 25: Phasing assumptions ........................................................................................................................................... 38Table 26: Project Returns ...................................................................................................................................................... 39Table 27: Projected Balance Sheet ....................................................................................................................................... 2Table 28: Projected Profit & Loss ........................................................................................................................................... 3Table 29: Project Cash Flows ................................................................................................................................................. 4Table 30: Project Cost Summary .......................................................................................................................................... 1Table 17: Comparative Tax Regimes .................................................................................................................................... 2

Index of FiguresFigure 1:Kolkata ........................................................................................................................................................................ 7Figure 2: Growth in Working Population .............................................................................................................................. 8Figure 3: Sector-wise GDP contribution of Kolkata ............................................................................................................. 9Figure 4: FDI Inflows from FY 2000 to FY 2007 ............................................................................................................... 10Figure 5: Infrastructure Map .................................................................................................................................................. 14Figure 6: Kolkata Metro Expansion Map ............................................................................................................................. 14Figure 7: SEZ Supply in Top Seven Cities ........................................................................................................................ 17Figure 8: Comparative upcoming SEZ & STPI Supply .................................................................................................... 17Figure 9: Comparative of SEZ and STPI Absorption ....................................................................................................... 17Figure 10: Rental Value Trend.............................................................................................................................................. 19Figure 11: Capital Value Trend ............................................................................................................................................. 19

Figure 12: Location Map of Bantala SEZ ........................................................................................................................... 20Figure 13: Site Plan Bantala SEZ ........................................................................................................................................ 21Figure 14: STPI Exports Trend ............................................................................................................................................ 24Figure 15: SPTI Growth in Exports Trend .......................................................................................................................... 24Figure 16: Vacancy figures in major IT buildings ............................................................................................................... 29Figure 17: Supply & Absorption Trend ................................................................................................................................ 29


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List of Abbreviations & Measurements

Abbreviations

Approx. Approximately

BHK Bedroom Hall Kitchen

BUA Built Up Area

SBUA Super Built Up Area

CBD Central Business District

FAR Floor Area Ratio

FSI Floor Space Index

Ft. Feet

Govt. Government

INR Indian Rupee

Km Kilometer

M Meter

RCC Reinforced Cement Concrete

Sq. ft Square Feet

Sq. m Square Meter

Table 1: List of Abbreviations

Measurements

1 Acre 43560 Square Feet

1 Hectare 2.471 Acres

1 Square Meter 10.764 Square Feet

1 Square Yard 9 Square Feet

Table 2: List of Measurements


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1.0 EXECUTIVE SUMMARY

Background

Cushman & Wakefield (C&W) has been appointed by Forum IT Parks to undertake Commercial MarketSurvey & Business Plan assessment for setting up of IT SEZ on their 10.5 acres property located in Bantala.

The study evaluates the overall real estate scenario in Kolkata with focus on the real estate dynamics in thesubject micro market. This has been done in order to assess the market prospects for the proposeddevelopment. The study evaluates the subject property on various parameters such as location dynamics,competitiveness and demand prospects to ascertain/ assess the sustainability of the proposed development.

Objective

The primary objective of this assignment is to Ascertain the commercial IT real estate market dynamics inKolkata (and specifically in the subject micro market), considering the local market development patterns andtrends to enable the client to come up with the optimal development and phasing of the subject property.

Approach & Methodology

A physical inspection of the subject site & market survey was carried out in Bantala. Assessment ofcommercial IT/ITeS real estate trends in and around micro market of Bantala, Salt Lake and Rajarhat was

mainly based on interaction with local industry players and leveraging on C&W services knowledge base andnetworks.

Secondary research covered the review of existing reports and studies including publications by governmentagencies; publications by research firms for statistical data; & publications by various industry associations.

C&W also conducted a review of the dynamics of the commercial IT/ITeS real estate in terms of the overallgrowth direction, existing and proposed development hubs, and the infrastructure initiatives in the region toestablish the development framework for the subject property.

Market Analysis & Development Options

The subject micro-market of Bantala has been analyzed to understand the existing and proposeddevelopment patterns to gauge potential for development of an IT SEZ.

As a result of the detailed analysis, we are of the opinion that:

The subject site is suitable for development of IT SEZ. This segment is expected to witness furtherdemand post the STPI sunset clause comes into force in FY 2011, this demand is expected tocontinue in the long term

Project Returns

We have undertaken financial assessment for the development options indicated above to arrive at thehighest and best use development on the subject property. The same is summarized below:

Development Options Project IRR Project NPV

Commercial 22.6% INR 2611 m

Table 3: Project Returns of Proposed Development Options

Conclusion & Recommendations

Based on market & financial assessment undertaken, we recommend development option of Retail, Hotel andCommercialon the subject property enabling estimated returns of 22.6% as project IRR (post tax).

Please note that the values derived are indicative. Depending on transactional peculiarities, the achievablevalues can vary broadly in the range of 3% of the values indicated.


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2.0 CITY OVERVIEW

2.1 Introduction

Kolkata the capital of West Bengal is the main business, commercial and financial hub of eastern India and

the northeastern states. The city is situated in the Eastern part of India on the bank of river Ganges and is theworlds 8th largest urban agglomeration. A city with one foot in its 300 year old heritage and a richly mixed

culture, and the other forward to grab the best of today, Kolkata tends to be a city that delights with stunning

glimpses into a rich culture, history, with amazing oasis of natural beauty in the heart of the city.

Figure 1:Kolkata

2.2 Demographics

As per Census 2001, the Kolkata Metropolitan Area (KMA) houses a population of 14,720,000. Of this,

nearly 4.7 million people reside within the Kolkata Municipal Area (KMC). The urban agglomeration Kolkata

Metropolitan Area is 1851 sq. km. in size whereas the Municipal Area within this region is about 185 sq. km1.

By 2025, the population in KMA is expected to be approximately 22 million. The present density of urban

population of Kolkata is 24,760 persons / sq. km.

The following table provides a perspective of Kolkatas existing and emerging demographics as stipulated in

the Vision 2025 document:

Area/District 1961 1971 1981 1991 2001 2011 2021

Kolkata

Municipal Area(KMC)

16,740 18,813 20,891 22,273 23,149 25,257 26,620

Hooghly 1,937 2,487 3,170 3,993 4,734 5,394 6,169

Howrah 4,234 4,591 5,805 7,429 8,604 9,606 11,056

1 KMA (Kolkata Metropolitan Area) refers to the overall administrative area under KMDA (Kolkata Metropolitan Development Authority) which

includes the core city within the KMC (Kolkata Municipal Corporation) and surrounding urban sprawl (outgrowth areas defined by the planningauthority).


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Nadia 505 685 1,279 1,783 2,256 2,682 3,228

North 24Parganas

2,964 4,256 5,687 7,415 9,385 10,742 12,498

South 24Parganas

1,008 1,465 1,821 2,430 3,201 3,590 4,191

KolkataMetropolitanArea (KMA)

3,817 4,651 5,666 6,826 7,950 8,914 10,045

Table 4: Projected Population Density in KMA in persons per sq. km.: Census 2001

At present, the average literacy rate in Kolkata is 81.31%. The Age Sex Ratio in Kolkata is currently 956

females per 1000 males. The annual growth rate of population for Kolkata is estimated to be approximately

4%. In order to meet the demands of the growing city population, the Kolkata Metropolitan Development

Authority has proposed a few satellite townships around the city. These large developments shall act as

counter-magnets and help in effectively reducing the burden on the core areas of the city.

The working age population of the state is set to increase by 17 million by 2016, thereby leading to further

urbanization.

Figure 2: Growth in Working Population

2.3 Economic Indicators

2.3.1 GDP overview

Kolkata is a major economic centre of India. It is one among the fastest growing cities in the world.Following are the key economic indicators for the city:

Area/Item Primary Secondary Tertiary Total

West Bengal ( Net State DomesticProduct in US Mn $ )

7,766.55 7,310.76 14,802.16 29,879.47

KMA ( District Domestic Product in US Mn$ )

50.14 2,362.18 5,586.96 7,999.28

KMAs share in West Bengal (%) 0.65 33.95 33.70 _

Distribution of SDP in KMA by Sector (%) 0.63 29.53 69.84 100

Table 5: Economic indicators of Kolkata as on 2001-02

0

5

10

15

20

25

30

2006 2011 2016

Working Age Population in million

EnteringWorkforce


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The figure represents sector-wise

contribution of Kolkatas GDP to the

total GDP of West Bengal. Kolkata

has a major share of contribution in

the Secondary and Tertiary sector

GDP of West Bengal.

As of 2001-02, Secondary and

Tertiary sector contributed about

30% and 70% respectively to the

states GDP. Under The Tertiary

sector, the service sector, chiefly IT&ITeS, Real estate, Business Services had a major contribution of nearly

45% to the total GDP of Kolkata3.

2.3.2 Income overview

The Annual Survey of Industries data show that 1990-91 onwards there has been a significant increase in

the quantum of Productive Capital base of KMA-districts, registering a growth of about 35.5 percent per

annum in the KMA-districts, as against a much lower rate of growth of 19.7 percent per annum for the state

as a whole. KMA-districts accounted for an investment of Rs.5591 crores in the large and medium industry

projects implemented between 1991 and 2002. This constituted 25 percent of total investment of Rs.22,101

crores in West Bengal during the same period. On the contrary, the labour-output ratios have experienced a

declining trend during the last decade in both the state as well as in KMA-districts. This could be explained

by increasing adoption of capital-intensive or labour-saving technologies in manufacturing processes.

2.4 Economic Base and Drivers for the City

Trade & Industry in Kolkata has played a significant role in developing the economic scenario of West

Bengal. The prominent industrial sectors in Kolkata are Information Technology, Real Estates, Electronics,

Apparel and Plastic products. Information Technology is the most developing industry in Kolkata that

accounts for a major portion to the overall trade in West Bengal. Some of the other significant industries in

Kolkata include construction, chemicals, cosmetics & jewellery, furniture, sports goods, tourism, rubber,

media and advertising.

Kolkata is also base to several industrial units with produce ranging from jute to electronics. Some of the

renowned Indian companies headquartered in Kolkata include Bata India, ITC Limited, Coal India Limited,

2Source: Statistical Abstract, BAE&S GoWB,: data as of 2001-02

3www.indiastat.com

Figure 3: Sector-wise GDP contribution of Kolkata2

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

Primary Secondary Tertiary

GDP West Bengal GDP Kolkata


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Birla Corporation, Bengal Peerless, National Insurance Company, Orient fans, Exide, Berger Paints and Tata

Tea.

Stagnation in the major traditional industries in KMA like jute, engineering, cotton and chemicals had been

caused by a number of factors including the ownership structure of industries, the national policy of freight

equalization for iron and steel, promotion of similar industries in other parts of the country to achieve regional

balance etc. However, the knowledge based IT and ITES industries have witnessed year on year higher

growth in terms of both annual turnover and exports. The magnitude of software exports from Kolkata rising

from Rs. 3.5 billion in 1999-2000 to Rs.12 billion during 2002-03 and further to Rs.16 billion in 2003-04, have

clearly reinstated the fact that IT&ITeS industry is the economic spine of Kolkata.

Industrial revival of the state is faced with the following challeges; Bengal has 37,574 hectares of barren land

most of it is in areas far from demand centers. The government has 9073 hectares available for industry while

pending industrial proposals before West Bengals commerce and industries department would require 36,437

hectares.The acquisition of such vast amount of land could potentially displace about 619 thousand persons.

On the other hand large government spending on infrastructure may not be feasible, given Bengal's

economy reels under huge debt; about 97 per cent of the state's revenue is spent on paying interests for

loans and salaries. Therefore the state would have to attract FDI Inflows coupled with high dose of private

investments to sustain future growth.

According to Nasscom Deloitte Study 2008, for every job created in the IT Sector four indirect employment is

created 75% of those employees are SSC/HSC educated. Further output multiplier of IT industry on other

sectors is 2, through non- wage operating expenses and Cap-ex. Therefore the IT Sector is expected to be a

major growth driver for Bengal since (a) it is not land intensive (b) knowledge workers are not unionized (c)

healthy supply of highly skilled manpower (d) lower cost of living and wage cost (e) existing urban/telecominfrastructure can sustain growth of IT sector. WEBEL is the facilitator for development of Information

Technology (IT) and IT Enabled Services (ITES) in the state, besides being the nodal agency for

development of electronic industries. Principally located in Salt Lake (chiefly in Sector V area), Rajarhat and

to some extent in areas around EM Bypass currently, there are approximately 250 IT companies in Kolkata

employing over 75,000 IT professionals.

Figure 4: FDI Inflows from FY 2000 to FY 2007

020000400006000080000

100000120000140000

160000180000200000

FDI

FDI Inflows FY 2000-2010

Rs Cr


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IT/ITES

Industry Overview

The IT sector in Kolkata had grown at a CAGR of 88% between 1996-97 and 2002-03.During 2001-2005, it has witnessed 70% growth against the national average of 37%.The IT/ITeS Sector witnessed an export turnover of Rs 35 billion in 2006-07. Even duringthe recent global slowdown, the IT/ITeS growth in Kolkata is currently at 12% in the year2008-09, which is still higher than the national average.

Kolkata had an advantage of lower commercial lease rentals/ capital rates, availability oflarge talent pool, lower attrition rates, adequate support infrastructure, adequate socialinfrastructure, affordable housing, which has been the major attraction for IT playerslooking for expansion plans with cheaper overhead costs.

MNCs like Pricewaterhouse Coopers, IBM, TCS, Cognizant, Wipro, Skytech, Lexmark,AIG and HSBC including Indian corporate houses like ITC Infotech and Reliance areoperational in the city. Some other IT companies in Kolkata include Acumen SoftTechnologies, Ambujex Technologies (P) Ltd, Alliant Technologies Private Limited, AptSoftware Avenues Pvt Ltd, Bright Soft Solutions, Calinnovations, ChaiONE, Digital carePvt. Ltd, Kris Systems Pvt Ltd, MaxMobility PVT LTD, Ontrack Systems Limited, Re-LifeDigital Solution Pvt Ltd and Webel Technology Limited.

Some of the prominent IT campuses in Kolkata are the Wipro SEZ, the DLF IT Park at

Rajarhat, Infinity Benchmark, Godrej Waterside, the Technopolis building, RMZ Ecospacemostly concentrated in Rajarhat & Salt Lake Sector V.

GovernmentInitiatives

The West Bengal Government had earmarked IT Industry as the priority sector forIndustrial Development in the State. A number of initiatives have been taken by thegovernment to attract IT companies in the state, viz.: Setting up of a dedicated IT department within the ministry in year 2000, Empowering agencies like WEBEL in facilitating the IT sector in Sector V, Salt Lake, Bringing IT within the ambit of Public Utility Services, Procurement and facilitating in land acquisition, Providing land at cross subsidy, Creating requisite physical infrastructure for the IT Industry.

Heavy-engineering

Industry Overview

Casting, forging, metallic articles, machinery, generators, transformers, electric motors, shipsand vessels and related accessories, railway wagons and coaches and accessories havebeen the dominant traditional industries in KMA in terms of contributing substantially to statedomestic product and also providing considerable employment.

More than 3 lakh persons are employed in this industry in the state. The metal-based foundryindustry and a large number of small engineering units in Howrah have been among theoldest heritage industries of India. This industry manufactures a wide range of products,serves the requirement of automobile industries, railways, agriculture, mining, various partsand components of jute, cotton, cement, rolling mills etc., and is highly labour intensive innature.

This industry has been passing through severe crisis due to a number of reasons, important

among them being decentralization of procurement by Indian Railways, shortage of inputs likecoal, lack of technological up gradation and diversification and freight equalization policy ofthe Government of India. Although the number of units is seen to be rising in recent years,there is a need for modernization of this industry to render itself more competitive.


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Construction

Industry Overview

Construction Industry constitutes the second major activity after manufacture and engineering.The SDP generated in this sector in KMA-districts registered an annual average rate of growthof around 6.3 percent in the present decade (2001 onwards). A major part of the constructionactivities in KMA is accounted for by real estate and infrastructure development activities.

Real estate activities have witnessed a significant jump in recent years within KMA, registeringan annual growth of 9.5 percent in the same decade.

Chemicals and Small Scale Industries

Industry Overview

West Bengal has been among the leaders in production of Chemicals, Drugs &Pharmaceuticals. The recent increasing popularity of herbal drugs has provided a greatopportunity for drugs & pharmaceuticals industry in the State and also in KMA. The recentlyestablished Haldia Petrochemicals Complex 120 kilometres away from KMA has opened upopportunity for both chemical and drugs & pharmaceuticals industries within KMA.

The growth of registered Small Scale Industry (SSI) units has been significant in KMA, thetotal number of registered SSI units in KMA being approximately 6000 employing roughly33,000 people. The major small-scale units in KMA are metal-based engineering, leather,chemicals and food based industries. However, most of these industries have been plaguedby problems like inadequate supply of raw materials, absence of application of moderntechnology and lack of institutional financing facility.

Table 6: Key Industries


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2.5 Existing & Upcoming Infrastructure

2.5.1 Existing Infrastructure

Infrastructure Description

Airport

Kolkatas airport provides both domestic and international connectivity and is located in thenorth of Kolkata City in Dum Dum. Kolkata is currently serviced by 14 international, 8 domesticairlines and 5 Cargo Airlines. The number of domestic & international passengers in 2006-07was around 6 million.

Calcutta Airport has been ranked as the 7th spot much ahead of Hyderabad InternationalAirport (10th Spot), Chennai International Airport (14th Spot) and New Delhi Indira GandhiInternational Airport (25th spot) in an official statistics regarding the "Top 25 fastest growingairports 2007" worldwide with a 28.2% increase in the passenger traffic, according to the WorldAirport Traffic 2007 report released by the Airports Council International.

Roads

Kolkata has a road space at just 6% of the total city area as against the standard 20% in well-

planned cities like Delhi. The major road developments in KMA are: Belghoria Expressway Kona Expressway Acharya Jagadish Chandra Bose Road Eastern Metropolitan Bypass VIP Road Rajarhat Arterial Road Diamond Harbour Road Basanti Highway National Highway 2 National Highway 6 National Highway 117 National Highway 34 National Highway 35 National Highway 41

The Rabindra Setu, the Vivekananda Setu, the Dakshineshwar Bridge and the SecondVivekananda Bridge, are the vital parts of linkages over the river Hooghly that create betteraccessibility to the entire KMA and its periphery.

Two recent significant developments are the SVTB (Second Vivekananda Tollway Bridge) andthe Garia Metro Extension (operational by 2009) both of which have made a significant impacton traffic mobilization by improving connectivity and reducing travel-time.

Railways

Kolkata has two major long distance railway stations at Howrah Station and Sealdah. Howrahstation connects to rest of India and Sealdah station to north of Bengal and northeastern part ofthe country. It also has The Suburban Railway connecting to the suburbs surrounding the city ofKolkata.

The Kolkata Metro is the underground rail network in Kolkata, India. It is run by the IndianRailways and is the first underground built in India with service starting in 1984. The line beginsat Dum Dum in the north and continues south through Park Street, Esplanade in the heart ofthe city till the southern end in Kavi Nazrul.

Port

The Port of Kolkata is a riverine port in the city of Kolkata, India. It is the oldest operating port inIndia, having originally been constructed by the British East India Company. The Port has twodistinct dock systems - Kolkata Docks at Kolkata and a deep-water dock at Haldia DockComplex, Haldia.

Table 7: Existing Infrastructure


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Fi

Figure 6: Kol

gure 5: Infrastructure Map

ata Metro Expansion Map


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2.5.2 Upcoming Infrastructure Initiatives

Projects Description

New MetropolitanHighways

Several new highways have been proposed in KMA, some major projects are mentioned belowwith the running length in kilometres:

Dum-Dum Barrackpore Expressway

- Madhyamgram to Belghoria: 6.0 km

Eastern Expressway- NH 34 to Taki: 8.0 km- Taki to B N Dey Road: 22.5 km- B N Dey Road to Baruipur and NH 34 to Barrackpore-Kalyani Road: 30.1 km

Southern Expressway- Baraipur to Diamond Harbor Road: 15.5 km- Diamond Harbour Road to Budge Budge to Bauria to NH 6: 22.7 km- Bridge over / tunnel under Hooghly

Serampur-Barrackpore-Barasat Expressway- Connecting NH 2 and Eastern Expressway: 22.5 km

Western Riverfront Expressway- Andul Road to Bauria Connector: 14.0 km

Metro Rail Project

The proposed East-West Metro Corridor will run 13 km from Salt Lake to Howrahstation and is set to be operational by 2012.

The 12 stations on the route will be Howrah, Mahakaran, Central, Bowbazar, Sealdah,Phoolbagan, Salt Lake stadium, Bengal Chemical, City Centre, Central Park,Karunamoyee and Sector V.

The route will intersect the existing North-South Metro Corridor at Central Station.

Bridges/ Flyovers

KMDA along with international fund houses like JBIC (Japan Bank of International Co-operation) has proposed construction of several flyovers/ bridges at critical junctions someof which have been shown below:

Over crossing of Jessore Road and Dum Dum Road (2007-2012)

Salt Lake Bypass across J K Saha Bridge (2007-2012)

Along Anwar Shah Road across Raja Subodh Mallick Road (2007-2012)

Esplanade RA Kidwai Road

- Across Park Street (2012 onwards)

- Across Loudon Street (2012 onwards)

- Across Camac Street (2012 onwards)

Elevated Ring Road Corridor around Kolkata with entry and exit ramps

- Across Strand Bank Road-Strand Road-Diamond Harbor Road-Alipore-Prince Anwar Shah Road-EM Bypass-VIP Road-Circular Canal-Bagabazar(2012 onwards)

Elevated Road from Park Circus to Parama Island (2012 onwards)

Patipukur Underpass on Jessore Road (2012 onwards)

EM Bypass to VIP Road (2012 onwards)

Vivekananda Road Flyover Phase I : Howrah to CR Avenue crossing (2012 onwards)

Vivekananda Road Flyover Phase II : CR Avenue crossing to Airport (2012 onwards)

Table 8: Upcoming Infrastructure Initiatives


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3.0 PAN INDIA COMMERCIAL REAL ESTATE OVERVIEW

The table below highlights SEZ supply and absorption across India over the period of last 2 years, including theprojected figures for 2010. The current vacancy rate being high correction in new supply is expected, as reflectedin the figures for FY 2010.

Table 9: Pan India IT SEZ Supply & Absorption

The table below highlights STPI supply and absorption across India over the period of last 2 years, including the

projected figures for 2010. FY 2009 was a tough year for the IT Industry and the industry clocked single digit

growth of 5.4% consequently the absorption levels dropped sharply as compared to FY 2008. Due to changes in

policy environment particularly STPI sunset clause projected absorption for FY 2010 is expected to fall further.

The STPI supply for FY 2010 is on the higher side mainly because of delayed prior IT projects which are nearing

completion.

Table 10: Pan India STPI Supply & Absorption

IT SEZ Supply(mn sq ft) 2008 2009 2010 (P)

IT SEZAbsorption(mn sq ft) 2008 2009 2010 (P)

NCR 2.00 2.62 0.50 NCR 1.70 2.18

Mumbai 1.60 - - Mumbai 1.50 - -

Pune 3.57 1.96 1.65 Pune 2.51 1.05 1.05

Kolkata - 0.70 0.60 Kolkata - 0.69 0.60

Hyderabad 1.29 2.25 1.86 Hyderabad 0.58 0.85 -

Bangalore 5.72 2.83 4.40 Bangalore 5.14 1.10 0.74

Chennai 3.87 3.38 2.97 Chennai 3.25 1.59 1.67

Total 18.75 13.04 7.73 Total 14.67 7.46 4.05

STPI Supply(mn sq ft) 2008 2009 2010 (P)

STPIAbsorption(mn sq ft) 2008 2009 2010 (P)

NCR 7.22 4.17 8.97 NCR 5.76 1.30 -

Mumbai 3.21 - - Mumbai 0.58 - -

Pune 8.84 6.78 7.67 Pune 3.02 3.37 0.96

Kolkata 1.28 2.71 - Kolkata 0.48 0.86 -

Hyderabad 1.61 3.58 3.50 Hyderabad 0.90 1.31 -

Bangalore 5.46 2.48 9.15 Bangalore 5.22 4.63 3.76

Chennai 4.40 3.90 3.93 Chennai 2.11 1.70 1.79

Total 32.01 23.62 33.23 Total 18.07 13.17 6.51


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Nov 2010

Figure 7: SEZ Supply in Top Seven Cities

Figure 8: Comparative upcoming SEZ & STPI Supply

Figure 9: Comparative of SEZ and STPI Absorption

SEZ SUPPLY - BIG 7

0.50

2.00 2.62

0.500.00

1.60 -

-

2.32

3.57

1.96

1.65 2.13 2.40

0.00

0.70

-

-

0.96

1.29

2.25

1.860.40

2.37

2.98

5.72

2.83

0.75

3.88

3.87

3.38

2.97

4.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

2007 2008 2009 2010 (P) 2011 (P) 2012 (P)

sq.f

t.

NCR Mumbai Pune Kolkata Hyderabad Bangalore Chennai


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Nov 2010

4.0 KOLKATA REAL ESTATE OVERVIEW

4.1 Overview of Major commercial IT/ITeS real estate in Kolkata

Kolkata commercial market is relatively in its nascent and emerging stage. Currently there is only oneoperational SEZ development in the market. Most of these commercial developments are coming up in the

eastern quadrant of the city.

Aggregate office space occupied by some of the key IT Vendors:

Table 11: Occupied Office Space KeyIT Vendors in Kolkata

Though in nascent stage, Kolkata also had its share of recessionary effect on the commercial space.

Table below highlights IT projects that are delayed due to the economic recession. On account of limited

response from the market DLF had to de notify its SEZ development in Rajarhat in FY2009-10; however

due to improvement in market sentiments DLF has applied to the Board of Approval, for re-notification of

Rajarhat SEZ in May 2010.

Builder Name Type Project Details Micro Market

Shapoorji Pallonji IT SEZ

50 acres IT SEZ has beenpostponed, of which 25 acreshas been de-notified Rajarhat

Godrej Properties IT Park

1.5 m sq ft Genesis scheduledto be completed by 2010, is

now on hold Salt Lake

Godrej Properties IT ParkWaterside Phase II of this 1.8m sq ft project is delayed Salt Lake

Unitech IT SEZ

4.2 m sq ft Infospace SEZ wasto be completed by 2010,however only Phase I iscomplete, Phase-II 700,000sq ft is under constructiondelayed by 3 years Rajarhat

Vipul IT Park420,000 Tech Square isdelayed by 2 years Salt Lake

Table 12: Delayed Projects

4.2 Prevailing rentals and capital values in Kolkata and subject micro market

The rental values in Kolkata have been highest in the CBD area followed by suburban region and peripheral.

However, in the Suburban & Peripheral areas the prices are likely weaker due to the large-scale infusions in

the supply level and greater availability of space. Kolkata witnessed significant correction in rental values

across almost all micro-markets pursuant to the general slowdown in the economys corporate activities in

late 2008. The lowering of rentals stabilized in mid 2009 and by end 2009, there was a new demand for fresh

commercial spaces.

Occupier Area (sq ft) Occupier Area (sq ft)

IBM/Daksh 850000 Lexmark 150000

TCS 800000 Bharti 80000

Cognizant 530000 Global Tele 40000

Genpact 200000 HCL 20000

One Source 150000 ABN Amro 18000

HSBC 200000


19/53


Nov 2010

Rental values across most micro markets remained stable during 4Q 2009 except for a minor appreciation in

Salt Lake. This was primarily attributed to the reinstatement of developers confidence in wake of increased

enquiries and subsequent rise in the absorption level in the micro market.

Following graph highlights the rental & capital value trend in various micro-markets of Kolkata:

Figure 10: Rental Value Trend

Figure 11: Capital Value Trend

Rental values in the peripheral locations are likely to witness minor appreciation on account of increased

enquiries and demand mainly from IT and telecom sector. Developers are also likely to initiate delivery ofunder construction projects. Vacancy level is however, likely to remain at the higher side due to significant

supply remaining unabsorbed. Moreover, the market is expected to witness increased competition to

capitalize on the increased enquiries and revival of demand in the market

Kolkata Rental Value Trend

0

20

40

60

80

100

120

2006 2007 2008 2009 2010

INR/SFT/Month

Saltlake Sec V / Rajarhat ( IT) Park Street / Camac Street (Non IT) Dalhousie Square (Non IT)

Topsia/Ruby (Non IT) Saltlake Sec V / Rajarhat (Non IT)

0

2,000

,000

,000

,000

10,000

12,000

200 200 200 200 2010 ()

/ ( ) / ( )

( ) / ( )

/ ( )


20/53

Market Survey & Demand Assessm

5.0 SITE AND LOCATION AN

5.1 Assessment of Site Locati

Bantala is located on the eastern frin

Park is located 15 km from Science C

5.2 Important developments in

The 130 acres Kolkata IT Park waacquired land are Cognizant (20acr

built-up space like Forum Projects (

Three years back it was poised to be

However since then not much dev

Cognizant Tech Campus. Proposed

by Srijan Developers and Mani Squar

ent Study

LYSIS

n

es of the city. ML Dalmiya & Co notified IT SEZ als

ity. The two lanes Basanti Highway connect the site

Figure 12: Lo

the surrounding area

carved out of the Calcutta Leather Complex. Cs), Patni (14 acres), Tech Mahindra (12.12 acres

0.56 acres), Dhunseri Group (10 acres) and Infin

come an upcoming growth corridor for the city, com

lopment has been seen in this micro-market ex

evelopment in the area include 1.2 million sq ft res

e II retail mall are also currently on hold.

know as Kolkata IT

to EM Bypass.

ation Map of Bantala SEZ

ompanies that have) and developers of

ity Park (11.6acres).

peting with Rajarhat.

ept the Rs 188 crs

idential development


21/53


5.3 Infrastructure around subj

The accessibility to the Kolkata IT Pa

congestion during peak hours is still a

Construction on the two proposed fly

commenced yet.

ent Study

Figure

ct site

k from EM Bypass on Basanti Highway has improv

concern. The widening of Basanti Highway to 4 lan

vers that would have connected it to Rajarhat and

13: Site Plan Bantala SEZ

d however

es is on the anvil.

uby has not


22/53


Nov 2010

5.4 SWOT Analysis

Strengths Weaknesses

Road, Power and Telecom Infrastructure

inside ML Dalmiya & Co SEZ are adequate.

Concerns of waste disposal from tanneries

have been resolved with canal segregation.

Land cost being lower than Rajarhat rentals

are expected to be competitive

The site is in the outer fringes of the city

distant from major residential &

commercial hubs

Being adjacent to Leather Complex

Opportunities Threats

The proposed project has the potential to be

the first multi-tenanted IT SEZ after Unitech

SPTI Sunset clause and favorable impact on

SEZ

IT majors are setting up their own

campuses

Relative attractiveness of Rajarhat due

to integrated development , closeness to

existing IT Corridor of Salt Lake

Postponed projects like widening of

Basanti-Highway, Rajarhat & Ruby

Flyover


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Nov 2010

6.0 EVALUATING THE PROPOSED IT SEZ

6.1 Outlook for IT SEZ in current policy environment

The union budget 2010-11 does not provide for extension of STPI benefits. Further MAT (minimum alternative

tax) applicable on STPI units has been increased from 15% to 18% in the financial year 2010-11. It isinteresting to learn that most of the large IT firms have already enjoyed STPI benefits for an entire 10-year

timeframe, and consequently would not be eligible for tax rebates. There is lack of clarity on the extension of

tax benefits to IT SME and newer firms who are yet to enjoy the full term of the earlier tax benefit scheme.

On the other hand the latest notification issued by the Ministry of Commerce relaxes the 80:20 ratios for the

transfer of old assets into SEZ. Further SEZ units are exempt from exemption from Minimum Alternative Tax

(MAT) and Service Tax.

The concerns for units shifting from STPI setups into IT SEZs is the fact that such units will have to forego the

corporate tax exemptions and obtain new licenses for old operations. If the Goods and Services Tax (GST)

and the Direct Tax Code (DTC) come into force in 2011, it might be a cause for concern for firms and

developers and co-developers operating out of SEZs. Some of the key points considered in the DTC draft

include no income tax benefits for SEZ units, tax holiday becoming investment-linked and not profit linked for

developers and co-developer, as well as MAT becoming applicable for a developer and co-developer. But

there is a lack of clarity as to whether the DTC will be implemented from April 2011, and whether all the points

mentioned above will be taken into consideration or not.

Since the inception of SEZs, key IT companies such as Infosys, Wipro, TCS,CTS and HCL, to name a few

have been the early birds to receive final SEZ notifications, with a few already having commenced operations

too. Captive Multi National Corporations (GENPACT, American Express, Texas Instruments, Philips,

Siemens, etc.),on the other hand, are in tax neutral positions, willing to operate either from a STPI or a SEZ,

with their focus on expanding in India with maximum cost advantages. It is also interesting to know that MNCs

like IBM, Accenture, Metlife, Cisco, I-flex, WNS, EDS, Honeywell, Perot Systems, etc., have already started

operating out of SEZs to avail various benefits. SMEs and other mid-cap IT companies are the ones who

have been affected the most with no extension in STPI and at the same time are skeptical of moving into

SEZ. With ambiguity on the extension of benefits to STPI units, as well as the lack of clarity on the guidelines

for DTC (applicable from April 2011), several corporate are currently sitting on the fence; and are

apprehensive about taking either route. Please refer to Annexure-I for a comparative tax regimes and its

implications for SEZs.


24/53


6.2 Market Research and Dem

Kolkata accounts for only 2.5 % of th

FY 2007-08. Although the state had

uncertainty has impacted growth proj

The global economic recession had s

single digit growth of 5.4% during FY

NASSCOM to $ 54 billion against a

20.0

10.0

0.0

10.0

20.0

30.0

0.0

0.0

All India Karnataka

2008-09 207357 70375

2007-08 180155 550002006-07 144214 48700

0

50000

100000

150000

200000

250000

ent Study

and Estimation

Indias IT Exports from STPI and its share has rem

nvisioned increasing Bengals share to 10%, but p

ctions.

Figur

Figure 15: SP

evere impact on the IT Sector and for the first time

2009-10. The IT export target for the current fiscal

earlier projection of $ 62 billion. In spite of the

STPI Growth (%)

MaharashtraAndhraPradesh

Tamilnadu NCR

42360 31039 28355 24436

35374 26122 28295 2691927625 18582 20745 21886

SPTI Exports (Rs crs)

ained constant since

litical and economic

e 14: STPI Exports Trend

I Growth in Exports Trend

the industry clocked

has been revised by

ecession and policy

200

200

Bengal

5129

45003500

2008-09

2007-08

2006-07


25/53


Nov 2010

uncertainty exports from notified IT SEZs has grown at a phenomenal 400%. Although the official STPI

annual report for FY 2009-10 has not been published our estimates suggests SPTI exports has declined by

about 5% during the same period. In light of SPTI sun set clause incremental exports are expected to come

from SEZ, thus declining trend in STPI exports should continue.

The table below highlights the growth of IT exports from operational SEZ across India.

IT Exports notified SEZ (RsCr) Location FY2009-10 FY2008-09

Andhra Pradesh

APIIC Nanakramguda 146.84 72.83

APIIC Madhurwara, Hill IT 34.28 57.3

CMC Limited Ranga Reddy 570.98 100

DivyaSree NSL Ranga Reddy 87.85 26.78

DLF Ranga Reddy 652.2 300.3

L&T Phoenix Infopark Mandal, Andhra IT 150.73 69.5

Lanco Hills Manikonda 8.81 UI

Maytas Hill Bachupally 68.27 UISerene Properties Pocharam 8.43 UI

Sundew Madhapur, RR 101.86 9.83

Wipro Limited Manikonda 853.94 300

Navayuga Legal Serilingampally 24.17 UI

Chandigarh21 Rajiv Gandhi Tech Park Chandigarh 289.97 14.54

Gujarat

Larsen & Toubro Distt. Vadodara 5.11 UI

Haryana

DLF Cyber City Gurgaon, 587.88 66.45

DLF Limited Gurgaon, 88 UI

Gurgaon Infospace Gurgaon, 342.9 220

Karnataka

Manyata Embassy BusinessPark Bangalore, 3582.8 268.98

WIPRO Limited Varthur Hobli, Varthur Hobli, 4129.44 UI

WIPRO Sarjapur Road, 1671.58 UI

Infosys Bantwal Taluk, Mangalore 642.36 94.32

Vikas Telecom Bangalore, 587.31 9.6

Adarsh Prime Devarabeesanaha IT 1029.91 225

Divyashree SEZ Krishnarajapura, Bangalore 1514 245

Cessna Garden Bangalore, 1885.8 600Tanglin Devp (Global VillageSEZ) Pattengere/Mylas IT 1063.12 80

HCL Bangalore 13.29 UIInformation Tech Park Bangalore 2572.16 317

Primal Projects Banglore, Bangalore 115.49 UI

Bagmane Bangalore North, IT 768.74 UI

Kerala

Infopark SEZ Kochi 317.816 110

Electronic Tech Park SEZ-I Trivandrum 13.397 79.83

Electronic Park Trivandrum 14.98 56.59

MaharashtraHiranandani Business Park Powai, 839.3 UI

Infosys Rajiv Gandhi Info Park, Pune 649.72 24.29

EON Kharadi Taluka Haveli, 726.53 190

DLF Akruti Hinjewadi, 329.691 200Dynasty Developers Pune, 164.22 UI


26/53


Table 13: IT SEZ Exports4

We have derived demand for multi-tenanted SEZs based on macro level data in our demand estimation model

(Refer to Table: 16). Bengals overall share in pan India SEZ exports (2009-10) is around 2.3%.we have assumed

its share of pan India SEZ exports would increase from current 2.3% to 3% by FY 2012-13. This can be attributed

to political stability after impending election in 2011 and relative cost competitiveness of Kolkata.

It is important to note that IT/ITeS majors like TCS, Wipro, Cognizant, Tech Mahindra and HCL who contribute

bulk of the IT Exports from Kolkata, already have land parcels to setup their own campuses. Currently only

Cognizant Bantala SEZ is operational. TCS & Wipro Rajarhat SEZ and Tech Mahindra Bantala SEZ are expected

to be operational FY2012-13. The share of exports from multitenant IT SEZ office space has been assumed to

4http://sezindia.nic.in/writereaddata/updates/Exports_3st_March09-%20.pdf

The Manjari Pune, 58.58 UI

MIDC Pune, 762.73 772

Syntel Pune, 30.53 129

Magarpatta Township Pune, 108.51 UI

Serene Kalwa Trans 82.87 UI

WIPRO NA 156

Orissa

Orissa Ind dev Bhubaneswar 75.65 UI

Rajasthan

Mahindra World City Jaipur, IT 90.79 24.19

Tamil Nadu

TCS Siruseri and 2213.95 UI

ETL Infra Tambaram Taluk, IT 1229.788 UI

Hexaware SIPCOT IT Park 127.29 UI

DLF Infocity Manapakkam IT 1200.766 UI

Arun Excello Vallncheri and 13.88 UI

ETA Technopark Old 486.74 UI

Electronics Corp of TN Kancheepuram, 622.85 UI

Coimbatore Hitech Infra Coimbatore 105.02 UI

Shriram Perungalathur UI

Uttar Pradesh

HCL Noida 437.3 UIWIPRO Ltd. Greater Noida 578.7 UI

Seaview Noida, Sector-135, 73.66 UI

West Bengal

Unitech Hi-tech Rajarhat, 109.15 95

M L Dalmiya & Kolkata 6.21 UI

Exports-SEZ estd prior to SEZAct 05

WIPRO,Salt Lake ElectronicCity Kolkata, West 739.94 400

Mahindra City Tamil Nadu 2,163.82 2209

TOTAL 37,9723 7523

IndiaIT/ITeSExports

Bengalsshare inSEZexports

Share ofBengalsMultitenatedSEZ

Totalemployeerequirement

TotalMultitenantedSEZ spacerequired

Share ofsubjectproject


27/53


Nov 2010

remain at 55% of total IT SEZ exports from Kolkata, this is inline with other mature markets like Bangalore and

Hyderabad. Further we have assumed weighted average space for IT services and BPO to be 100 sq ft per

employee. Based upon the past trends the average export productivity per employee in IT/ITeS sector is

estimated to be around Rs 14.2 lacs/year.

The table below provides demand estimates for the subject property at Bantala567:

5 http://www.nasscom.in/upload/5216/IT_Industry_Factsheet-Mar_2009.pdf

6http://www.mit.gov.in/document-publications

7http://www.stpi.in/index1.php?langid=1&level=0&linkid=134&lid=192

PAN INDIA ITEXPORTS DATA FY2008-09 FY2009-10

FY2010-11(E)

FY2011-12(E)

FY2012-13(E)

FY2013-14(E)

FY2014-15(E)

FY2015-16(E)

IT Services/Engg,R&DExports (INR cr)A 156,978.73 176,428.25 197317 226914.55 260951.7 313142.1 375770.5 450924.6

BPO Exports (INR cr) B 58,752.27 58,651.75 65596 75435.4 86750.7 104100.9 124921.0 149905.2

IT Software/BPOServices Exports (INRcr) (A+B) 216,190 235,080 262,913 302,350 347,702 417,243 500,692 600,830

STPI Exports E 207,357 197,107 187,252 177,889 168,995 160,545 152,518

SEZ Exports F 7,523 37,973 75,661 124,461 178,708 256,698 348,174 600,830Total IT/ITeS Exports(SPTI+SEZ) (INR cr) 214,880 235,080 262,913 302,350 347,702 417,243 500,692 600,830

Software ExportsGrowth AssumptionYoY 16% 6% 15% 15% 15% 20% 20% 20%BENGAL IT DEMANDESTIMATION FY2008-09 FY2009-10

FY2010-11(E)

FY2011-12(E)

FY2012-13(E)

FY2013-14(E)

FY2014-15(E)

FY2015-16(E)

Bengal's Share of TotalSEZ Exports % P 6.6 2.3 2.5 2.5 3.0 3.0 3.0 3.0

SEZ Exports Bengal(Q= F*P) (INR cr) 495 855 1,892 3,112 5,361 7,701 10,445 18,025Share of multi tenantedbuilding (U=R/Q) 13% 52% 60% 55% 55% 55% 55%

Multi- enated SEZ -Total area operationalsft (T*100) 78000 690000 1318071 2081815 2990344 4055970 6999227Total employmentgeneration (T=R*100/S) 780 6900 13181 20818 29903 40560 69992Total export revenuegenerated /employee -wt avg (Lacs) S 14.2 14.2 14.2 14.2 14.2 14.2 14.2Revenue generated bymulti tenanted SEZs(INR Cr) (R= Q*U) 110 977 1867 2949 4236 5745 9914Incremental Spacereqd -1 - 628,071 763,744 908,529 1,065,626 2,943,256

Less:Existing vacant stock -op balance V 60000 660000 268929 192185 170656 162030Unitech InfospacePhase-II (Tower 1,2,3)Rajarhat -2 750000 600,000 237,000 237,000 237,000 237,000 600000


28/53


Nov 2010

Table 14: Demand Estimation

The risk in this demand estimation model primarily stems from upcoming SEZ supply. Unitech Infospace Phase-I

has about 750,000 sq ft and is the largest operational SEZ in Kolkata with tenants like IBM, Capgemini, Genpactand PWC. Unitech Infospace Phase-II would add about 600,000 sq ft in the current fiscal. While the total

development potential for Unitech Infospace in about 4.2 million sq ft, we have assumed one tower of 237,000 sq

ft to be added every year. Unitech being an operational SEZ in the more established IT corridor is in a better

position to capitalize on incremental demand; subsequent demand should come to Bantala. There is considerable

uncertainty with respect to DLF IT Park II re-notification process; if notified it would add another 1 million sq ft of

SEZ supply. Further Shapoorji Pallonji Infocity SEZ in Rajarhat is still on hold; supply for these two projects has

not been considered in our model. Dhunseri IT SEZ at Bantala is under construction and would add 720,000 sq ft

FY 2012-13 onwards, and would put the subject project in direct competition.

6.3 Vacancy rate trend

Since 2006, supply of commercial office space has been exceeding yearly absorption on a year on year basis

leading to significantly high vacancy levels as is being witnessed currently. Average Grade A vacancy in the city

has increased from 8% levels in 2007 period to upwards of 23% in 2009. The overall vacancy level in the city

remained at approximately 23% in 4Q 2009. Peripheral locations continued to register highest vacancy level at

approximately 36% on account of recurrent infusion of new supply in the micro market. CBD also witnessed a

minor rise in vacancy level due to the infusion of new supply during the quarter.

Over all vacancy trend witnessed in the city for commercial office is represented in the table below:

Dhunseri Bantala -Total available stock forthe year - - 200,000 250,000 270,000

SUBJECT PROJECTSUPPLY - AvailableStock - 250,000 400,000 550,000 350,000

LEASE PHASINGFY2012-13

(E)FY2013-14

(E)FY2014-15

(E)FY2015-16

(E)

Total estimatedAbsorption of atBantala SEZ -W(1-V-2) 257,815 479,344 657,970 2,181,227

Leased Area inSubject Project (60%)X= V*60%+ W*60% 154,689 402,917 497,176 495,218

Leased Area inDhunseri SEZ (40%) 103,126 268,612 331,451

2007 2008 2009

Vacancy Levels 8% 11% 23%


29/53


Nov 2010

The average vacancy levels at the end of Q1 2010 for major Commercial and IT and SEZ buildings in Salt Lake

and Rajarhat is 39%.

Figure 16: Vacancy figures in major IT buildings

6.4 Analysis of Supply & Absorption

Commercial office segment has been at the centre of real estate activity in Kolkata over the last 3 years.Within the segment, majority of the demand is driven by IT/ITeS & BFSI occupiers. Over the years the city

has witnessed significant supply of commercial office space in the IT SEZ and non SEZ segment being

infused into the city. The graph shows the supply absorption dynamics of commercial IT office space

primarily in Salt Lake and Rajarhat.

Figure 17: Supply & Absorption Trend

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

( ) ( )

0

500000

1000000

1500000

2000000

2500000

2008 2009 2010

Supply ( Sq Ft)

Absorption ( Sq Ft)

Vacant Stock Total BUA Vacancy Rate

IT Parks (inc DLF Phase-II)

3793150 11592454

33%IT SEZ 60,000 700,000 9%


30/53


Nov 2010

The tables below highlights the supply and absorption of Grade A office space on a quarterly basis since FY

2008. It should be mentioned that grade A developments form a significant percentage of the over all

absorption witnessed in the city. This can be attributed to majority of space being absorbed by IT & BFSI

tenants who seek good quality developments in line with standards of operations suited to their international

offices or clients serviced by these occupiers.

Supply Analysis of Grade A Commercial IT buildings can be detailed as follows:

KOLKATA TOTAL SUPPLY IN 2008

Project Name Developer Location Micro market

EstimatedSupply(Sq.Ft.)

Estimated timeof Supply

Type ofDevelopment

SUPPLY 1Q 2008

Unitech Rajarhat SEZ Unitech Rajarhat PD 700,000 Q1 2008 SEZ

TOTAL 700,000

SUPPLY 2Q 2008

Globsyn Crystals Globsyn Crystals Salt Lake PD 220,000 Q2 2008 IT/Commercial

EP-Y9, (Unnamed) Window Technology Salt Lake PD 40,000 Q2 2008 IT/Commercial

PTI, DP- 9 Salt Lake PD 98056 Q2 2008 IT/Commercial

The Matrix, DN-24 Nangalia Group Salt Lake PD 70,000 Q2 2008 IT/Commercial

TOTAL 428,056

SUPPLY 3Q 2008

TOTAL 0

SUPPLY 4Q 2008

South City Pinnacle South City Pinnacle Salt Lake PD 276000 Q4 2008 IT/Commercial

IT SEZ DLF Rajarhat PD 90,000 Q4 2008 SEZ

TOTAL 366,000

KOLKATA TOTAL SUPPLY IN 2008 1,494,056


Developer Project Name Location Micro Market

EstimatedProject

Size(Sq.Ft.)

Estimatedtime ofSupply

Type ofDevelopment

SUPPLY 1Q 2009

PS Srijan PS Srijan Tech Park Sector V, Salt Lake PD 400,000 1Q 2009 IT

Bhimrajka Impex Ltd Infinium Digispace Sector V, Salt Lake PD 150,000 1Q 2009 IT

DLF DLF IT PARK II Rajarhat PD 400000 1Q 2009 SEZ

TOTAL 950,000

SUPPLY 2Q 2009

TOTAL-

SUPPLY 3Q 2009

Godrej Properties Godrej Waterside Sector V, Salt Lake PD 615,000 3Q 2009 IT

Saltee Group DN - 18 Sector V, Salt Lake PD 90,000 3Q 2009 IT

DLF DLF IT PARK II Rajarhat PD 600,000 3Q 2009 SEZ


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Nov 2010

TOTAL 1,305,000

SUPPLY 4Q 2009

TOTAL-

KOLKATA TOTAL SUPPLY IN 2009 2,255,000


Developer Project Name LocationMicroMarket

EstimatedProject Size

(Sq.Ft.)

Estimated timeof Supply

Type ofDevelopment

SUPPLY 1Q 2010

Unitech Unitech SEZ Phase-II Rajarhat PD 600,000 2Q 2010 IT

WEBEL JV India Design Centre Rajarhat PD 100,000 2Q 2009 IT

TOTAL 700,000

Table 15: Grade A IT Building Supply

A number of intended IT buildings in Salt Lake and Rajarhat got converted to commercial office space

due to lack demand from IT sector on account of global economic recession. Therefore a significant part

of the absorption came from emerging sectors like telecom, R&D and engineering services.

Supply Analysis of Grade A Commercial IT buildings on basis of industry/sector of the tenantscan be detailed as follows:

KOLKATA TOTAL ABSORPTION 2008

Project Name Location Micro market LesseeNature of

Transaction Quarter

AreaLeased(Sq.Ft.)

Industry/Sector

ABSORPTION 1Q 2008

Unitech Infospace Rajarhat PDCap gemini & IBMDaksh Absorption 1Q 2008 200,000 IT

Unitech Infospace Rajarhat PD HCL Absorption 1Q 2008 120000 IT

Unitech Infospace Rajarhat PD Genpact Absorption 1Q 2008 40000 IT

TOTAL 360,000

ABSORPTION 2Q 2008

Eternity, DN - 1Sector V, Salt

Lake PD Airtel Absorption 2Q 2008 7800 Telecom

DLF IT Park Rajarhat PD Bharti Infratel Absorption 2Q 2008 8000 Telecom

TOTAL 15800


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Nov 2010

ABSORPTION 3Q 2008

DN 14Sector V, Salt

Lake PD Tyco Engineering Absorption 3Q 2008 5000 Engineering

DN 14Sector V, Salt

Lake PD Shapoorji Paloonji Absorption 3Q 2008 10,000 Engineering

DN 14Sector V, Salt

Lake PD Bank of Baroda Absorption 3Q 2008 5500 Financial

Infinity BenchmarkSector V, Salt

Lake PD Quotient Engineering Absorption 3Q 2008 20000 Engineering

Sugam BusinessPark

Sector V, SaltLake PD

Adhunik (RelianceComm) Absorption 3Q 2008 13400 Telecom

Sugam BusinessPark

Sector V, SaltLake PD 3i Infotech Absorption 3Q 2008 6700 IT

Sugam BusinessPark

Sector V, SaltLake PD Diageo Absorption 3Q 2008 6700 Commercial

Sugam BusinessPark

Sector V, SaltLake PD Schindler Electric Absorption 3Q 2008 13400 Engineering

TOTAL 80700

ABSORPTION 4Q 2008

Infinity BenchmarkSector V, Salt

Lake PD KPMG Absorption 4Q 2008 8815 IT

RDB BoulevardSector V, Salt

Lake PD MN Dastur Absorption 4Q 2008 15000 Engineering

Globsysn Crystal ISector V, Salt

Lake PD Ericsson Absorption 4Q 2008 30,000 IT

DN 14Sector V, Salt

Lake PD Johnson Control Absorption 4Q 2008 5000 Engineering

DLF IT Park Rajarhat PD IBM Daksh Absorption 4Q 2008 63,438 IT

DLF IT Park Rajarhat PD Lexmark Absorption 1Q 2009 100,000 R&D

EP/Y-13 (PeeconBuilding)

Sector V, SaltLake PD Spanco Telesystems Absorption 4Q 2008 20000 IT

BIPL OmegaSector V, Salt

Lake PD ABB Absorption 4Q 2008 36000 Engineering

TOTAL 278253

KOLKATA TOTAL ABSORPTION IN 2008 734,753


Project Name Location Micromarket LesseeNature of

Transaction Quarter

AreaLeased(Sq.Ft.)

Industry/Sector of

Lessee

ABSORPTION 1Q 2009

PS SrijanSalt Lake SectorV PD Shyam-Sistema Lease

1Q2009 22000 Telecom

PS SrijanSalt Lake SectorV PD Idea Cellular Lease


South City PinnacleSalt Lake SectorV

PDPWC Precommited

2Q2008 110000 ITeS

South City PinnacleSalt Lake SectorV

PDOutotecEngineering Lease

1Q2009 17000 Engineering

TOTAL 199000

ABSORPTION 2Q 2009

DLF IT Park Tower CGround Floor Rajarhat PD Tech Mahindra Lease

2Q2009 30000 IT

DLF IT Park Tower CGround Floor Rajarhat PD HP Lease

2Q2009 9000 IT

RMZ Rajarhat PDMc Nally BharatEngineering Lease



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Sunrise TowersSalt Lake SectorV PD Airtel Lease

2Q2009 9000 Telecom

PS SrijanSalt Lake SectorV PD Tata Teleservices Precommited

1Q2009 150000 Telecom

TOTAL 348000

ABSORPTION 3Q 2009

Infinity Benchmark

Salt Lake Sector

V PD

Pinnacle (Dynamic

Securities) Lease

3Q

2009 12500 IT

Infinity BenchmarkSalt Lake SectorV PD Mahua TV Sale

3Q2009 45000 Entertainment

PS SrijanSalt Lake SectorV PD Usha Telecom Lease


Asyst ParkSalt Lake SectorV PD Sparsh BPO Lease

3Q2009 11500 IT

Advantage TowersSalt Lake SectorV PD

Orange BusinessServices Lease

3Q2009 10400 IT

Infinity BenchmarkSalt Lake SectorV PD Lexplosion Lease

3Q2009 4500 IT

Infinity BenchmarkSalt Lake SectorV PD Kobel Co. Engg. Lease


TOTAL 107290

ABSORPTION 4Q 2009

Southcity PinnacleSalt Lake SectorV PD Unitech Wireless Lease


Southcity PinnacleSalt Lake SectorV PD Unitech Wireless Lease


GN - 31, (Benfish)Salt Lake SectorV PD Sterling Wilson Lease


DLF IT Park I Rajarhat PD EX 3 Lease4Q

2009 2600 IT

DLF IT Park I Rajarhat PD Kolkata Info Lease4Q

2009 1000 IT

DLF IT Park I Rajarhat PD Va Tech Wabag Lease4Q

2009 2470 Engineering

DLF IT Park I Rajarhat PDGeotechInformatics Lease

4Q2009 2930 IT

DLF IT Park I Rajarhat PD Tech Mahindra Lease3Q

2009 40000 IT

DLF IT Park II Rajarhat PD Sparsh BPO Lease4Q

2009 29000 IT

Ambuja Ecospace Rajarhat PD L&T Voith Outright

4Q

2009 32000 Engineering

GN - 31, (Benfish)Salt Lake SectorV PD

Astha TechnologyServices Lease


Globsyn Crystals-ISalt Lake SectorV PD Aegis BPO Lease

4Q2009 96000 IT

CD - 16Salt Lake SectorV PD Met Life Lease

4Q2009 3200 Financial

Asyst ParkSalt Lake SectorV PD

Tata Tele Com(WTTIL) Lease


Unitech Infospace Rajarhat PD TCS Lease4Q

2009 250000 IT

Infinity BenchmarkSalt Lake SectorV PD Infosoft Global Lease

4Q2009 4500 IT

Infinity BenchmarkSalt Lake SectorV PD Pearl Studios Lease

4Q2009 17500 Entertainment

Sunrise TowersSalt Lake SectorV PD Limtex Info Lease

3Q2009 12000 IT

Technopolis Salt Lake SectorV PD Castle Rock Lease 3Q2009 6500 Research

Godrej WatersideSalt Lake SectorV PD BRG Iron & Steel Lease

4Q2009 31000

Metal &Minerals

TOTAL 610115

KOLKATA TOTAL ABSORPTION IN 2009 1264405



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Project Name Location Micromarket LesseeNature of

Transaction Quarter

AreaLeased(Sq.Ft.)

Industry/Sector

ofLessee

ABSORPTION 1Q 2009

DLF IT Park-II Rajarhat PD I-Nova Solutions Lease1Q

2010 11,500 IT

Godrej Waterside Salt Lake Sector V PD ZTE Lease

1Q

2010 32,000 Telecom

Godrej Waterside Salt Lake Sector V PD Royal Infra Lease1Q

2010 4,300 Telecom

DN-14 Salt Lake Sector V PDCMC Lease

1Q2010 17,000 IT

Ashram Building Salt Lake Sector V PDAditya Birla Minacs Lease

1Q2010 40,000 IT

South CityPinnacle

Salt Lake Sector V PDArcelor Mittal Lease

1Q2010 16,000 Steel

South CityPinnacle

Salt Lake Sector V CBD NSNLease

1Q2010 13,777 Telecom

ABSORPTION 2Q 2009

Unitech SEZRajarhat

PD Bridge Tree Lease2Q

2010 11,000 IT

KOLKATA TOTAL ABSORPTION IN 2009 145,577

Table 16: Grade A Building Absorption

6.5 Potential IT/ITeS companies looking at Kolkata for future expansion & nature of theirexpansion

Tech Mahindrahas decided to surrender the 2.77-acre plot in Salt Lake, Sector-V, indications are

there for development of 12-acre campus in the Bantala IT SEZ., to be operational by December

2010. Estimated 2,000 IT professionals from Telecom software delivery and BPO units will be housed

initially.

TCShas about 8000 IT professionals in Kolkata, distributed 8 development centers in the Salt Lake

Electronics Complex., of which 6 are leased facilities. Tata Realty Infrastructure Ltd has mandate

build 40 acres Rajarhat campus over the next two years. It is expected to house 15,000 employees

and a section of TCS employees operating at some of out leased facilities may be relocated.

Infosys proposal to develop Rs 5000 Mn. development centre with 5,000 people has not

materialized, since 2004. In September 2009 the state government offered 45 acres each to Infosys

and Wipro at Rajarhat. Infosys which had postponed the project due to economic meltdown and

political climate may be evaluating the offer again.

Wipro has 7000 people in BPO and Development Centre in Salt Lake; it has got possession of 45

acres land at Rajarhat, proposed to be developed as SEZ.

HSBC Global Resourcing had planned to develop 2nd

center in Nonadanga off EM-Bypass, the

Sunrise City project status is unknown.


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Rolta had taken possession of 5 acres at Nonadanga, to set up a Rs 2500 m campus in 2007,

however the same has not materialized. The project had the potential to create 5000 IT jobs.

Accenture was scouting for 2 m sq ft lease at Unitech Infospace in 2007, may be reviewing

possibility to set up a centre here.

Atos Origin a French IT firm is set double its India headcount from 3,300 to 6,000 by 2010. It

operates two development centers in Salt Lake

Cap Gemini is making Kolkata Retail Centre of Excellence with its new 200,000 sq ft facility at

Rajarhat, which will house 1700 people. The company currently has 80,000 sq ft at Asyst Park in Salt

Lake, the IT hub of the city.

Aegis BPOhas about 80,000 sq ft space in Globsyn Crystal,

Zensar BPO the IT arm of RPG is looking to set up a 1000 seat call center in Kolkata.

ITC Infotech has delivery hub in Kolkata is planning to add 1800 employees in India by 2011.

6.6 Commentary on quantum of development with respect to market dynamics

In accordance with our demand estimate for the subject site we dont foresee development before FY 2012-

13 due to over supply in the IT SEZ space. The potential development of 1.55 m sq ft can be achieved within

a horizon of next six years. However entry of large IT/BPO into the Kolkata can favorably alter demand

dynamics.

Based on current market dynamics, if the project needs to be completely leased out within a period of next 5

years then the development size would need to come down to about 1 mill ion sq ft.

6.7 Opinion on development and lease phasing

Table below depicts proposed development and lease phasing:

Table 17: Development & Lease Phasing

Lease phasing has been calculated in the following manner (Refer to Table: 12 Demand Estimation):

For the year FY 2012-13 the absorption of new supply in Bantala SEZs = 257,815 sq ft; it has been

arrived at after deducting existing vacant stock and Unitech SEZ supply from Incremental SEZ

space required i.e. 763,744 sq ft. The subject project (Forum) has been assumed to get 60% of the

remaining demand share.

PHASING (sq ft)FY2010-

11(E)FY2011-12

(E)FY2012-13

(E)FY2013-14

(E)FY2014-15

(E)FY2015-16 (E)

Development - 250,000 400,000 550,000 350,000

Lease 154,689 402,917 497,176 495,218


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From the year FY 2013-14 the total vacant stock subject project (forum) gets 60% share of existing

vacant stock along with 60% of absorption of net demand for Bantala. It is assumed that vacant

stock being carried forward year on year (YoY) is from Bantala alone as Unitech SEZ supply is

expected to be fully absorbed. For subsequent years the same rational holds good.

6.8 Steps to improve marketability of the project

The accessibility to Bantala SEZ has to improve, the proposed widening of Basanti Highway and

Flyover link to Rajarhat would accelerate development in the region.

Lack of public transport is an impediment. As suggested by Forum provision for conveyance would

improve the marketability of the project.

Open effluent canals are still an issue while canal segregation has taken place; means to create

ambient environment should be prioritized.

Relative advantages of Bantala- mainly better availability of water and power visa vi Rajarhat can be

highlighted.

The subject project may also propose a build to suite development for key IT vendors in Kolkata.

The subject project if cost competitive has the potential to attract BPO vendors due to (a) BPO being

more cost conscious (b) gives less importance to growing in an around existing IT Cluster (c)

proximity to affordable housing in the Ruby to Garia region, compared to Salt Lake and Rajarahat.


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7.0 FINANCIAL ANALYSIS

7.1 Assumptions

As per information provided by client, FAR of 2.76 has been assumed for calculating Built-up-Areaexcluding car parking. Construction costs for the project have been assumed as per market benchmarksand thumb rule assumptions, considering the nature of the development components proposed.

7.1.1 Area Assumptions

Table 18: Area assumptions

No assumptions have been made for power, water and other regular costs as these have been treated asa pass-through to the end user, since the charges for these facilities would be recovered by client fromthe users at actual.

7.1.2 Project Development key dates

Project Key Dates

Start date 01-Jan-11

Construction starts after approval of Development Plan 0 Months

Construction period (+Lead time) 36 Months

Certification/Approval for Occupancy/Usage 0 Months

Operation/Occupancy starts on 01-Jan-14

Financial year ending (of occupancy/lease) 31-Mar-14Table 19:Development key dates

7.1.3 Project Structure Assumptions

Structure

Equity Return Expectation Rate 20%

Debt Rate 12%

Equity Percentage 35%

Debt Percentage 65%

Developer Profit Margin 0%

Discounting Rate 12.46%Table 20: Project Structure assumptions

Component Area

Built-up Area 1,260,915

Car Parking 492,872

Total Construction Area 1,753,787

Total Leasable Area 1,513,098


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7.1.4 Construction cost8

Table 21: Construction cost assumptions

7.1.5 Other cost assumptions

Other Costs Percentage (%)

Architects & Consultants' Fee (%-age of Construction Cost) 2.35

Pre-Operative Expenses (%-age of Construction Cost) 6.69

Advertising & Marketing Cost (%-age of Construction Cost) 2.00

Miscellaneous & Contingencies (%-age of Construction Cost) 3.41

Total 14.45

Table 22: Other cost assumptions

7.1.6 Land development cost

The infrastructure development like roads, power and water supply is already available inside notifiedarea of ML Dalmiya SEZ. Therefore land development cost for the project has been assumed to beminimal.

Cost component on Built up Area INR in Rs/ Sq.ft.

Infrastructure cost 1

Land cost 259.85

Table 23: Land development cost assumptions

7.1.7 Revenue assumptions

Table 24: Revenue assumptions

7.1.8 Phasing assumptions

Development Phasing 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14

IT SEZ 4.00% 32.00% 31.00% 33.00%

Lease Phasing 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18

IT SEZ 70.00% 75.00% 85.00% 95.00%

Table 25: Phasing assumptions

8Construction Cost implies bare shell cost without fittings and furnishings and does not include soft costs like overhead charges, consultingfees, etc.

Development Component Cost on BUA (INR/Sq.ft.)Escalation

(per annum)

IT SEZ 2132 3%

Car Parking 350 3%

Development ComponentRental (INR/Sq.ft.) on saleable/

leasable area

Escalation

(per annum)

CapitalizationRate

IT SEZ 35 per month 5% 9%


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7.1.9 Project Returns

Based on the above assumptions, following are the arrived returns for the project:

Project Returns

Project NPV InINR Million

as on Jan 1st

2010

Equity NPV In INR Million

as on Jan 1st2010

Project IRR Equity IRR

IT SEZ 2611 2923 22.6 % 33.1%

Table 26: Project Returns


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7.1.10 Project Balance Sheet

BalanceSheet 1-Jan-11

01-Apr-11

01-Apr-12 01-Apr-13

01-Apr-14

01-Apr-15

01-Apr-16

01-Apr-17

01-Apr-18

01-Apr-19

01-A

31-Mar-1131-Mar-

1231-Mar-

Forum IT SEZ Draft 29.10.10

Documents

Transcript of Forum IT SEZ Draft 29.10.10