REAL ESTATE - Sector Update April 10, 07

Recently, the EGoM came up with new SEZ regulations which will have serious repercussions for the developers of these SEZs. The rulings are majorly due to the concerns raised by various factions on the land acquisition by SEZs and rehabilitation of the displaced residents. Moreover,
the government too was under pressure after what happened at Nandigram, West Bengal. The three major points that came out of the meeting are:
1. Fixing the ceiling on land area of an SEZ at 5,000 hectares.
2. Increasing the processing area from 35% to 50% of the total area under the SEZ.
3. State Government's role in land acquisition to be minimized.

We believe that fixing of the land ceiling to 5,000 hectares will affect developers with large SEZ projects. We believe that the developers will now split there SEZs into parts to overcome this ceiling. Hence, the final impact of this is to be seen. For instance, Reliance Industries may build
5 SEZs at Jhajjar, Haryana with one multi-product SEZ of 5,000 hectares and 4 smaller SEZs on the rest 5,000 hectares.
Moreover, the increase in processing area from 35% to 50% of the SEZ area is a big negative for all the SEZ developers as most of the money was to be made form the residential and commercial side of the play. The scope of this has now been reduced. This will force many developers to rework there plans from scratch. This will be a negative for developers like Mahindra Gesco, Indiabulls, DLF, Unitech, Omaxe, Peninsula Land, Anant Raj Industries and D S Kulkarni Developers.