Forum IT SEZ Draft 29.10.10

Market Research & Demand Assessment for IT SEZ at Kolkata
Market Survey & Demand Assessment Study
TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY ............................................................................................................................................. 6
BACKGROUND ......................................................................................................................................................................... 6 OBJECTIVE .............................................................................................................................................................................. 6 APPROACH & METHODOLOGY ................................................................................................................................................ 6 MARKET ANALYSIS & DEVELOPMENT OPTIONS ..................................................................................................................... 6 PROJECT RETURNS................................................................................................................................................................. 6 CONCLUSION & RECOMMENDATIONS ..................................................................................................................................... 6 2.0 CITY OVERVIEW ......................................................................................................................................................... 7
2.1 INTRODUCTION ............................................................................................................................................................ 7 2.2 DEMOGRAPHICS .......................................................................................................................................................... 7 2.3 ECONOMIC INDICATORS .............................................................................................................................................. 8 2.3.1 GDP overview ................................................................................................................................................... 8 2.3.2 Income overview ............................................................................................................................................... 9 2.4 ECONOMIC BASE AND DRIVERS FOR THE CITY .......................................................................................................... 9 2.5 EXISTING & UPCOMING INFRASTRUCTURE ............................................................................................................... 13 2.5.1 Existing Infrastructure .................................................................................................................................... 13 2.5.2 Upcoming Infrastructure Initiatives ............................................................................................................... 15 3.0 4.0 4.1 4.2 5.0 5.1 5.2 5.3 5.4 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 7.0 PAN INDIA COMMERCIAL REAL ESTATE OVERVIEW ................................................................................... 16 KOLKATA REAL ESTATE OVERVIEW ................................................................................................................ 18 OVERVIEW OF MAJOR COMMERCIAL IT/ITES REAL ESTATE IN KOLKATA ................................................................ 18 PREVAILING RENTALS AND CAPITAL VALUES IN KOLKATA AND SUBJECT MICRO MARKET ........................................ 18 SITE AND LOCATION ANALYSIS ......................................................................................................................... 20 ASSESSMENT OF SITE LOCATION ............................................................................................................................. 20 IMPORTANT DEVELOPMENTS IN THE SURROUNDING AREA ....................................................................................... 20 INFRASTRUCTURE AROUND SUBJECT SITE................................................................................................................ 21 SWOT ANALYSIS ...................................................................................................................................................... 22 EVALUATING THE PROPOSED IT SEZ ............................................................................................................... 23 OUTLOOK FOR IT SEZ IN CURRENT POLICY ENVIRONMENT ..................................................................................... 23 MARKET RESEARCH AND DEMAND ESTIMATION ...................................................................................................... 24 VACANCY RATE TREND .............................................................................................................................................. 28 ANALYSIS OF SUPPLY & ABSORPTION ...................................................................................................................... 29 POTENTIAL IT/ITES COMPANIES LOOKING AT KOLKATA FOR FUTURE EXPANSION & NATURE OF THEIR EXPANSION 34 COMMENTARY ON QUANTUM OF DEVELOPMENT WITH RESPECT TO MARKET DYNAMICS......................................... 35 OPINION ON DEVELOPMENT AND LEASE PHASING .................................................................................................... 35 STEPS TO IMPROVE MARKETABILITY OF THE PROJECT ............................................................................................. 36 FINANCIAL ANALYSIS ............................................................................................................................................ 37
7.1 ASSUMPTIONS ........................................................................................................................................................... 37 7.1.1 Area Assumptions ........................................................................................................................................... 37 7.1.2 Project Development key dates .................................................................................................................... 37 7.1.3 Project Structure Assumptions ..................................................................................................................... 37 7.1.4 Construction cost ............................................................................................................................................ 38 7.1.5 Other cost assumptions ................................................................................................................................. 38 7.1.6 Land development cost .................................................................................................................................. 38 7.1.7 Revenue assumptions.................................................................................................................................... 38 7.1.8 Phasing assumptions ..................................................................................................................................... 38 7.1.9 Project Returns................................................................................................................................................ 39 7.1.10 Project Balance Sheet ...................................................................................................................................... 1 7.1.11 Project P&L ........................................................................................................................................................ 2 7.1.12 Project Cash Flows ........................................................................................................................................... 3
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7.1.13 7.1.14 8.0
Project Costing .................................................................................................................................................. 1 Project Cost ....................................................................................................................................................... 1
CONCLUSION / RECOMMENDATION .................................................................................................................... 1
CAVEATS AND LIMITATION ................................................................................................................................................ 4 ANNEXURE 3 SITE PHOTOGRAPHS .............................................................................................................................. 6
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Index of Tables
Table 1: List of Abbreviations ................................................................................................................................................. 5 Table 2: List of Measurements ............................................................................................................................................... 5 Table 3: Project Returns of Proposed Development Options ............................................................................................ 6 Table 4: Projected Population Density in KMA in persons per sq. km.: Census 2001 ................................................... 8 Table 5: Economic indicators of Kolkata as on 2001-02 .................................................................................................... 8 Table 6: Key Industries .......................................................................................................................................................... 12 Table 7: Existing Infrastructure ............................................................................................................................................. 13 Table 8: Upcoming Infrastructure Initiatives ....................................................................................................................... 15 Table 9: Pan India IT SEZ Supply & Absorption ................................................................................................................ 16 Table 10: Pan India STPI Supply & Absorption ................................................................................................................. 16 Table 11: Occupied Office Space KeyIT Vendors in Kolkata ........................................................................................ 18 Table 12: Delayed Projects ................................................................................................................................................... 18 Table 13: IT SEZ Exports ...................................................................................................................................................... 26 Table 14: Demand Estimation .............................................................................................................................................. 28 Table 13: Grade A IT Building Supply ................................................................................................................................. 31 Table 16: Grade A Building Absorption ............................................................................................................................... 34 Table 17: Development & Lease Phasing........................................................................................................................... 35 Table 18: Area assumptions ................................................................................................................................................. 37 Table 19:Development key dates ......................................................................................................................................... 37 Table 20: Project Structure assumptions ............................................................................................................................ 37 Table 21: Construction cost assumptions ........................................................................................................................... 38 Table 22: Other cost assumptions ....................................................................................................................................... 38 Table 23: Land development cost assumptions................................................................................................................. 38 Table 24: Revenue assumptions .......................................................................................................................................... 38 Table 25: Phasing assumptions ........................................................................................................................................... 38 Table 26: Project Returns ...................................................................................................................................................... 39 Table 27: Projected Balance Sheet ....................................................................................................................................... 2 Table 28: Projected Profit & Loss ........................................................................................................................................... 3 Table 29: Project Cash Flows ................................................................................................................................................. 4 Table 30: Project Cost Summary .......................................................................................................................................... 1 Table 17: Comparative Tax Regimes .................................................................................................................................... 2
Index of Figures
Figure 1:Kolkata ........................................................................................................................................................................ 7 Figure 2: Growth in Working Population .............................................................................................................................. 8 Figure 3: Sector-wise GDP contribution of Kolkata ............................................................................................................. 9 Figure 4: FDI Inflows from FY 2000 to FY 2007 ............................................................................................................... 10 Figure 5: Infrastructure Map .................................................................................................................................................. 14 Figure 6: Kolkata Metro Expansion Map ............................................................................................................................. 14 Figure 7: SEZ Supply in Top Seven Cities ........................................................................................................................ 17 Figure 8: Comparative upcoming SEZ & STPI Supply .................................................................................................... 17 Figure 9: Comparative of SEZ and STPI Absorption ....................................................................................................... 17 Figure 10: Rental Value Trend.............................................................................................................................................. 19 Figure 11: Capital Value Trend ............................................................................................................................................. 19 Figure 12: Location Map of Bantala SEZ ........................................................................................................................... 20 Figure 13: Site Plan Bantala SEZ ........................................................................................................................................ 21 Figure 14: STPI Exports Trend ............................................................................................................................................ 24 Figure 15: SPTI Growth in Exports Trend .......................................................................................................................... 24 Figure 16: Vacancy figures in major IT buildings ............................................................................................................... 29 Figure 17: Supply & Absorption Trend ................................................................................................................................ 29
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List of Abbreviations & Measurements
Abbreviations Approx. BHK BUA SBUA CBD FAR FSI Ft. Govt. INR Km M RCC Sq. ft Sq. m Approximately Bedroom Hall Kitchen Built Up Area Super Built Up Area Central Business District Floor Area Ratio Floor Space Index Feet Government Indian Rupee Kilometer Meter Reinforced Cement Concrete Square Feet Square Meter
Table 1: List of Abbreviations
Measurements 1 Acre 1 Hectare 1 Square Meter 1 Square Yard 43560 Square Feet 2.471 Acres 10.764 Square Feet 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 Market Survey & 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 the subject micro market. This has been done in order to assess the market prospects for the proposed development. 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 in Kolkata (and specifically in the subject micro market), considering the local market development patterns and trends 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 of commercial 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 and networks. Secondary research covered the review of existing reports and studies including publications by government agencies; 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 overall growth direction, existing and proposed development hubs, and the infrastructure initiatives in the region to establish 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 proposed development 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 further demand post the STPI sunset clause comes into force in FY 2011, this demand is expected to continue in the long term
Project Returns
We have undertaken financial assessment for the development options indicated above to arrive at the highest and best use development on the subject property. The same is summarized below:
Development Options Commercial Project IRR 22.6% Project NPV 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 and Commercial on 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 achievable values 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 the worlds 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 Kolkata Municipal Area (KMC) Hooghly Howrah 1961 16,740 1,937 4,234 1971 18,813 2,487 4,591 1981 20,891 3,170 5,805 1991 22,273 3,993 7,429 2001 23,149 4,734 8,604 2011 25,257 5,394 9,606 2021 26,620 6,169 11,056
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 planning authority).
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Nadia North 24 Parganas South 24 Parganas Kolkata Metropolitan Area (KMA)
505 2,964 1,008 3,817
685 4,256 1,465 4,651
1,279 5,687 1,821 5,666
1,783 7,415 2,430 6,826
2,256 9,385 3,201 7,950
2,682 10,742 3,590 8,914
3,228 12,498 4,191 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.
30 25 20 15 10 5 0 2006 2011 2016 Figure 2: Growth in Working Population
Entering Workforce
Working Age Population in million
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 West Bengal ( Net State Domestic Product in US Mn $ ) KMA ( District Domestic Product in US Mn $) KMAs share in West Bengal (%) Distribution of SDP in KMA by Sector (%) Primary 7,766.55 50.14 0.65 0.63 Secondary 7,310.76 2,362.18 33.95 29.53 Tertiary 14,802.16 5,586.96 33.70 69.84 Total 29,879.47 7,999.28 _ 100
Table 5: Economic indicators of Kolkata as on 2001-02
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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
Figure 3: Sector-wise GDP contribution of Kolkata2
25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 Primary
Secondary
Tertiary
GDP West Bengal
GDP Kolkata
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,
2 3
Source: Statistical Abstract, BAE&S GoWB,: data as of 2001-02 www.indiastat.com
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/telecom infrastructure 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.
FDI Inflows FY 2000-2010

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0
FDI
Rs Cr
Figure 4: FDI Inflows from FY 2000 to FY 2007
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IT/ITES 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 during the recent global slowdown, the IT/ITeS growth in Kolkata is currently at 12% in the year 2008-09, which is still higher than the national average. Kolkata had an advantage of lower commercial lease rentals/ capital rates, availability of large talent pool, lower attrition rates, adequate support infrastructure, adequate social infrastructure, affordable housing, which has been the major attraction for IT players looking for expansion plans with cheaper overhead costs.
Industry Overview
MNCs like Pricewaterhouse Coopers, IBM, TCS, Cognizant, Wipro, Skytech, Lexmark, AIG and HSBC including Indian corporate houses like ITC Infotech and Reliance are operational in the city. Some other IT companies in Kolkata include Acumen Soft Technologies, Ambujex Technologies (P) Ltd, Alliant Technologies Private Limited, Apt Software Avenues Pvt Ltd, Bright Soft Solutions, Calinnovations, ChaiONE, Digital care Pvt. Ltd, Kris Systems Pvt Ltd, MaxMobility PVT LTD, Ontrack Systems Limited, Re-Life Digital 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 Ecospace mostly concentrated in Rajarhat & Salt Lake Sector V.
Government Initiatives
The West Bengal Government had earmarked IT Industry as the priority sector for Industrial Development in the State. A number of initiatives have been taken by the government 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 Casting, forging, metallic articles, machinery, generators, transformers, electric motors, ships and vessels and related accessories, railway wagons and coaches and accessories have been the dominant traditional industries in KMA in terms of contributing substantially to state domestic product and also providing considerable employment. More than 3 lakh persons are employed in this industry in the state. The metal-based foundry industry and a large number of small engineering units in Howrah have been among the oldest heritage industries of India. This industry manufactures a wide range of products, serves the requirement of automobile industries, railways, agriculture, mining, various parts and components of jute, cotton, cement, rolling mills etc., and is highly labour intensive in nature. 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 like coal, lack of technological up gradation and diversification and freight equalization policy of the 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.
Industry Overview
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Construction 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 growth of around 6.3 percent in the present decade (2001 onwards). A major part of the construction activities 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, registering an annual growth of 9.5 percent in the same decade.
Industry Overview
Chemicals and Small Scale Industries West Bengal has been among the leaders in production of Chemicals, Drugs & Pharmaceuticals. The recent increasing popularity of herbal drugs has provided a great opportunity for drugs & pharmaceuticals industry in the State and also in KMA. The recently established Haldia Petrochemicals Complex 120 kilometres away from KMA has opened up opportunity for both chemical and drugs & pharmaceuticals industries within KMA.
Industry Overview
The growth of registered Small Scale Industry (SSI) units has been significant in KMA, the total number of registered SSI units in KMA being approximately 6000 employing roughly 33,000 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 plagued by problems like inadequate supply of raw materials, absence of application of modern technology 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 Kolkatas airport provides both domestic and international connectivity and is located in the north of Kolkata City in Dum Dum. Kolkata is currently serviced by 14 international, 8 domestic airlines and 5 Cargo Airlines. The number of domestic & international passengers in 2006-07 was around 6 million.
Airport
Calcutta Airport has been ranked as the 7th spot much ahead of Hyderabad International Airport (10th Spot), Chennai International Airport (14th Spot) and New Delhi Indira Gandhi International Airport (25th spot) in an official statistics regarding the "Top 25 fastest growing airports 2007" worldwide with a 28.2% increase in the passenger traffic, according to the World Airport Traffic 2007 report released by the Airports Council International. Kolkata has a road space at just 6% of the total city area as against the standard 20% in wellplanned 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 Second Vivekananda Bridge, are the vital parts of linkages over the river Hooghly that create better accessibility to the entire KMA and its periphery. Two recent significant developments are the SVTB (Second Vivekananda Tollway Bridge) and the Garia Metro Extension (operational by 2009) both of which have made a significant impact on traffic mobilization by improving connectivity and reducing travel-time. Kolkata has two major long distance railway stations at Howrah Station and Sealdah. Howrah station connects to rest of India and Sealdah station to north of Bengal and northeastern part of the country. It also has The Suburban Railway connecting to the suburbs surrounding the city of Kolkata. The Kolkata Metro is the underground rail network in Kolkata, India. It is run by the Indian Railways and is the first underground built in India with service starting in 1984. The line begins at Dum Dum in the north and continues south through Park Street, Esplanade in the heart of the city till the southern end in Kavi Nazrul. The Port of Kolkata is a riverine port in the city of Kolkata, India. It is the oldest operating port in India, having originally been constructed by the British East India Company. The Port has two distinct dock systems - Kolkata Docks at Kolkata and a deep-water dock at Haldia Dock Complex, Haldia.
Table 7: Existing Infrastructure
Roads
Railways
Port
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Figure 5: Infrastructure Map
Figure 6: Kolkata Metro Expansion Map
2.5.2 Upcoming Infrastructure Initiatives

Projects Description Several new highways have been proposed in KMA, some major projects are mentioned below with 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 The proposed East-West Metro Corridor will run 13 km from Salt Lake to Howrah station and is set to be operational by 2012. Metro Rail Project 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. KMDA along with international fund houses like JBIC (Japan Bank of International Cooperation) has proposed construction of several flyovers/ bridges at critical junctions some of 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
New Metropolitan Highways
Bridges/ Flyovers
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-AliporePrince 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 the projected figures for 2010. The current vacancy rate being high correction in new supply is expected, as reflected in the figures for FY 2010.
IT SEZ Absorption (mn sq ft)
NCR Mumbai Pune Kolkata Hyderabad Bangalore Chennai
IT SEZ Supply (mn sq ft)

2008
2.00 1.60 3.57 1.29 5.72 3.87
2009
2.62 1.96 0.70 2.25 2.83 3.38
2010 (P)
0.50 1.65 0.60 1.86 4.40 2.97
2008
1.70 1.50 2.51 0.58 5.14 3.25
2009
2.18 1.05 0.69 0.85 1.10 1.59
2010 (P)
1.05 0.60 0.74 1.67
Total
18.75
13.04
7.73
Total
14.67
7.46
4.05
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.
STPI Absorption (mn sq ft)
STPI Supply (mn sq ft)

2008
7.22 3.21 8.84 1.28 1.61 5.46 4.40
2009
4.17 6.78 2.71 3.58 2.48 3.90
2010 (P)
8.97 7.67 3.50 9.15 3.93
2008
5.76 0.58 3.02 0.48 0.90 5.22 2.11
2009
1.30 3.37 0.86 1.31 4.63 1.70
2010 (P)
0.96 3.76 1.79
Total
32.01
23.62
33.23
Total
18.07
13.17
6.51
Table 10: Pan India STPI Supply & Absorption
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SEZ SUPPLY - BIG 7

20.00 18.00 3.87 16.00 14.00 12.00 s q .ft. 10.00 3.88 8.00 6.00 2.98 4.00 0.96 0.00 2.00 0.00 2.32 0.00 0.50 2007
NCR
5.72 3.38
1.29 0.70 3.57
2.83 2.97 0.75 1.86 1.65 0.50 2010 (P)

Hyderabad
2.25 1.96
4.00 2.37 0.40 2.13 2011 (P)

Bangalore Chennai
1.60 2.00 2008

Mum bai
2.62
2.40 2012 (P)
2009
Pune Kolkata
Figure 7: SEZ Supply in Top Seven Cities
Figure 8: Comparative upcoming SEZ & STPI Supply
Figure 9: Comparative of SEZ and STPI Absorption
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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 one operational 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:
Occupier
IBM/Daksh TCS Cognizant Genpact One Source HSBC
Area (sq ft)

850000 800000 530000 200000 150000 200000
Occupier
Lexmark Bharti Global Tele HCL ABN Amro
Area (sq ft)

150000 80000 40000 20000 18000
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 50 acres IT SEZ has been postponed, of which 25 acres has been de-notified 1.5 m sq ft Genesis scheduled to be completed by 2010, is now on hold Waterside Phase II of this 1.8 m sq ft project is delayed 4.2 m sq ft Infospace SEZ was to be completed by 2010, however only Phase I is complete, Phase-II 700,000 sq ft is under construction delayed by 3 years 420,000 Tech Square is delayed by 2 years Micro Market
Shapoorji Pallonji
IT SEZ
Rajarhat
Godrej Properties Godrej Properties
IT Park IT Park
Salt Lake Salt Lake
Unitech Vipul
IT SEZ IT Park
Rajarhat 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.
18
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:
Kolkata Rental Value Trend
120 100 INR/SFT/Month 80 60 40 20 0 2006 2007 Saltlake Sec V / Rajarhat (IT) Topsia/Ruby (Non IT) 2008 Park Street / Camac Street (Non IT) Saltlake Sec V / Rajarhat (Non IT) 2009 2010 Dalhousie Square (Non IT)
Figure 10: Rental Value Trend
Kolkata Capital Value Trend

12,000 10,000 INR/SFT 8,000 6,000 4,000 2,000 0 2006 2007 2008 2009 2010 (E)
Saltlake Sec V / Rajarhat (IT) Dalhousie Square (Non IT) Saltlake Sec V / Rajarhat (Non IT)
Park Street / Camac Street (Non IT) Topsia/Ruby (Non IT)

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 of under 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
19
Nov 2010
5.0 SITE AND LOCATION ANALYSIS ALYSIS

5.1 Assessment of Site Location
Bantala is located on the eastern fringes of the city. ML Dalmiya & Co notified IT SEZ also know as Kolkata IT Park is located 15 km from Science City. The two lanes Basanti Highway connect the site to EM Bypass.
Figure 12: Location Map of Bantala SEZ
5.2
Important developments in the surrounding ar area
The 130 acres Kolkata IT Park was carved out of the Calcutta Leather Complex. Companies that have acquired land are Cognizant (20acres), Patni (14 acres), Tech Mahindra (12.12 acres) and developers of built-up up space like Forum Projects (10.56 acres), Dhuns Dhunseri Group (10 acres) and Infinity Park (11.6acres). Three years back it was poised to become an upcoming growth corridor for the city, competing with Rajarhat. However since then not much development has been seen in this micro-market market except the Rs 188 crs Cognizant Tech Campus. Proposed development in the area include 1.2 million sq ft residential development by Srijan Developers and Mani Square II retail mall are also currently on hold.
Figure 13: 13 Site Plan Bantala SEZ
5.3
Infrastructure around subject site
The accessibility to the Kolkata IT Park from EM Bypass on Basanti Highway has improved however congestion during peak hours is still a concern. The widening of Basanti Highway to 4 lanes is on the anvil. Construction on the two proposed flyovers that would have connected it to Rajarhat and Ruby has not commenced yet.
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
IT majors are setting up their own campuses The proposed project has the potential to be the first multi-tenanted IT SEZ after Unitech SPTI Sunset clause and favorable impact on SEZ 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
22
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 is interesting 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.
23
Nov 2010
6.2
Market Research and Demand Estimation
Kolkata accounts for only 2.5 % of the India Indias IT Exports from STPI and its share has remained constant since FY 2007-08. Although the state had envisioned increasing Bengals share to 10%, but political and economic uncertainty has impacted growth projections.
STPI Growth (%) 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0
2008 2007
Figure 14: STPI Exports Trend
250000
SPTI Exports (Rs crs)
200000
150000
2008-09
100000
2007-08 2006-07
50000
0 All India 2008-09 2007-08 2006-07 207357 180155 144214 Karnataka 70375 55000 48700 Maharashtra 42360 35374 27625
Andhra Pradesh 31039 26122 18582
Tamilnadu 28355 28295 20745
NCR 24436 26919 21886
Bengal 5129 4500 3500
Figure 15: SPTI Growth in Exports Trend
The global economic recession had severe impact on the IT Sector and for the first time the industry clock clocked single digit growth of 5.4% during ing FY 2009 2009-10. The IT export port target for the current fiscal has been revised by NASSCOM to $ 54 billion against an earlier projection of $ 62 billion. In spite of the recession and policy
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 (Rs Cr)
Andhra Pradesh APIIC APIIC CMC Limited DivyaSree NSL DLF L&T Phoenix Infopark Lanco Hills Maytas Hill Serene Properties Sundew Wipro Limited Navayuga Legal Chandigarh 21 Rajiv Gandhi Tech Park Gujarat Larsen & Toubro Haryana DLF Cyber City DLF Limited Gurgaon Infospace Karnataka Manyata Embassy Business Park WIPRO Limited Varthur Hobli, WIPRO Infosys Vikas Telecom Adarsh Prime Divyashree SEZ Cessna Garden Bangalore, Tanglin Devp (Global Village SEZ) HCL Information Tech Park Primal Projects Banglore, Bagmane Kerala Infopark SEZ Electronic Tech Park SEZ-I Electronic Park Maharashtra Hiranandani Business Park Infosys EON Kharadi DLF Akruti Dynasty Developers
Location
FY2009-10
FY2008-09
Nanakramguda Madhurwara, Hill IT Ranga Reddy Ranga Reddy Ranga Reddy Mandal, Andhra IT Manikonda Bachupally Pocharam Madhapur, RR Manikonda Serilingampally Chandigarh Distt. Vadodara Gurgaon, Gurgaon, Gurgaon,
146.84 34.28 570.98 87.85 652.2 150.73 8.81 68.27 8.43 101.86 853.94 24.17 289.97 5.11 587.88 88 342.9
72.83 57.3 100 26.78 300.3 69.5 UI UI UI 9.83 300 UI 14.54 UI 66.45 UI 220
Bangalore, Varthur Hobli, Sarjapur Road, Bantwal Taluk, Mangalore Bangalore, Devarabeesanaha IT Krishnarajapura, Bangalore
3582.8 4129.44 1671.58 642.36 587.31 1029.91 1514 1885.8 1063.12 13.29 2572.16 115.49 768.74 317.816 13.397 14.98 839.3 649.72 726.53 329.691 164.22
268.98 UI UI 94.32 9.6 225 245 600 80 UI 317 UI UI 110 79.83 56.59 UI 24.29 190 200 UI
Pattengere/Mylas IT Bangalore Bangalore Bangalore Bangalore North, IT Kochi Trivandrum Trivandrum Powai, Rajiv Gandhi Info Park, Pune Taluka Haveli, Hinjewadi, Pune,
25
Nov 2010
The Manjari MIDC Syntel Magarpatta Township Serene WIPRO Orissa Orissa Ind dev Rajasthan Mahindra World City Tamil Nadu TCS ETL Infra Hexaware DLF Infocity Arun Excello ETA Technopark Electronics Corp of TN Coimbatore Hitech Infra Shriram Uttar Pradesh HCL WIPRO Ltd. Seaview West Bengal Unitech Hi-tech Rajarhat, M L Dalmiya & Kolkata Exports-SEZ estd prior to SEZ Act 05 WIPRO,Salt Lake Electronic City Mahindra City TOTAL
Pune, Pune, Pune, Pune, Kalwa Trans
58.58 762.73 30.53 108.51 82.87 NA 75.65 90.79 2213.95 1229.788 127.29 1200.766 13.88 486.74 622.85 105.02
UI 772 129 UI UI 156 UI 24.19 UI UI UI UI UI UI UI UI UI UI UI UI 95 UI
Bhubaneswar Jaipur, IT Siruseri and Tambaram Taluk, IT SIPCOT IT Park Manapakkam IT Vallncheri and Old Kancheepuram, Coimbatore Perungalathur Noida Greater Noida Noida, Sector-135,
437.3 578.7 73.66 109.15 6.21
Kolkata, West Tamil Nadu
739.94 2,163.82 37,9723
400 2209 7523

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.
India IT/ITeS Exports
Bengals share in SEZ exports
Share of Bengals Multitenated SEZ developments
Total employee requirement
Total Multitenanted SEZ space required
Share of subject project
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
4
http://sezindia.nic.in/writereaddata/updates/Exports_3st_March09-%20.pdf
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 Bantala 567:
PAN INDIA IT EXPORTS DATA

IT Services/Engg,R&D Exports (INR cr) A BPO Exports (INR cr) B IT Software/BPO Services Exports (INR cr) (A+B) STPI Exports E SEZ Exports F Total IT/ITeS Exports (SPTI+SEZ) (INR cr) Software Exports Growth Assumption YoY BENGAL IT DEMAND ESTIMATION Bengal's Share of Total SEZ Exports % P SEZ Exports Bengal (Q= F*P) (INR cr) Share of multi tenanted building (U=R/Q)
FY2008-09
FY2009-10
FY201011(E)
FY2011-12 (E)
FY2012-13 (E)
FY2013-14 (E)
FY2014-15 (E)
FY2015-16 (E)
156,978.73 58,752.27
176,428.25 58,651.75
197317 65596
226914.55 75435.4
260951.7 86750.7
313142.1 104100.9
375770.5 124921.0
450924.6 149905.2
216,190 207,357 7,523 214,880
235,080 197,107 37,973 235,080
262,913 187,252 75,661 262,913
302,350 177,889 124,461 302,350
347,702 168,995 178,708 347,702
417,243 160,545 256,698 417,243
500,692 152,518 348,174 500,692
600,830
600,830 600,830
16%
6%
FY2008-09
6.6 495
FY2009-10
2.3 855 13%
15% FY201011(E) 2.5 1,892 52%
15% FY2011-12 (E) 2.5 3,112 60%
15% FY2012-13 (E) 3.0 5,361 55%
20% FY2013-14 (E) 3.0 7,701 55%
20% FY2014-15 (E) 3.0 10,445 55%
20% FY2015-16 (E) 3.0 18,025 55%
Multi-tenated SEZ Total area operational sft (T*100) Total employment generation (T=R*100/S) Total export revenue generated /employee wt avg (Lacs) S Revenue generated by multi tenanted SEZs (INR Cr) (R= Q*U) Incremental Space reqd -1
Less: Existing vacant stock op balance V Unitech Infospace Phase-II (Tower 1,2,3) Rajarhat -2
78000 780
690000 6900
1318071 13181
2081815 20818
2990344 29903
4055970 40560
6999227 69992
14.2
14.2
14.2
14.2
14.2
14.2
14.2
110
977
1867
2949
4236
5745
9914
628,071
763,744
908,529
1,065,626
2,943,256
60000
660000
268929
192185
170656
162030
750000
600,000
237,000
237,000
237,000
237,000
600000
http://www.nasscom.in/upload/5216/IT_Industry_Factsheet-Mar_2009.pdf http://www.mit.gov.in/document-publications http://www.stpi.in/index1.php?langid=1&level=0&linkid=134&lid=192
27
Nov 2010
Dhunseri Bantala Total available stock for the year
200,000
250,000
270,000
SUBJECT PROJECT SUPPLY - Available Stock LEASE PHASING Total estimated Absorption of at Bantala SEZ -W (1-V-2) Leased Area in Subject Project (60%) X= V*60%+ W*60% Leased Area in Dhunseri SEZ (40%)
250,000 FY2012-13 (E)
400,000 FY2013-14 (E)
550,000 FY2014-15 (E)
350,000 FY2015-16 (E)
257,815
479,344
657,970
2,181,227
154,689
103,126
402,917
497,176
495,218
268,612 331,451 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, Genpact and 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:
2007 Vacancy Levels 8% 2008 11% 2009 23%
28
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%.
Vacant Stock 3793150 IT Parks (inc DLF Phase-II) IT SEZ 60,000 700,000 Total BUA 11592454 33% 9% Vacancy Rate
BUA (Sq ft)

1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 -
Vacancy (Sq ft)
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.
2500000 2000000 1500000 Supply ( Sq Ft) 1000000 500000 0 2008 2009 2010
Figure 17: Supply & Absorption Trend
Absorption ( Sq Ft)
29
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
Unitech Rajarhat SEZ
Developer
Unitech
Location
Rajarhat
Micro market
PD
Estimated Supply (Sq.Ft.)

700,000
Estimated time of Supply

Q1 2008
Type of Development
SEZ
SUPPLY 1Q 2008 TOTAL SUPPLY 2Q 2008

Globsyn Crystals EP-Y9, (Unnamed) PTI, DP- 9 The Matrix, DN-24 Globsyn Crystals Window Technology Nangalia Group Salt Lake Salt Lake Salt Lake Salt Lake PD PD PD PD 220,000 40,000 98056 70,000 Q2 2008 Q2 2008 Q2 2008 Q2 2008 IT/Commercial IT/Commercial IT/Commercial IT/Commercial
700,000
TOTAL SUPPLY 3Q 2008 TOTAL SUPPLY 4Q 2008

South City Pinnacle IT SEZ South City Pinnacle DLF Salt Lake Rajarhat PD PD
428,056 0
276000 90,000 Q4 2008 Q4 2008 IT/Commercial SEZ
TOTAL KOLKATA TOTAL SUPPLY IN 2008
366,000 1,494,056
KOLKATA TOTAL SUPPLY IN 2009 Estimated Project Size (Sq.Ft.)

400,000 150,000 400000
Developer
Project Name SUPPLY 1Q 2009
Location
Micro Market
Type of Development
PS Srijan Bhimrajka Impex Ltd DLF
PS Srijan Tech Park Infinium Digispace DLF IT PARK II TOTAL
Sector V, Salt Lake Sector V, Salt Lake Rajarhat
PD PD PD
1Q 2009 1Q 2009 1Q 2009
IT IT SEZ
950,000
SUPPLY 2Q 2009 TOTAL -
SUPPLY 3Q 2009
Godrej Properties Saltee Group DLF Godrej Waterside DN - 18 DLF IT PARK II Sector V, Salt Lake Sector V, Salt Lake Rajarhat PD PD PD 615,000 90,000 600,000 3Q 2009 3Q 2009 3Q 2009 IT IT SEZ
30
Nov 2010
TOTAL SUPPLY 4Q 2009 TOTAL KOLKATA TOTAL SUPPLY IN 2009
1,305,000
2,255,000
KOLKATA TOTAL SUPPLY IN 2010 Developer Project Name SUPPLY 1Q 2010 Unitech SEZ Phase-II
India Design Centre
Location
Micro Market
PD PD
Estimated Project Size (Sq.Ft.)

600,000 100,000

2Q 2010 2Q 2009
Type of Development
IT IT
Unitech WEBEL JV
Rajarhat Rajarhat
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 tenants can be detailed as follows:
KOLKATA TOTAL ABSORPTION 2008
Project Name
Location
Micro market
Lessee
Nature of Transaction
Quarter
Area Leased (Sq.Ft.)
Industry /Sector
Unitech Infospace Unitech Infospace Unitech Infospace
Rajarhat Rajarhat Rajarhat
ABSORPTION 1Q 2008 Cap gemini & IBM PD Daksh

PD PD HCL Genpact
Absorption Absorption Absorption
1Q 2008 1Q 2008 1Q 2008
200,000 120000 40000
IT IT IT
TOTAL ABSORPTION 2Q 2008

Eternity, DN - 1 DLF IT Park Sector V, Salt Lake Rajarhat PD PD Airtel Bharti Infratel Absorption Absorption 2Q 2008 2Q 2008
360,000
7800 8000
Telecom Telecom
TOTAL
15800
31
Nov 2010
ABSORPTION 3Q 2008
DN 14 DN 14 DN 14 Infinity Benchmark Sugam Business Park Sugam Business Park Sugam Business Park Sugam Business Park Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake PD PD PD PD PD PD PD PD Tyco Engineering Shapoorji Paloonji Bank of Baroda Quotient Engineering Adhunik (Reliance Comm) 3i Infotech Diageo Schindler Electric Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption 3Q 2008 3Q 2008 3Q 2008 3Q 2008 3Q 2008 3Q 2008 3Q 2008 3Q 2008 5000 10,000 5500 20000 13400 6700 6700 13400 Engineering Engineering Financial Engineering Telecom IT Commercial Engineering
TOTAL ABSORPTION 4Q 2008

Infinity Benchmark RDB Boulevard Globsysn Crystal I DN 14 DLF IT Park DLF IT Park EP/Y-13 (Peecon Building) BIPL Omega Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Sector V, Salt Lake Rajarhat Rajarhat Sector V, Salt Lake Sector V, Salt Lake PD PD PD PD PD PD PD PD KPMG MN Dastur Ericsson Johnson Control IBM Daksh Lexmark Spanco Telesystems ABB Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption 4Q 2008 4Q 2008 4Q 2008 4Q 2008 4Q 2008 1Q 2009 4Q 2008 4Q 2008
80700
8815 15000 30,000 5000 63,438 100,000 20000 36000
IT Engineering IT Engineering IT R&D IT Engineering
TOTAL KOLKATA TOTAL ABSORPTION IN 2008
278253 734,753
KOLKATA TOTAL ABSORPTION 2009 Nature of Transaction Area Leased (Sq.Ft.) Industry /Sector of Lessee
Project Name
Location
Micromarket
Lessee
Quarter
1Q 2009 1Q 2009 2Q 2008 1Q 2009
PS Srijan PS Srijan South City Pinnacle South City Pinnacle
ABSORPTION 1Q 2009 Salt Lake Sector V PD Shyam-Sistema Salt Lake Sector V PD Idea Cellular Salt Lake Sector PD V PWC Salt Lake Sector Outotec PD V Engineering TOTAL ABSORPTION 2Q 2009
Lease Lease Precommited Lease
22000 50000 110000 17000
Telecom Telecom ITeS Engineering
199000
2Q 2009 2Q 2009 2Q 2009
DLF IT Park Tower C Ground Floor DLF IT Park Tower C Ground Floor RMZ
Rajarhat Rajarhat Rajarhat
PD PD PD
Tech Mahindra HP Mc Nally Bharat Engineering
Lease Lease Lease
30000 9000 150000
IT IT Engineering
32
Nov 2010
Sunrise Towers PS Srijan
Salt Lake Sector V Salt Lake Sector V
PD PD
Airtel Tata Teleservices
Lease Precommited
2Q 2009 1Q 2009
9000 150000
Telecom Telecom
TOTAL ABSORPTION 3Q 2009 Salt Lake Sector Pinnacle (Dynamic V PD Securities) Salt Lake Sector V PD Mahua TV Salt Lake Sector V PD Usha Telecom Salt Lake Sector V PD Sparsh BPO Salt Lake Sector Orange Business V PD Services Salt Lake Sector V PD Lexplosion Salt Lake Sector V PD Kobel Co. Engg. TOTAL ABSORPTION 4Q 2009 Salt Lake Sector V PD Unitech Wireless Salt Lake Sector V PD Unitech Wireless Salt Lake Sector V PD Sterling Wilson
Rajarhat Rajarhat Rajarhat Rajarhat Rajarhat Rajarhat Rajarhat Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Rajarhat Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V PD PD PD PD PD PD PD PD PD PD PD PD PD PD PD PD PD EX 3 Kolkata Info Va Tech Wabag Geotech Informatics Tech Mahindra Sparsh BPO L&T Voith Astha Technology Services Aegis BPO Met Life Tata Tele Com (WTTIL) TCS Infosoft Global Pearl Studios Limtex Info Castle Rock BRG Iron & Steel 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 3Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 4Q 2009 3Q 2009 3Q 2009 4Q 2009 3Q 2009 3Q 2009 3Q 2009 3Q 2009 3Q 2009 3Q 2009 3Q 2009
348000
Infinity Benchmark Infinity Benchmark PS Srijan Asyst Park Advantage Towers Infinity Benchmark Infinity Benchmark
Lease Sale Lease Lease Lease Lease Lease
12500 45000 20000 11500 10400 4500 3390
IT Entertainment Telecom IT IT IT Engineering
107290
Southcity Pinnacle Southcity Pinnacle GN - 31, (Benfish) DLF IT Park I DLF IT Park I DLF IT Park I DLF IT Park I DLF IT Park I DLF IT Park II Ambuja Ecospace GN - 31, (Benfish) Globsyn Crystals-I CD - 16 Asyst Park Unitech Infospace Infinity Benchmark Infinity Benchmark Sunrise Towers Technopolis Godrej Waterside
Lease Lease Lease Lease Lease Lease Lease Lease Lease Outright Lease Lease Lease Lease Lease Lease Lease Lease Lease Lease
27554 13777 13292 2600 1000 2470 2930 40000 29000 32000 13292 96000 3200 11500 250000 4500 17500 12000 6500 31000
Telecom Telecom Engineering IT IT Engineering IT IT IT Engineering Engineering IT Financial Telecom IT IT Entertainment IT Research Metal & Minerals
TOTAL KOLKATA TOTAL ABSORPTION IN 2009
610115 1264405
KOLKATA TOTAL ABSORPTION 2010
33
Nov 2010
Project Name
Location
Micromarket
Lessee
Nature of Transaction
Quarter
1Q 2010 1Q 2010 1Q 2010 1Q 2010 1Q 2010 1Q 2010 1Q 2010 2Q 2010
Area Leased (Sq.Ft.)
Industry /Sector of Lessee
ABSORPTION 1Q 2009
DLF IT Park-II Godrej Waterside Godrej Waterside DN-14 Ashram Building South City Pinnacle South City Pinnacle Rajarhat Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V Salt Lake Sector V PD PD PD PD PD PD CBD I-Nova Solutions ZTE Royal Infra CMC Aditya Birla Minacs Arcelor Mittal NSN Lease Lease Lease Lease Lease Lease Lease 11,500 32,000 4,300 17,000 40,000 16,000 13,777 IT Telecom Telecom IT IT Steel Telecom
ABSORPTION 2Q 2009
Unitech SEZ Rajarhat PD Bridge Tree Lease 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 their expansion
Tech Mahindra has 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.
TCS has 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 2 Sunrise City project status is unknown.
nd
center in Nonadanga off EM-Bypass, the
34
Nov 2010
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 BPO has 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 201213 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 million sq ft.
6.7
Opinion on development and lease phasing
Table below depicts proposed development and lease phasing:
PHASING (sq ft)

Development Lease
FY201011(E) -
FY2011-12 (E)
FY2012-13 (E) 250,000 154,689
FY2013-14 (E) 400,000 402,917
FY2014-15 (E) 550,000 497,176
FY201516 (E) 350,000 495,218
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.
35
Nov 2010
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.
36
Nov 2010
7.0 FINANCIAL ANALYSIS
7.1
Assumptions
As per information provided by client, FAR of 2.76 has been assumed for calculating Built-up-Area excluding car parking. Construction costs for the project have been assumed as per market benchmarks and thumb rule assumptions, considering the nature of the development components proposed.
7.1.1 Area Assumptions

Component Area 1,260,915 492,872 1,753,787 1,513,098
Table 18: Area assumptions
Built-up Area Car Parking Total Construction Area Total Leasable Area
No assumptions have been made for power, water and other regular costs as these have been treated as a pass-through to the end user, since the charges for these facilities would be recovered by client from the users at actual. 7.1.2 Project Development key dates
Project Key Dates
Start date Construction starts after approval of Development Plan Construction period (+Lead time) Certification/Approval for Occupancy/Usage Operation/Occupancy starts on Financial year ending (of occupancy/lease)
01-Jan-11 0 Months 36 Months 0 Months 01-Jan-14 31-Mar-14

Table 19:Development key dates
7.1.3 Project Structure Assumptions

Structure
Equity Return Expectation Rate Debt Rate Equity Percentage Debt Percentage Developer Profit Margin Discounting Rate
20% 12% 35% 65% 0% 12.46%

Table 20: Project Structure assumptions
37
Nov 2010
7.1.4 Construction cost
Development Component
Cost on BUA (INR/Sq.ft.) 2132 350
Escalation (per annum) 3% 3%

Table 21: Construction cost assumptions
IT SEZ Car Parking
7.1.5 Other cost assumptions

Other Costs Architects & Consultants' Fee (%-age of Construction Cost) Pre-Operative Expenses (%-age of Construction Cost) Advertising & Marketing Cost (%-age of Construction Cost) Miscellaneous & Contingencies (%-age of Construction Cost) Total Percentage (%) 2.35 6.69 2.00 3.41 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 notified area of ML Dalmiya SEZ. Therefore land development cost for the project has been assumed to be minimal.
Cost component on Built up Area Infrastructure cost Land cost INR in Rs/ Sq.ft. 1 259.85
Table 23: Land development cost assumptions
7.1.7 Revenue assumptions

Escalation (per annum) 5% Capitalization Rate 9%
Table 24: Revenue assumptions
Development Component
Rental (INR/Sq.ft.) on saleable/ leasable area 35 per month
IT SEZ
7.1.8 Phasing assumptions

Development Phasing IT SEZ Lease Phasing IT SEZ 31-Mar-11 4.00% 31-Mar-15 70.00% 31-Mar-12 32.00% 31-Mar-16 75.00% 31-Mar-13 31.00% 31-Mar-17 85.00% 31-Mar-14 33.00% 31-Mar-18 95.00%
Table 25: Phasing assumptions
Construction Cost implies bare shell cost without fittings and furnishings and does not include soft costs like overhead charges, consulting fees, etc.
38
Nov 2010
7.1.9 Project Returns Based on the above assumptions, following are the arrived returns for the project:
Project NPV In INR Million st as on Jan 1 2010 2611 Project IRR Equity NPV In INR Million st as on Jan 1 2010 2923 22.6 % 33.1%
Table 26: Project Returns
Equity IRR
Project Returns
IT SEZ
39
Nov 2010
7.1.10 Project Balance Sheet
Balance Sheet
1-Jan-11 31-Mar-11
01-Apr11 31-Mar12 1
01-Apr12 31-Mar13 2
01-Apr-13 31-Mar-14 3
01-Apr14 31-Mar15 4
01-Apr15 31-Mar16 5
01-Apr16 31-Mar17 6
01-Apr17 31-Mar18 7
01-Apr18 31-Mar19 8
01-Apr19 31-Mar20 9
01-Apr20 31-Mar21 10
01-Apr21 31-Mar22 11
01-Apr-22 31-Mar-22 12
Years Liabilities Share Capital Equity Reserves & Surplus Term Loan - Secured Total Liabilities Assets Fixed Asset Gross Block Depreciati on Net Block Cuurent Asset Work In Progress
81.59 -
471.43 -
893.09 -
893.09 (133.70)
893.09 (300.58)
893.09 (312.34)
893.09 (56.69)
893.09 259.97
893.09 638.42
893.09 1,205.51
893.09 1,921.11
893.09 2,527.44
893.09 2,527.44
165.64
957.14
1,813.24
2,589.23
2,502.21
2,337.37
2,100.37
1,863.37
1,563.37
1,163.37
396.37
0.36
247.23
1,428.57
2,706.33
3,348.62
3,094.72
2,918.13
2,936.77
3,016.44
3,094.89
3,261.97
3,210.57
3,420.89
3,420.53
2,706.33 2,706.33
2,706.33 67.66 2,638.67
2,706.33 381.93 2,324.40
2,706.33 343.74 2,362.59
2,706.33 309.37 2,396.97
2,706.33 278.43 2,427.90
2,706.33 250.59 2,455.75
2,706.33 225.53 2,480.80
2,706.33 202.98 2,503.36
2,706.33 137.01 2,569.32
2,706.33 2,706.33
247.23
1,428.57
1
Nov 2010
Cash & Bank Balance Total Assets
709.95
770.32
555.53
539.80
588.53
639.14
781.17
707.21
851.57
714.20
247.23
1,428.57
2,706.33
3,348.62
3,094.72
2,918.13
2,936.77
3,016.44
3,094.89
3,261.97
3,210.57
3,420.89
3,420.53
Table 27: Projected Balance Sheet
7.1.11 Project P&L
Profitability Statement
1-Jan-11 31-Mar-11
01-Apr11 31-Mar12 1
01-Apr12 31-Mar13 2
01-Apr-13 31-Mar-14 3
01-Apr14 31-Mar15 4
01-Apr15 31-Mar16 5
01-Apr16 31-Mar17 6
01-Apr17 31-Mar18 7
01-Apr18 31-Mar19 8
01-Apr19 31-Mar20 9
01-Apr20 31-Mar21 10
01-Apr21 31-Mar22 11
Years
Revenue Income Commerci al Office Space Maintenance Charges Commercial Office Space Total Revenue Expenditure Operating and Maintenance Cost Commercial
128
548
621
798
798
798
918
957
718
48 176
215 763
256 877
301 1,099
316 1,114
331 1,130
348 1,266
381 1,337
300 1,017
58
243
255
268
281
295
310
325
256
2
Nov 2010
Office Space Total Expenditure PBITD Interest Depreciation Commercial Office Space Profit Before Tax Tax Profit After Tax
58 118 66
243 521 305
255 622 290
268 831 266
281 833 238
295 835 206
310 956 164
325 1,012 94
256 761 18
68 (16)
382 (167)
344 (12)
309 256
278 317
251 378
226 567
203 716
137 606
(16)
(167)
(12)
256
317
378
567
716
606
Table 28: Projected Profit & Loss
7.1.12 Project Cash Flows
Cash Flow
1-Jan-11 31-Mar-11
01-Apr11 31-Mar12 1
01-Apr12 31-Mar13 2
01-Apr-13 31-Mar-14 3
01-Apr14 31-Mar15 4
01-Apr15 31-Mar16 5
01-Apr16 31-Mar17 6
01-Apr17 31-Mar18 7
01-Apr18 31-Mar19 8
01-Apr19 31-Mar20 9
01-Apr20 31-Mar21 10
01-Apr21 31-Mar22 11
Years
Sources of Funds Increase in Capital Increase in Term Loan Profit After Tax
81.59
389.84
421.66
165.64 -
791.50 -
856.10 -
117.91
520.53
622.36
831.28
832.92
834.64
956.22
1,012.16
3
Nov 2010
Total Application of Funds Fixed Assets Work in Progress Interest Payment Tax Term Loan Repayment Total Opening Balance Surplus / Defecit Closing Balance
247.23
1,181.34
1,277.76
117.91
520.53
622.36
831.28
832.92
834.64
956.22
1,012.16
247.23 -
1,181.34 -
1,277.76 -
66.04 -
305.49 -
290.38 -
266.26 -
237.82 -
205.60 -
163.60 -
93.58 -
247.23
1,181.34
1,277.76
15.06 81.10
87.01 392.50
164.84 455.22
237.00 503.26
237.00 474.82
300.00 505.60
400.00 563.60
767.00 860.58
0.00 -
0.00 -
36.81 36.81
36.81 128.03 164.85
164.85 167.15 331.99
331.99 328.01 660.00
660.00 358.09 1,018.10
1,018.10 329.04 1,347.14
1,347.14 392.61 1,739.75
1,739.75 151.57 1,891.32
Table 29: Project Cash Flows
4
Nov 2010
7.1.13 Project Costing
Description of Items Land Cost: Civil Works: Piling Sub Structure Superstructure Brickwork/ Plaster Finishes Door Interior Flooring Elevation Landscaping Utility & Services Lift Electric Firefighting Plumbing & Sanitary A C Plant Total Hard Cost
Rate INR Per Sq Ft. 1,139.64 160.32 325.57 584.18 69.57 417.27 20.86 104.32 90.44 173.81 27.84 574.50 62.59 228.15 37.60 55.61 190.55 2,131.42
Project Cost (INR Million) 118 202 410 736 87 14,366.00 26 131 114 219 35 5,260.00 78 287 47 70 240 2804
Table 30: Project Cost Summary
1
Nov 2010
7.1.14 Project Cost
Cost Phasing Cost of Land Soil Testing Civil Works Pilling Sub Structure Superstructure Brickwork/Plast er Finishes Door Interior Flooring Elevation Landscaping
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Q13
Q14
Total
12 1 161 108 53 71 70 93 3 0 15 107 14 0 19 4 2 13 108 14 0 44 4 22 17 71 165 136 154 31 163 62 18 68 14 0 107 4 22 17 55 9 0 0 223 12 34 41 11 8 8 0 0 2 6 0 4 5 0 5 6 10 149 0 5 6 0 114 27 41 13 10 23 0 1 5 6 7 5 7 7 7 7 2 0 99 1 21 11 57 9 0 46 2 30 1 8 5 0 0 32 43 11 11 14 0 0 32 0 79 1 0 112 7 44 12 13 36 0 10 6 0 0 14 155 1 154 29 58 87 86 14 0 14 84 15 0 37 3 25 9 45 14 0 57 7 25 24 0 147 3 1 23 107 14 0 63 26 22 2 0 6 6 0 2 87 87 100 99 58
119 1 1,437 202 410 736 88 0 526 26 132 114 219 35 0 724 79 288 47 70 240 0 40 88
Utility & Services Lift Electric Firefighting Plumbing & Sanitary A C Plant
49
Mobilization Architect & Consultancy
25 16
1
Nov 2010
Pre - Operative Expenses Plan Sanction Charges Administrative OH Marketing and Publicity Sub - Total (1 to 9) Contingency Provisions TOTAL 1 TO 7 Interest During Construction @ 12% GRAND TOTAL MEANS OF FINANCE Promoters Contribution Debt
159 40 119
21
18
12
11
250 40
3 6
3 18 0 195 0 8 202
3 15 0 232 0 9 241
3 9 0 442 0 18 460
3 3 0 394 0 16 410
2 9
150 60
0 480 0 4 484
0 88 0 4 91
0 308 0 12 320
0 97 0 5 101
0 94 0 5 99
0 164 0 8 172
0 225 0 12 236
0 237 0 14 251
0 219 0 13 232
0 11 0 1 11
0 3,184 0 127 3,311
1 484
4 95
8 210
15 256
23 483
33 443
42 362
48 149
51 150
54 226
59 295
65 316
72 304
25 37
499 3,810
380
151
147
98
49
49
75
98
105
101
122
1270
103
95
210
255
332
295
263
99
99
150
196
210
202
24
2540
2
Nov 2010
8.0 CONCLUSION / RECOMMENDATION

Growth projections of IT industry is once again looking up and the outlook for IT-SEZs is positive in wake of sunset clause on STPI tax exemptions. While Kolkata share of overall IT exports has remained stable at 2.5%; there is potential in the city to achieve a higher share. Tholons study in 2007 ranked Kolkata 7th amongst 50 emerging BPO hubs. The education system churns out 1,50,000 graduates along with 60,000 to 70,000 engineers, while only 8,000-10,000 people were employed in the BPO sector. Salary rates were nearly 28% cheaper while total costs of setting up business units was 20% lower in Kolkata than in other traditional BPO hubs. While its recent rank has fallen to 13
th
due to political uncertainity- the potential is
clearly there. Some of the Top 20 BPO which doesnt have a presence in Kolkata include- Progeon, Transworks,Cambridge Solutions, Mphasis, EXL, Intelenet Global, WNS Global Services, Hinduja Global and Convergys. Entry of major vendors can alter demand dynamics.
Conclusion The above detailed demand and financial analysis concludes that the project is financially viable and will be able to meet the financial obligations. The following points as evaluated in the study highlight the same: We are of the opinion that, given the market dynamics the subject projects potential development of approximately 1.55 million sq ft can be achieved within the period FY2010-11 to FY 2015-16. The project is in direct competition with Dhunseri IT SEZ at Kolkata, the key success factor for the project would be (a) to capitalise on demand by bringing in intended supply before Dhunseri SEZ (b) to capitalise on Technopolis brand which already has a operation IT Park in Salt Lake, quality of developemnt would be differentiating factor (c) the rentals should be competative with other IT SEZs in Rajarhat and Bantala; Unitech is currently quoting Rs 36-38/sq ft. Based on the financial analysis the estimated Project IRR is 22.6 %.
1
Nov 2010
ANNEXURE -I
SEZ Act 2005 STPI Act Direct Tax Code Bill 2009 Revised draft DTC 2010 DTC substitutes profit-linked incentives by investment linked incentives. Under the new scheme SEZ units and developers would be allowed to recover all capital and revenue expenditure (except expenditure on land, goodwill financial instrument) and would be liable to income tax on profit made 9 there after Revised DTC draft 2010 has clarified that both SEZ developers and units that start operations before the DTC is implemented on April 1, 2011 will continue to get tax exemptions on profits for the remaining years of the unexpired 10 period.
SEZ units get 100% tax exemption on profits for first five years 50% exemption for the next five years another 50% exemption on reinvested profits in the following five years. SEZ developers get 100% tax exemption on profits for a block of ten years
Income-tax holiday till March 31, 2011 on export earnings
Exemption on MAT ( Minimum Alternative Tax)
MAT is applicable and has been increased from 15-18% in the FY 2010-11
MAT of 2% on gross assets as provided in DTC 2009, has been done away with and MAT on book 11 profits is reinstated. Developers as well as SEZ units would not get the MAT exemption anymore, however there is no clarity on rate of MAT. Economic Advisory Council (EAC) has suggested 10% MAT on SEZ Units MAT cannot be carried forward for claiming tax credit in subsequent 12 years.
Exemption from payment of excise and customs duties Exemption from payment of Service Tax on input services
Exemption from payment of excise and customs duties Service tax rebate available only where Unit exports taxable services Re-imbursement of CST on interstate purchase of goods
Table 31: Comparative Tax Regimes
Exemption of CST on interstate purchase of goods
http://www.edelcap.com/CMT/Upload/ArticleAttachments/Direct%20Tax%20Bill_Aug-09-EDEL.pdf
10
http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/Revised_discussion_paper_on_the_Direct_Taxes_Code.pdf http://finmin.nic.in/DTCode/RevisedDiscussionPaper.pdf
11
http://www.ey.com/Publication/vwLUAssets/EY_Tax_Alert__India_Budget_2010,_Real_estate_impact/$FILE/EY%20Tax%20Alert,%20India%20Budget%202010,%20Real%20Estate.pdf
12
2
Nov 2010
The revised draft for Direct Tax Code does not extend profit linked tax exemptions for industrial units which commences operation after DTC comes into effect. The changes in the tax regime, if executed, could cut down tax benefits enjoyed by SEZs, especially in sectors like IT where investments are low. The implication for developers is if all the space of a SEZ is not sold before April 1, 2011 and a unit starts operation in it after April 1, 2011, it will not get the tax benefit; therefore they may not be able to attract units. Further SEZ units may also attract minimum alternative tax (MAT) as the proposed DTC has no provision of giving any sector exemption from MAT. This would also result in lot of rush by corporates to establish operating units in SEZs before March 31, 2011, according to KPMG.
3
Nov 2010
CAVEATS AND LIMITATION

1. The Development Feasibility Study (hereafter referred to as the Report) is not based on comprehensive market research of the overall market for all possible situations. Cushman & Wakefield India (hereafter referred to as C&WI) has covered specific markets and situations, which will be highlighted in the Report. C&WI has not carried out comprehensive field research based analysis of the market and the industry given the limited nature of the scope of the assignment. In this connection, C&WI has relied solely on the information supplied to C&WI and update it by reworking the crucial assumptions underlying such information as well as incorporating published or otherwise available information. 2. In conducting this assignment, C&WI has carried out analysis and assessments of the level of interest envisaged for the city under consideration and the demand-supply for the commercial retail & hospitality sector in general. C&WI has also obtained other available information and documents that are additionally considered relevant for carrying out the exercise. The opinions expressed in the Report will be subject to the limitations expressed below. a. C&WI endeavors to develop forecasts on demand, supply and pricing on assumptions that has been considered relevant and reasonable at that point of time. All of these forecasts are in the nature of likely or possible events/occurrences and the Report will not constitute a recommendation to Forum IT Parks Pvt Ltd (hereafter referred to as the Client) or its affiliates and subsidiaries or its customers or any other party to adopt a particular course of action. The use of the Report at a later date may invalidate the assumptions and bases on which forecasts have been generated and is not recommended as an input to a financial decision. b. Changes in socio-economic and political conditions could result in a substantially different situation than those presented at the stated effective date. C&WI assumes no responsibility for changes in such external conditions. c. In the absence of a detailed field survey of the market and industry (as and where applicable), C&WI has relied upon secondary sources of information for a macro-level analysis. Hence, no direct link is sought to be established between the macro-level understandings on the market with the assumptions estimated for the analysis. d. The services provided is limited to development feasibility and will not constitute an audit, a due diligence, tax related services or an independent validation of the projections. Accordingly, C&WI will not express any opinion on the financial information of the business of any party, including the Client and its affiliates and subsidiaries. The Report is prepared solely for the purpose stated, and should not be used for any other purpose. e. While the information included in the Report is believed to be accurate and reliable, no representations or warranties, expressed or implied, as to the accuracy or completeness of such information is being made. C&WI will not undertake any obligation to update, correct or supplement any information contained in the Report. f. In the preparation of the Report, C&WI has relied on the following information: i. Information provided to us by the Client and its affiliates and subsidiaries and third parties; ii. Recent data on the industry segments and market projections; iii. Other relevant information provided to us by the Client and its affiliates and subsidiaries at C&WI's request; iv. Other relevant information available to C&WI; and v. Other publicly available information and reports. 3. The Report reflects matters as they currently exist. Changes may materially affect the information contained in the Report. 4. All assumptions made in the feasibility study are based on information or opinions as current. In the course of the analysis, C&WI has relied on information or opinions, both written and verbal, as current obtained from the Clients as well as from third parties provided with, including limited
4
Nov 2010
information on the market, financial and operating data, which would be accepted as accurate in bona-fide belief. No responsibility is assumed for technical information furnished by the third party organizations and this is bona-fidely believed to be reliable. 5. No investigation of the title of the assets has been made and owners' claims to the assets is assumed to be valid. No considerations have given to liens or encumbrances, which may be against the assets. Therefore, no responsibility is assumed for matters of a legal nature. 6. The Client including its agents, affiliates and employees, must not use, reproduce or divulge to any third party any information it receives from C&WI for any purpose without prior consent from C&WI and should take all reasonable precautions to protect such information from any sort of disclosure. The information or data, whether oral or in written form (including any negotiations, discussion, information or data) forwarded by C&WI to the Client may comprise confidential information and the Client undertakes to keep such information strictly confidential at all times.
5
Nov 2010
ANNEXURE 3 SITE PHOTOGRAPHS

Photographs Adjacent Development Photograph Adjacent Development Photograph
DHUNSERI IT PARK is currently under construction; pilling work is in progress
Subject Property
Description of the Photograph Partially built building of Tech Mahindra Campus Cognizant Tech Campus is the only operational SEZ at Bantala
Photograph Adjacent Development Photograph Adjacent Development Photograph
Description of the Photograph Buildings of Leather Complex adjacent to Kolkata IT SEZ in Bantala
Critical / Relevant Photographs Photograph 1 Photograph 2 Photograph 3
6
Nov 2010
Description of Photograph 3 Description of Photograph 1 Road Abetting the subject property Description of Photograph 2 Proposed Dhunseri IT-SEZ Effluent Canal of Leather complex passing through the IT SEZ; canal segregation work is due to completed
7
Nov 2010

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Market Research & Demand Assessment for IT SEZ at Kolkata

Market Survey & Demand Assessment Study

TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY ............................................................................................................................................. 6

Market Survey & Demand Assessment Study

7.1.13 7.1.14 8.0

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

Market Survey & Demand Assessment Study

Market Survey & Demand Assessment Study

List of Abbreviations & Measurements

Table 1: List of Abbreviations

Market Survey & Demand Assessment Study

1.0 EXECUTIVE SUMMARY

Approach & Methodology

Market Analysis & Development Options

Table 3: Project Returns of Proposed Development Options

Conclusion & Recommendations

Market Survey & Demand Assessment Study

2.0 CITY OVERVIEW

Market Survey & Demand Assessment Study

Nadia North 24 Parganas South 24 Parganas Kolkata Metropolitan Area (KMA)

505 2,964 1,008 3,817

685 4,256 1,465 4,651

1,279 5,687 1,821 5,666

1,783 7,415 2,430 6,826

2,256 9,385 3,201 7,950

2,682 10,742 3,590 8,914

3,228 12,498 4,191 10,045

Working Age Population in million

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

Market Survey & Demand Assessment Study

GDP West Bengal

Economic Base and Drivers for the City

Source: Statistical Abstract, BAE&S GoWB,: data as of 2001-02 www.indiastat.com

Market Survey & Demand Assessment Study

FDI Inflows FY 2000-2010

Figure 4: FDI Inflows from FY 2000 to FY 2007

Market Survey & Demand Assessment Study

Market Survey & Demand Assessment Study

Market Survey & Demand Assessment Study

Existing & Upcoming Infrastructure

Market Survey & Demand Assessment Study

Figure 5: Infrastructure Map

Figure 6: Kolkata Metro Expansion Map

Market Survey & Demand Assessment Study

2.5.2 Upcoming Infrastructure Initiatives

New Metropolitan Highways

Market Survey & Demand Assessment Study

3.0 PAN INDIA COMMERCIAL REAL ESTATE OVERVIEW

IT SEZ Supply (mn sq ft)

Table 9: Pan India IT SEZ Supply & Absorption

STPI Supply (mn sq ft)

Table 10: Pan India STPI Supply & Absorption

Market Survey & Demand Assessment Study

SEZ SUPPLY - BIG 7

1.29 0.70 3.57

2.83 2.97 0.75 1.86 1.65 0.50 2010 (P)

4.00 2.37 0.40 2.13 2011 (P)

1.60 2.00 2008

2.40 2012 (P)

Figure 7: SEZ Supply in Top Seven Cities

Figure 8: Comparative upcoming SEZ & STPI Supply

Figure 9: Comparative of SEZ and STPI Absorption

Market Survey & Demand Assessment Study

4.0 KOLKATA REAL ESTATE OVERVIEW