Development Watch – Week #3 Dec’24
Development News
Higher paying Jobs are what is needed
India’s challenge isn’t job creation, but low wages. Addressing this requires a multifaceted approach, beyond simply generating more jobs. It necessitates investment in infrastructure, innovation and urban development to create higher-paying jobs. This is needed alongside improving education and skilling the workforce to enable wage growth nationwide. Infra and urbanization reinforce each other while contributing to formalization of economic processes. Innovation is exogenous to these complementary forces. It leads to clustering effects. For instance, a labour-intensive manufacturing base in the hinterland that feeds export markets through world-class logistics chains to its coastal cities that are research hubs in areas such as AI and energy transition. Cities like Mumbai and Bengaluru have acquired their standards of living by creating jobs for a broad range of workforce skills.
Rural investment to boost Economic growth
A huge transformation has taken place in India’s villages. Particularly in the areas of financial infrastructure and entrepreneurial spirit. This complimented the regions of making significant progress. Pre and post-Covid rural India are starkly different. Financial infrastructure is a big step more mature. There is an interest in entrepreneurship in India’s rural side. India’s economy is navigating through fluctuations, with a dip in growth observed over the last two quarters. One of the key ways to empower rural entrepreneurship is by connecting rural products to urban markets. Taking brands from these regions and bringing them on quick commerce in urban India helps give a direct boost to rural entrepreneurs who are developing and growing these products.
BMW-UNICEF partnership for Rural India
The BMW Group and UNICEF have announced a partnership in India with an aim to transform the educational landscape for 1 lakh children in 4 states. The partners would focus on foundational learning and STEM skills from early years through adolescence. STEM education will be provided to girls from Kasturba Gandhi Balika Vidyalayas and Tribal Ashramshalas. These belong to the most marginalized groups in hard-to-reach rural areas in Assam, Jharkhand, Tamil Nadu and West Bengal. The global long-term tie-up between the BMW Group and UNICEF to reach more than 10 million children annually through education and training. BMW has large operations in South Africa, Brazil, Mexico and Thailand.
Government to relax solar scheme credit for households
The government is streamlining the loan application process for rooftop solar installations under the PM Suryaghar Muft Bijli Yojana. MNRE is in discussion with Department of Financial Services and public sector banks to simplify documentation, potentially eliminating site inspections by banks, to accelerate adoption. The scheme targets 10 million household installations by 2026-27, offering subsidized loans at 7% interest. There is a financial outlay of Rs. 9,600 Crores allocated at the revised estimate stage in 2024-25 for the scheme. The scheme has seen 685,763 installations so far since its launch in February, reaching 86% of the total installations in the decade before that.
Macquarie Asset Management to sell Highway portfolio
Macquarie Asset Management (MAM) will begin the sale process by early next year and plans to appoint a banker by the end of this month. It had acquired the rights to manage the 648km-long national highways in Andhra Pradesh (AP) and Gujarat from the National Highway Authority of India in 2018. MAM is the world’s largest infrastructure asset manager. It’s largest Indian road portfolio of 9 national highways stretches at a combined valuation of $2 billion. The portfolio of roads has a long concession period of 30 years. MAM had acquired the road assets for Rs. 9,681 Crores, which was 1.5 times higher than the base price set by NHAI, in the first Toll-Operate-Transfer (ToT) auction, held in 2018. MAM has more than $600 billion of assets under management (AUM). It has made more than 60 investments in India, including in toll roads and renewables. Toll income for FY23 for all nine stretches together stood at Rs 915 crore, witnessing improvement by 12%, as compared with FY22.
REITs Association appoints new Chairman
MD and CEO of Brookfield India Real Estate Trust has been appointed Chairman of the Indian REITs Association (IRA). Established in 2023, the IRA is a non-profit trade organization that supports the growth and development of India’s Real Estate Investment Trust (REIT) sector. Its founding members include Brookfield India Real Estate Trust, Embassy Office Parks REIT, Mindspace Business Parks REIT, and Nexus Select Trust. IRA aims to work closely with SEBI to support industry growth, protect investor interests, and uphold high regulatory standards. Alok Aggarwal, the new Chairman, has held leadership roles at prominent organizations such as Sun Apollo Capital Partners, Milestone Capital Advisors Ltd, DLF Universal Ltd and Mahindra Gesco Developers Ltd.
$8.87 billion Institutional investment in 2024
Institutional investment in Indian real estate rose 51% to a record $8.87 billion during 2024. Investors looked to encash strong demand for housing, office and warehousing properties. According to a report by JLL, the investment was only $5.87 billion in the preceding calendar year. Foreign institutional investors accounted for 63 per cent of the total institutional investments in Indian real estate. Among different asset classes, the residential segment attracted 45 per cent of inflows followed by office buildings 28 per cent and warehousing properties 23 per cent. The number of deals also saw an increase of 47% in 2024. Strong growth, political stability, and diverse investment opportunities positioned India favourably in the global economic context. There is an increasing participation of domestic domiciled investors since 2023. Office investments have experienced a downturn in 2024, with a 17 per cent decrease compared to 2023.
GIFT City to build 7.54L sq ft Commercial tower
Gujarat International Finance Tec-City Company Ltd. (GIFTCL), Gujarat government’s special purpose vehicle (SPV) is responsible for development of GIFT CIty. GIFTC has invited global bids to develop a commercial tower spread over 754,000 sq ft in the processing area of the SEZ. Bidders can be a domestic or international company, a consortium or a joint venture. As a co-developer of the project, the selected bidder will be required to design, finance, develop, construct, operate and maintain the commercial tower. The land for the project will be allotted on a leasehold basis for 99 years. The lease deed will be executed only after completion of the construction, which has to be done in five years.
The bidder is expected to hold an average annual turnover of at least Rs 322.49 crore over the last three consecutive financial years before the bid due date. It is expected to also have a net worth of at least Rs 161.24 crore in the financial year preceding the bid due date. In terms of technical capability, in the last six years, the bidder must have completed at least one project of commercial, residential, institutional, or mixed-use buildings, or parking structures with a minimum size of half a million sq ft and height of 40 meters.
Airports to hike capex to Rs. 60,000 Crore in 3 years
Indian airports are expected to raise total capex spending to Rs. 60,000 Crore over the next 3 years through FY-27 from Rs. 53,000 Crores in FY-22 to FY-24. This is in a bid to expand infrastructure to cater about 65 million additional passengers a year. 70% of the fresh capex is expected to be funded through debt, adding that estimates are based on a study of 11 private airports that contributed about 60% of total passenger traffic in FY-24. Revenue of the privately held Indian airports is also expected to grow at an average 17% between FY25 and FY27, backed by growing passenger traffic, higher tariffs, and increase in spending within the airport ecosystem. Improved access to funding and a predictable regulatory regime will also support the strong credit profiles of private airports.
Local Feedback
LocalFeedback.org aims to track and document actionable parameters that help improve urban and rural infrastructure. The founder, Susmita, has juggled diverse roles in real estate, project budgeting, valuation and execution on construction sites. Having traveled to more than 20 countries, she has worked across 4 regions in India. Her areas of interest include sustainable buildings, electric mobility and urban development. She visited top-ranking cities on livability indices and has presented published papers at international conferences.