15 December 2018

State Focus: Karnataka

KARNATAKA - Fostering the right milieu to lure industries and investments

 

With investments in industrial parks as well as in realty and infrastructure sectors picking up, the construction machinery and equipment manufacturers and suppliers operating in Karnataka have started witnessing a welcome revival in demand for their products. Their market, which had seen a slump in the 2012-to-2014 period, posted a welcome reversal in 2015 and registered a positive growth that year. This trend is expected to further improve during this financial year and in the coming years, which will immensely benefit the construction equipment industry, reports Suresh R Menon.

 

Karnataka, which is one of the most progressive and industrialised states in our country, has lately emerged as the pan-India leader in attracting investments into various infrastructure projects as well as the real estate sector. Leasing activity in the state has also recorded positive growth during the past 18 months, and the trend is expected to continue into the coming years. Revealing that last year Bengaluru posted the strongest growth among all Asia-Pacific markets in the office space leasing segment, Henry Chin, Head of Research for Asia Pacific at the property advisory firm CBRE, observed that major demand for office space was coming from banking, financial services and insurance (BFSI) segment as well as the IT and BPO sectors followed by engineering, automotive and pharma companies.

Though there has been some decline in demand for office space from the e-commerce companies in recent years, big players in that segment have taken up more logistics and warehousing space. Furthermore, many projects in the industrial park space, which were kept in abeyance by builders and developers, are now getting revived. Meanwhile, Karnataka has also proved that it is possible for even Tier-II and Tier-III cities to post commendable success in realty and infrastructure development sectors despite innumerable and diverse constraints they may be facing. This is probably because the global investors and institutions have taken note of the changing regulations, especially with regard to real estate investment trusts (REITs).

The above developments have given a major fillip to investments in industrial parks as well as in the realty and infrastructure development sectors, thereby generating strong demand for construction machinery and equipments. This in turn augurs well for construction equipment manufacturers and suppliers operating in Karnataka. The market for construction machinery and equipment, which had witnessed a slump from 2012 to 2014, posted a welcome reversal in 2015 and registered a positive growth that year. This growth trend is expected to further improve during this financial year as well as in the coming years, which will immensely benefit the construction equipment industry.

Some of the major construction machinery and equipment manufacturers, suppliers and exporters having their production and distribution base in Karnataka include Caterpillar India, Volvo Construction Equipment, Leeboy India, Tata Hitachi Construction Machinery, Komatsu India, TADANO India, etc. These companies manufacture and supply an extensive range of high-quality machineries and world-class equipment that include articulated trucks, backhoe loaders, dozers, drills, excavators, excavator loaders, mining shovels, material handlers, hosting machinery, road machinery, wheel loaders, articulated haulers, asphalt pavers, compactors, pipe layers, piling machinery, road reclaimers, transit mixers, dump trucks, motor graders, cranes, tunnel boring machines, bulldozers, wheel dozers, precision digital controls, wheel loaders, mobile cranes, crawler cranes, loader cranes, etc.

 

SNAPSHOT OF STATE ECONOMY

Currently, Karnataka is the seventh largest Indian state with a total geographical area of about 191,976 square kilometers covering about 5.83 per cent of the total geographical area of India. Its Gross Domestic Product (GSDP) at current prices stood at $156.23 billion in 2015-16 with the state attracting Foreign Direct Investment (FDI) equity inflows to the tune of $20.24 billion during the April 2000-March 2016 period, as per the data published by the Department of Industrial Policy and Promotion (DIP). If the latest media reports are any indication, then Karnataka has emerged as a favourite investment destination and has attracted maximum ‘investment intentions’ in value terms.

For the six-month period January-June 2016, Karnataka has reportedly topped the list by receiving investment intentions to the tune of `67,757 crore. The three-day global investors meet ‘Invest Karnataka 2016’ organized by the state government has played a major role in propelling the state to become India’s most industry-friendly state. Karnataka has been consistently rated as one of the best places to do business by organizations like World Bank, FICCI, and ASSOCHAM. Meanwhile, the future looks bright for the state. Adequate infrastructure, easy availability of land for project development and proper access as well as adequate water and power supply will surely give the much-needed fillip to development. Though Karnataka is well-known as India’s IT hub and is home to the fourth largest technology cluster in the world, lately it is also emerging as a preferred investment destination for real estate and infrastructure projects.

 

KARNATAKA’S INFRASTRUCTURE POLICY

The state had an early-bird advantage as the Government of Karnataka came out with its first infrastructure policy way back in 1997, which extended specific incentives and concessions for infrastructure projects. The state government offers necessary assistance for obtaining clearances and approvals in addition to providing basic support services in the form of roads, power, and drainage system. Government departments also facilitate investors by helping them acquire the required land through the Karnataka Industrial Areas Development Board (KIADAB) for different types of infrastructure and real estate projects. The board within its provisions awards the contracts on ‘Swiss Challenge’ method to real estate and infrastructure developers, which even include firms providing consultancy services.

 

BENGALURU: REALTY INVESTORS PARADISE

The most attractive and preferred investment destination for real estate developers in Karnataka is Bengaluru, which is also the capital city of the state. Today, Bengaluru is India’s fifth largest city and home to over 630 multi-national corporations (MNCs), 2000 IT/BPO companies and 150 Biotechnology companies. The tremendous growth of the IT/ITES industry has helped in revolutionizing the residential real estate market, which in turn triggered massive infrastructure development activities in this city. Bengaluru is a marketer’s delight and an innovators market with the first 15 per cent  of any products across any sector being tested here.

This metropolitan city is home to some of the major property developers with a large geographical presence such as Mantri Developers, Total Environment, and Salarpuria who have set up their corporate offices in Bengaluru. Added to this list are leading listed real estate companies like Prestige, Sobha Developers, Puravankara, Cite Ville, Elegant Properties, Brigade Group, Nitesh Estates, etc. The residential sector in Bengaluru is witnessing a surge in inventory pile up with over 200,000 units from more than 800 projects with an average absorption rate of 58 per cent.

Meanwhile, in its review of the real estate scene of new launches for the first quarter, property consultants Cushman & Wakefield observed that Bengaluru is one of the two cities in India (the other being Hyderabad) that had bucked a trend of sluggish demand for office space. The city also accounted for 20 per cent of the launches in the residential segment with a good number of them being large-scale project launches.  

Furthermore, Bengaluru had an inventory of over 96 million square feet of commercial/office space during the first quarter of 2016, which is rated to be the second highest supply in the country after Mumbai. The micro markets such as Whitefield, Outer Ring Road and Bannerghatta Road have huge residential inventory. Some of the major real estate projects of some of the property developers and construction firms in the city of Bengaluru is depicted below in a tabulated format:

 

Name of the Developer

Zones

Name of Residential Projects- Completed/Ongoing

Brigade Group

EPIP ZONE, Bengaluru East

Brigade Lakefront

Shoba Developers

Thanisandra, Bengaluru North

Sobha City

City Ville

Hullimavu, Bengaluru South

Valmark City Ville

Salarpuria

Mysore Road, Bengaluru West

Sattva Divinity

Elegant Properties

MG Road, Bengaluru Central

Elegant Elysee

 

Meanwhile, another developer Godrej Properties Ltd has drawn up plans with Godrej Agrovet to develop a modern residential township of about 9 million square feet in multiple phases near Sarjapur in Bengaluru East. It would be well-connected to the key IT hubs of Whitefield, Outer Ring Road and Electronic City, which will enable it to derive immense benefits from a well-developed social and physical infrastructure, thereby making it a self-sustaining cluster.

 

INFRASTRUCTURE DEVELOPMENT: NAMMA METRO PROJECT

The State government with assistance from the Centre is going at full throttle on infrastructure development. Karnataka is ranked second in high road density among the ten largest states in India with the government already laying more than 1,100 kilometers of interconnected roads and highways to prominent locations in the state. Currently, Karnataka has 1,551 kilometers of rail lines under construction with the jewel in the crown being the Namma Metro being built and managed by Bangalore Metro Rail Corporation (BMRC).
This metro project is aptly divided into various phases. Phase-I portion was inaugurated and opened to the public on October 20, 2011. It stretches first 6.7 kilometers (Purple Line) and comprises six stations between Balappanahalli and Mahatma Gandhi Road. The second 6.4 kilometers with six stations of the Purple Line stretches between Mysore Road and Magadi Road, and it opened for public on November 16, 2015. The 4.8 km long underground metro section from Cubbon Park to Bangalore City Railway Station was inaugurated on April 29, 2016. This is South India’s first-ever underground metro section and it completes the 18.10 km long east-west corridor, also known as Purple Line.

A total sum of `13,845 crore was spent on Phase-I. Out of this, `5,335 crore was borne by the State government. Phase-II of Namma Metro will be around 72 km and is expected to be completed by December 2020. It will cost about `26,405 crore, out of which `9,000 crore will be borne by the state. Meanwhile, Phase-III of the project is proposed to cover a total length of 127 kilometers. There is also a proposal to have as many as nine alternative routes where Namma Metro line can connect the city with Kempe Gowda International Airport.
Furthermore, the Karnataka government has taken numerous other initiatives for the development of industrial infrastructure across the state.

 

OTHER INFRASTRUCTURE PROJECTS IN PIPELINE

  • BMIC Corridor: Karnataka government with NHAI’s (National Highway Authority of India) assistance has embarked on constructing a six-lane expressway connecting Bengaluru with Mysore. Officially called Bengaluru–Mysuru Infrastructure Corridor (BMIC), this project will cover a distance of 140 kilometers and is expected to be completed by 2021.
  • Chennai–Bengaluru–Chitradurga Industrial Corridor (CBCIC) and Bengaluru–Mumbai Economic Corridor (BMEC): In a bid to trigger industrial growth in the state, the Karnataka government has drawn up plans to develop these two industrial corridor projects within an influencing zone of 150 kilometers on each side, which will enable it to attract huge infrastructure projects.
  • State-of-the-Art Technology Cluster in Dharwad: To attract foreign companies which do not have a significant presence in India, the State government has recently signed a strategic MoU with Astarc Group to set up a first-of-its-kind Technology Cluster in Dharwad. The proposed Technology Cluster will boost development of Hubli-Dharwar region as it will come up on a strategically located private land bank of 200 acres on the NH4 highway next to IIT Dharwad.
  • Water Supply Project: The Government of Karnataka has entered into India’s first structured initiative with the World Bank to fund water supply project undertaken by Karnataka Urban Infrastructure Development & Finance Corporation (KUIDFC). This project, which is envisaged to cost over $38 million, would ensure 24x7 water supply to cities of Hubli-Dharwad, Belgavi and Kalburgi in addition to other cities of Karnataka.

 

For instance, industrial estates have been developed in Narasapura, Vemagal, Gauribidanur, Dobaspet, Mammigatti, Gamangatti, Kittur, Yadgir and Tandya. Meanwhile, a National Investment and Manufacturing Zone (NIMZs) admeasuring 12,500 acres of land has been approved by the Centre at Vasanthanarasapura in Tumkur. All these projects would help the state of Karnataka in turning its dream of ‘Make in Karnataka’ a reality.




Leave a Comment

Name  
Email Address
(will not be published)    
Website
Comment