INDIAN INFRASTRUCTURE

OPPORTUNITIES
May 2010
Urban Link Consulting Ltd
Contents
 Indian Economy

 Indian Infrastructure Landscape - Key Areas

 Highways
 Ports
 Telecom
 Airports
 Urban Developments Key Concepts

 Townships - Unique Opportunity within the Indian Infra Play

 Urbanization trends
 Townships - Demand Drivers
 Why Township is a better Infra play
 Township Cycle
INDIAN ECONOMY
India Economy – At Takeoff Stage

20 YEARS • 4th largest economy in the World

• 2nd fastest growing economy

7 GOVERNMENTS • 2nd largest population – 1.1 billion

• GDP 2008 at $1.6 trillion at Current Price

5 PRIME MINISTERS • Middle Class Consumer base of 300 m

7.8 per cent average annual GDP growth rate from 2005 to 2010
Infrastructure a key bottleneck
GDP Growth Forex FII Flow FDI Per Capita Inflation

1990 5.8 per cent < US$ 1 billion US$ 1 million (1993) US$ 97 million US$ 390 9 per cent

2009-2010 7.1 per cent US$ 279.7billion as on US$ 17.46 billion US$ 22 billion US$ 846 9.90 per cent
March 12, 2010 (Calendar year 2009) (April–Jan 10) (WPI) March
2010
India: Demographic Dividend
Population Median Age (in years): 2008E1
 Young population (under 25 years)
45 accounts for about 50 per cent of India’s
36 total population.
27  The country’s urban population accounted
Years

44
18 34 37 38 for 30 per cent of the total population in
2007 and is the second-largest in the
25
9

0
world. It is projected to reach 40 per cent
India China US Russia Japan by 2030.

Growth in Working Age Population (15–64 years) by 2010

 India is expected to register the (in million)

largest addition to the working Stock

Position
Additions to Working Age Population by 2010
age population in the world by 2005
314
World 4,168
2010 – 60% between 15 to 59 India 691 71

yrs Africa 500 64

China 934 44

 The country is expected to be South East Asia 362 33

powered by the largest working Latin America 359 31

Southern Asia 132 17

age population worldwide by US 200 10

2050. Europe 497 0

Japan 85 -3

 Its labour costs, as a percentage -5 45 95 145 195 245 295 345

of value added, are one of the In million

lowest among Asian countries.

INDIAN INFRASTRUCTURE
LANDSCAPE
- KEY AREAS
Indian Infrastructure Landscape – Key Assets

Highways Ports Power

Urban
Telecom Airports
Development
Roads Highways

 India has extensive road network 3.3 million kms – 2nd largest in the world. Carries
about 61% of freight and 85% passenger traffic.

 Highways/ Expressways constitute 2% of all roads – carries 40% of traffic

 Annual growth rate of traffic projected at 12% and cargo traffic 18%

 Ambitious National Highway Development Project underway. Various States are also
implementing State Highway Development Projects in Public –Private Partnerships

 National Highway Target is to awards 12000 km contracts in this fiscal year and 11000
km in next fiscal year

 An Investment of $ 70 billion is required in the Road Sector in the next 3 years; out of
which $ 40 billion from Private Sector

 Private Sector participation increasing through Construction Contracts, BOOT

models- 100% FDI permitted without any Government approval
 Ports
 Major Indian ports handled over 530 million tonnes of cargo in 2008-2009

 80% containers is dry and liquid bulk and remaining 20% is general cargo

 Indian a 12 major ports and 187 minor ports India. Has a huge coastline 7517 km

 Cargo handling at port expected to increase by 7.7% p.a till 2014, with minor ports growing
at faster pace.

 Level of containerisation expected to increase significantly

 Identified investments need $ 12.4 billion in major ports under the National Maritime
Development Program to boost infrastructure at these ports. Expected investment in minor
ports $ 7.7 billion.

 Target is also to increase the port capacity to 1500 million tonne – requires $ 25 billion
investment.

 Public – Private Partnership is seen as the key to improve Indian ports

 100% FDI investment permitted in Port development without prior Government Approval
 Power

 Generation capacity 141 GW, 663 billion units produced – Jan 2008

 5th largest electricity generation capacity – lower per capital consumption

 3rd largest T& D network in the world – 6.6 million circuit km.

 45% Coal fired plant, 25% hydel power, 10% gas based, 8% renewable energy and 3%
nuclear.

 Large demand supply gap. Current Power deficit of 9% (78429 MU) and Peak Power
deficit 12% (ie 14.98 GW). Projected to rise further.

 Government is expecting an investment of $300 billion in the Power sectors, including

T&D in Twelfth Five Plan 2013-2018 . Thrust on renewable energy

 The sector has been significantly de-regulated. 100% FDI is permitted in Power
Sectors without any prior Government Approval.
at Telecom

 5th largest telecom market in the world. Projected to become the 2nd largest.

 Has subscriber base of 562 million as of December 2009. Overall tele-density stands
at 47.48. Experiencing high subscriber growth - adds about 8 to 10 million
subscribers every month.

 Accordingly, to a study by Nokia, the sector will emerge as the largest contributors to
Indian GDP.

 As per Frost and Sullivian Study by 2012 Fixed Lines revenue expected to touch $
12.20 billion and mobile revenue $ 39.80 billion. Indian equipment market is approx
$24 billion.

 Government expects to mop up $ 7.53 billion through auction of 3G spectrum

 Various policy initiatives has been taken to facilitate rapid growth in sectors, including
rural telephony. 100% FDI is permitted in telecom equipment manufacturing and 74%
in telecom services, without any prior Government Approval.
g Airport

 India currently has 454 airports – 16 designated as International Airport

 97 Airports are owned and operated by the Airport Authority of India. Governments
aims to attract Private investments
 Mumbai & Delhi airports have been privatised – estimated investment of $ 4 billion over 2006-
2016
 Green field airports are being built by private consortrium at Bengaluru and Hyderabad, total
investment approx $ 800 million
 Green field airport planned at Navi Mumbai
 35 other city airports proposed to be upgraded, through a public private partnership at
investment of about $ 357 million.
 25 regional greenfield airports likely to be bit for private partnership

 Investment opportunity of $110 billion envisaged up to 2020 - $80billion new aircrafts

and $ 30 billion in airport infrastructure development

 FDI is permitted in the sectors, various limits for each of the sub-sectors/ activities
within the sector.
 Urban
Development
 As per 2001 Census only 28% of 1.1 billion lives in Urban India – expects to increase
to 40% by 2020

 60% of the Indian GDP originates from urban areas

 $12bilion allocated under the JNNURM for 7 years period for improving urban
infrastructure

 Almost $50 billion required for the next 5 years to improve and build urban
infrastructure

 Opportunities exists in
 Building Integrated Townships
 Slum Redevelopment
 Water supply and sanitation
 Urban transportation
 Solid waste management

 100% FDI permitted without any prior Government Approval

TOWNSHIPS
“UNIQUE” Opportunity within
the Indian Infrastructure Play
 Townships

 Historically, cities have been the driving force in economic and social development

 As per 2001 Census approximately 307 million Indians lives in nearly 3700 towns and
cities spread across the country. 2008 it is estimated to be 340 million. This is 30.5%
of its population, in sharp contrast to only 60 millions (15%) who lived in urban areas
in 1947 when the country became Independent.

 In last fifty years the population of India has grown two and half times, but Urban India
has grown by nearly five times.

 In numerical terms, India's urban population is second largest in the world after China,
and is higher than the total urban population of all countries put together barring
China, USA and Russia

 About one-third of Urban India (71 million) lives in metropolitan cities (million plus).
The number of such cities in India has increased from 1 in 1901 to 5 in 1951 to 23 in
1991 to 40 in 2001. Out of the total increase in the country's urban population of 58
million between 1981 and 1991, 44 million were added to Class I cities alone. 28 million
persons were added in metropolitan cities.
Township – Demand Drivers…

• By 2030 Urban India will create 70% of all new Jobs in India, twice as productive as
in rural sector - 120 million new jobs – 3.6% p.a growth from 2008 level
• Urban Population to soar to 590 million by 2030 – 40% of India’s population –
Growth in Twice the United States Population today!
Urban
• 91 miilion households will be middle class, up 22 million today
Population

• Indian will have 68 cities with a population more than 1 million up from 42 today –
Europe has 35 today!
• Need to build 700 to 900 million sq mtrs of residential and commercial space very
Need more year – One Chicago every year!
Cities • Affordable housing gap estimated at 38 million households by 2030

• India will need to invest $1.2 trillion just in capital expenditure in its cities over the
next 20 years
• Generate 70% of the India’s GDP by 2030
Investment
Opportunities
Source: McKinsey Report India’s Urban Awakening: Building Inclusive Cities, sustaining economic growth
(April 2010)
…Township – Demand Drivers

• Water Supply – 105 ltrs per day against standard of 150 ltrs per day
• Piped Water-coverage - 74 % the population
• Sewage and Septic tank coverage – 63% of the population
• Sewage treated – 30% of sewage generated
Current • Solid Waste Collected – 72% of total waste generated
Performance • Storm Water drainage – 20% of roads
of cities is • Health Care – 2 beds per 100 against 4 beds per 1000
• Slums – 24% of population
Poor • Parks and Open Space - 2.7 sq mtrs per capital as against 9 sq mtrs
per capita
• Education – 48 students per teacher as against standard of 30 per
teacher

Create • Create Integrated Townships near Urban Cities

• House – Residential, Services Industries,
Integrated Hospital & Education, along with world class
Townships infrastructure
through the • Being in Private Sectors provides flexibility to
plan and control the project
Private
Sector
Why is Township a better Indian Infra play?

Free Market
• Price to end consumers/ resident is not regulated by the
Government – Market determined.

Pricing • Economics of the Projects are not regulated

• No going through Government tendering and bidding process

Minimal • Does not require extensive Government Approvals, unlike other

infrastructure assets
Government • No Government Intervention in Master Planning; the Promoters
are permitted to use the permissible FAR in manner they
Intervention deemed fit

Relatively • Exits can be relatively easy – as self liquidating assets

easy exit • Can be monetized in piecemeal

Returns DE- RISKED from Government Regulation

Township Process

Master
Land Development
Planning &
Acquisition and sale
Approvals

• Is a key bottleneck as • Most of the States have • Developer should have

large land aggregation Comprehensive a strong franchise
required Township Policy
• Past Township
• Typical requires 100 • Master Planning is development experience
acres plus extremely important; helps addressing the
generally includes nuances associated
• Mostly agricultural/  Residential Housing with development and
 Commercial Office space
non zoned land, and  Hospitals sale of huge projects
hence requires unique  Educations

land aggregation skill 
Sports
Open Spaces and Gardens
• Very few Indian
sets  Captive Power Plants developers with past
 Infrastructure facilities township development
track record
• Generally a single
window approval
process
For Further Information Please Contact

Mustafa Hussain
Director
Urban Link Consulting Ltd
mustafa@ulc.co.in

Visit us at www.ulc.co.in