The ambitious Gujarat International Finance Tec-City (GIFT City) is at a critical cusp. The joint-venture partner is about to exit, an estimated Rs 11,000 crore of investments has been parked, a brand has been built and a city that houses the country’s first International Financial Service Centre (IFSC) has come alive on the dry riverbanks of Sabarmati in Gujarat.
Recently, a Mumbai-based valuation and advisory firm has been appointed to evaluate the equity stake held by Infrastructure Leasing & Financial Services (IL&FS), the crisis hit joint-venture partner of Gujarat government that is on its way out of the project. This happens at a time when the first residents have moved in and work on Gujarat’s “tallest residential tower” has begun, kicking off a crucial stage in the project that has the walk-to-work concept at its core.
The GIFT City has already become a brand and received a big push in the recent Union Budget. About 17 percent of the total promised development in this project, which houses India’s first International Financial Service Centre (IFSC), has either finished or is under construction. “The GIFT City is fast becoming a self-sustaining brand. Now nobody can stop it. The whole project is about 62 million square feet of which development rights have been given for 10-11 million square feet. So the committed investments parked so far in the project will be about Rs 11,000 crore,” says Tapan Ray, the newly appointed Managing Director and Group CEO.
Ray took over from Ajay Pandey who had to step down after a beleaguered IL&FS expressed inability to pay his salary. However, most of the top level executives with the project live in Gandhinagar.
Independent valuation and transaction advisory firm, RBSA Advisors, headed by chairman and founder RB Shah, has been appointed to determine the value of IL&FS stake. GIFT City is a 50:50 joint venture between IL&FS and the state government owned Gujarat Urban Development Company Limited (GUDCL). IL&FS initially invested about Rs 32.5 crore for 50 per cent of the shares in the project in 2007. Gujarat government, too, had a similar quantum of equity in the project.
Officials say IL&FS has no ownership on the 886 acres of land on which GIFT City project is being built. This land, which includes 261 acres of Special Economic Zone that has IFSC and 625 acres of domestic tariff area is owned completely by the Gujarat government.
The board of directors of Gujarat International Finance Tec City Co Ltd has also undergone a change. Gujarat government and IL&FS were represented on the board by four directors each and the remaining four on the 12-member board were independent directors. Today, only three directors are from IL&FS, while the number of representatives from the Gujarat government, including Tapan Ray, has risen to five.
IL&FS has built both the GIFT One and GIFT Two towers — the first high rise buildings to come up in the project. While IL&FS still occupies a part of the top floor of the GIFT One tower, IL&FS Transportation Networks Ltd occupies the 25th floor of the same tower.
The rest of the space has been sold. In the GIFT Two tower, seven to 10 floors, measuring about 1.5 lakh square feet, are vacant and are in the possession of IL&FS. Officials say IL&FS might consider selling these assets along with its stake in the project in the coming days.
Tallest residential tower of Gujarat
“Initial idea was to to ahead with no residential component in this project. That was a stumbling block,” says Ray. Officials point out that it was only in 2017 that the state government clarified that anyone could own a residence in GIFT City. However, only those working inside the GIFT campus will be able to occupy it.
At present, 150 residents have moved in and occupied almost 50 per cent of the lone affordable housing project in the scheme built for low-income workers of the project. The scheme developed by Janaadhar was at a cost of Rs 9.5 lakh per unit. The occupants earn Rs 6 lakh or less per annum, said officials.
The second residential housing scheme for which work has started belong to the Bangalore-based Sobha Group who is building high-end 1&2 BHK (Bedroom-Hall-Kitchen) apartments that are expected to be priced at Rs 45 lakh and above. The towers built by Sobha will have 33 floors and will be the highest residential towers in Gujarat. The real-estate firm that plans 1,000 residential units will build 474 units in Phase-I.
Of the 110 high-rise buildings that were part of the original master plan, eight buildings are operational and nine are either under construction or in the planning stage.
Jobs and business created
At present, GIFT City employs 9,000 persons in the 200-odd firms that dot the landscape that was once an unoccupied ravine on the banks of the river Sabarmati. The biggest employer is Bank of Baroda with 2,000 employees, followed by Tata Consultancy Services (TCS) with 1,200 employees. However, the situation of jobs in 2019 is a far cry from the estimates that were projected both by the Gujarat government and private entities. A study carried out in 2007 by M/s Mckinsey & Co had predicted that the GIFT City project will generate 10 lakh direct jobs by the year 2020.
The master plan of the project has undergone a number of changes than what was originally conceived. As per the earlier three-tier plan for the city, elevated Metro rail services was planned that would pass over the city. On the ground level, it was proposed to restrict the movement of vehicles and encourage employees to walk within the campus. Movement of cars, BRTS (Bus Rapid Transit System) and other vehicles was planned to be on 15.1 kilometres of recessed roads that would pass underneath the City.
While the three-tier plan was dropped due to overshooting expenses, the Metro rail connectivity to the project is expected to take another five years as it falls under Phase-II of the development Ahmedabad Metro. The Metro rail that was earlier expected to pass through the project will not be terminated outside the campus.
“It will now connect the city at the East gate,” said Ray. Currently, local GSTRC buses operate service in mornings and evenings. Most of the 9,000 employees depend on private transportation. BRTS, which was part of the original plan, is yet to happen.
“Till now the polices have come in bits and pieces. In the Union budget this year, there has been a concerted effort. It will help create jobs and boost economic activity. Now people will find the place attractive as there are many incentives, including those related to taxes. Investors will now come, especially in the SEZ area, which is deemed a foreign territory and profitable to do business,” said Ray whose association with the project began in 2007 when he was the Principal Secretary Economic Affairs in New Delhi.
“A lot of people had promised to come in. But in and around 2007, the Lehman Brothers incident happened and the project suffered a setback. Everybody used to say the project should happen. Everybody wanted it,” he said adding the project was slow in taking off due to the global financial crisis. The project picked up steam only after Narendra Modi became the Prime Minister in 2014.
One of the three schools planned in the city have come up, of which the Jamnabai Narsee School has been the most successful, says Ray.
For a project at an estimated cost of over Rs 70,000 crore with slow progress, the recent Union Budget came as a huge relief. Officials say the new budgetary provisions will help quadruple the business transactions in GIFT City.
“Before the Union Budget, the project was moving slowly. Tax and regulatory environment was not too conducive and transport connectivity was a challenge. However, the Budget has given GIFT City a level-playing field with other global IFSCs. There were lot of inquiries in the pipeline and now we hope that they will quickly get converted,” says an official from Hirandani Communities, which built the Hiranandani Signature tower in the SEZ area. Brigade Group and ATS-Savvy are other project developers in the SEZ areas which also houses the IFSC.
In the domestic tariff area, IL&FS, State Bank of India, World Trade Centers Association, GIDC, BSE Brokers Forum, LIC, Prestige Group, Sobha, Sangath IPL, Jamnabai Narsee School, Tata Communications and Sterling Hospital are among those who have committed investments. Fortune Group has opened the GIFT Club and Business Centre, a plush facility that houses a card room, pool tables, an infinity pool, restaurants, movie hall and library among others, open only to members. The club had its first open event recently with the Gujarat government hosting a day-long health seminar.
GIFT City Company Ltd has spent Rs 2,000 crore on creating state-of-the-art infrastructure, which includes district cooling plant, automatic waste collection system, underground service trenches and other facilities.
“The financial services help you to do billions of dollars in business, but they do not employ the similar number of people as the IT sector does. Now we are expecting many alternate investments funds to start and once that starts an ecosystem connected with it will also come. We expect that investors will now troop in,” says Ray.
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