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 7 GOVERNMENTS 5 PRIME MINISTERS

• 4th largest economy in the World • 2nd fastest growing economy • 2nd largest population – 1.1 billion • GDP 2008 at $1.6 trillion at Current Price • 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
1990 5.8 per cent

Forex
< US$ 1 billion

FII Flow
US$ 1 million (1993)

FDI
US$ 97 million

Per Capita
US$ 390

Inflation
9 per cent

2009-2010

7.1 per cent

US$ 279.7billion as on March 12, 2010

US$ 17.46 billion (Calendar year 2009)

US$ 22 billion (April–Jan 10)

US$ 846

9.90 per cent (WPI) March 2010

India: Demographic Dividend
Population Median Age (in years): 2008E1
45 36

Young population (under 25 years) accounts for about 50 per cent of India’s total population. The country’s urban population accounted for 30 per cent of the total population in 2007 and is the second-largest in the world. It is projected to reach 40 per cent by 2030.

Years

27 18 25 9 0 India China US Russia Japan 34 37 38 44

 India is expected to register the

Growth in Working Age Population (15–64 years) by 2010 (in million)
Stock Position 2005 World India Africa China South East Asia Latin America Southern Asia US Europe Japan 4,168 691 500 934 362 359 132 200 497 85
-3 -5 45 95 145 195 245 295 345 0 17 10 44 33 31 71 64

largest addition to the working age population in the world by 2010 – 60% between 15 to 59 yrs
 The country is expected to be

Additions to Working Age Population by 2010
314

powered by the largest working age population worldwide by 2050.
 Its labour costs, as a percentage

of value added, are one of the lowest among Asian countries.

In million

INDIAN INFRASTRUCTURE LANDSCAPE - KEY AREAS

Indian Infrastructure Landscape – Key Assets

Highways

Ports

Power

Telecom

Airports

Urban 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 20062016  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 – Twice the United States Population today! • 91 miilion households will be middle class, up 22 million today

Growth in Urban Population

Need more Cities

• 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 year – One Chicago every year! • 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 • Solid Waste Collected – 72% of total waste generated • Storm Water drainage – 20% of roads • Health Care – 2 beds per 100 against 4 beds per 1000 • Slums – 24% of population • 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

Current Performance of cities is Poor

Create Integrated Townships through the Private Sector

• Create Integrated Townships near Urban Cities • House – Residential, Services Industries, Hospital & Education, along with world class infrastructure • Being in Private Sectors provides flexibility to plan and control the project

Why is Township a better Indian Infra play?
Free Market Pricing Minimal Government Intervention Relatively easy exit
• Price to end consumers/ resident is not regulated by the Government – Market determined. • Economics of the Projects are not regulated • No going through Government tendering and bidding process

• Does not require extensive Government Approvals, unlike other infrastructure assets • No Government Intervention in Master Planning; the Promoters are permitted to use the permissible FAR in manner they deemed fit

• Exits can be relatively easy – as self liquidating assets • Can be monetized in piecemeal

Returns DE- RISKED from Government Regulation

Township Process

Land Acquisition
• Is a key bottleneck as large land aggregation required • Typical requires 100 acres plus • Mostly agricultural/ non zoned land, and hence requires unique land aggregation skill sets

Master Planning & Approvals
• Most of the States have Comprehensive Township Policy • Master Planning is extremely important; generally includes
        Residential Housing Commercial Office space Hospitals Educations Sports Open Spaces and Gardens Captive Power Plants Infrastructure facilities

Development and sale
• Developer should have a strong franchise • Past Township development experience helps addressing the nuances associated with development and sale of huge projects • Very few Indian developers with past 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

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